A crackdown is being launched against private hire drivers for unpaid taxes.
The government has begun to investigate hundreds of private hire drivers, who uses apps such as Uber, Ola and Bolt, on suspicion that they do not report all their income. HMRC is chasing the private hire taxi drivers for unpaid tax as new rules revealed they have been working under the table for years.
This does not apply to black cab drivers as they have different licensing requirements. There are more than 100,000 private hire drivers in London alone and only 22,000 traditional black cab drivers. This indicates that more people use personal hire services as opposed to black cabs.
People who operate in the hidden economy do so because they’re unaware or unsure of their tax obligations. As accountants, we need to ensure we’re advising and encouraging everyone to pay the correct taxes. This will help us get the money we’ve been missing from the hidden economy.
From April 2022, the government will ensure that private-hire drivers are fully vetted, which will be a requirement every three years. Hence, you will need a business registration number, which can be obtained from HM Revenue and Customs. According to HMRC, this is a great new approach to address the tax gap and believe that the new tax system will likely result in £270 million tax evasion being prevented over the next five years.
Uber insists it will fully comply with HMRC’s investigation into its business affairs and hand over all information requested. However, the taxi giant is still arguing that its drivers are self-employed. It was despite a historic ruling in February 2021 that said Uber drivers are, in fact, independent contractors and not employees. So, drivers are now entitled to pension contributions and holiday pay.
If individuals respond late to the summons or fail to attend court, they can face a penalty fine and more thorough scrutiny of their financial affairs. HMRC will send letters to those who haven’t declared their correct tax or paid their valid tax.
Drivers can make voluntary submission if they believe they have not filled their tax return correctly. In return, HMRC will send an acknowledgement letter and you will have 90 days to pay the tax.