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Markel Tax

11 Mar 2020

Budget 2020: Tax Conditionality – a new approach to tackle non-compliance in high risk sectors

Issue
 
The Government will introduce Tax Conditionality in relation to certain economic activity. Tax Conditionality is the concept that access to government awards and authorisations (such as approvals, licences, grants) is granted only if taxpayers can demonstrate good tax compliance.
 
What it was before
 
This is brand new legislation and so there are no existing rules regarding this. The idea was first published in a consultation document in 2017 and mooted in the 2018 Autumn statement.
 
What it is now
 
Legislation will be introduced in Finance Bill 2020/2021 to make the renewal of licenses to drive taxis and private hire vehicles (PHVs, e.g. minicabs), operate PHV firms, and deal in scrap metal conditional on applicants completing checks that confirm they are appropriately registered for tax.
 
The sectors covered are considered to be high-risk for non-compliance and so these provisions will bring to light businesses that are currently non-compliant and ensure those starting these businesses are compliant from the outset.
 
The government’s original proposal suggested checks for registration could include, where appropriate:

Obligations to register for Self Assessment
  • Obligations to enrol employees for tax
  • Obligations to register for Corporation Tax
The Government stated that registration for VAT will not be considered, as this is not necessarily an indicator of non-compliance and also that the checks would not be designed to determine the correct tax status.
 
Who is affected?
 
These changes will take effect in England and Wales in April 2022 but not currently Scotland or Northern Ireland, although consideration is being given to extending the provision to those administrations.
 
The government is very interested in this area and plans to continue its research through the publication of a further discussion document in spring asking how the application of Tax Conditionality might be broadened. 

For further information please contact Nathan Ross-Sercombe on 0845 4900 509 or via e-mail on nathan.ross-sercombe@markel.com
Tagged Tax investigations COVID-19
Next article in series

11 Mar 2020

Budget 2020: First thoughts