HMRC brought in new tax checks in April this year that taxi and Private Hire Vehicle (PHV) drivers in England and Wales must complete when they renew their licence, with plans for this to be rolled out to Scotland and Northern Ireland next year. The purpose of these tax checks are to ensure that drivers are properly registered for tax. On completion, drivers are given a 9-character tax check code which is needed for their licence application.
Yet it’s expected that around 4,000 PHV drivers will be receiving nudge letters from HMRC in relation to unpaid tax, with the Licensed Taxi Drivers Association’s general secretary Steve McNamara warning that there could potentially be thousands more to come over the next few years as more and more PHV licences come up for renewal.
What Is A Nudge Letter?
A nudge letter is a prompt from HMRC that explains that they believe you have forgotten to declare something…
Unfortunately they won’t provide you with any specifics on what you haven’t declared. This is a clever tactic that usually frightens people into declaring everything – rather than just what they think HMRC already know about!
Why Are So Many PHV Drivers Expected To Receive A Nudge Letter?
It seems that these new tax checks are exposing a vast amount of undeclared income amongst PHV drivers – specifically those who operate via booking apps such as Uber, Ola and Bolt (rather than traditional taxi drivers). In a statement for the Financial Times, HMRC established that the letters were “being sent to people who have earned money from driving customers who booked private hire cars through online driving applications”.
What Should You Do If You Receive A Letter?
The most important piece of advice is: don’t ignore it! You only have 30 days to respond, otherwise you could find HMRC scrutinising your taxes. Even if you don’t think the nudge letter is correct, you still need to respond! If you agree to a voluntary disclosure, you’ll be sent an acknowledgement letter with 90 days to work out and pay your tax.
If you haven’t yet received a nudge letter but are concerned that you might have undeclared income, it’s always better to act pre-emptively rather than have HMRC chasing you. If you come forward voluntarily, you’re more likely to avoid penalties and be in a better position to work with HMRC to pay the tax owed.
We strongly recommend that you contact your accountant as a matter of urgency if you receive a nudge letter so that they can help you ensure your disclosure is completed efficiently, effectively and accurately. False disclosures can lead to prosecution so caution is key here! For more information or for advice from one of our experienced accountants, please don’t hesitate to contact us – either via our website or by phone.