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Consultation on amending HMRC’s civil information powers

Consultation on amending HMRC’s..

The Government invites views from businesses, individuals and advisers on the effectiveness of HMRC’s current powers and proposed amendments.

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On 10 July 2018, HMRC published a consultation on amending their civil information powers. The objective of the consultation is to consider the relevance of HMRC’s civil powers given the amount of information that is now held electronically, and certain targeted changes, mostly relating to third party notices relating to a known taxpayer. The consultation is open until 2 October 2018.

The proposed options for changes set out in the consultation include:

  • Aligning the process for issuing third party notices with the process for taxpayer notices. This would result in the removal of the requirement for tribunal or taxpayer approval to be sought before issue of a third party notice, and would provide the third party with a right of appeal on the grounds that the notice is too onerous;
  • Introducing a new notice targeted specifically at banking information (since these requests comprise the majority of third party information requests received). This would likely be based on the provisions in Schedule 36 FA 2008 for ‘statutory records’, with neither a requirement for tribunal approval nor a right of appeal, provided that the information requested was only that reasonably required to check a taxpayer’s tax positions;
  • In the case where a tribunal has disapplied the requirement to send a summary of why information was requested to the taxpayer, prohibiting a third party from informing the taxpayer about the notice;
  • Extending Sch 36 FA 2008 to allow HMRC to obtain information reasonably required for all their tax functions, including debt collection; and
  • Amending the penalty regime to correct a lack of clarity in the legislation relating to increased daily penalties, and to harmonise the penalty regime across Sch 36 FA 2008.

The removal of the requirement for tribunal or taxpayer approval to be sought in particular represents a significant increase to HMRC’s civil information powers, since it would effectively remove the requirement for HMRC to demonstrate that the information requested is reasonably required, which a tribunal would have expected HMRC to demonstrate. Further, allowing HMRC to request information directly from banks has the potential to affect a taxpayer’s relationship with their bank which might make inferences as to why information has been requested. Alternative safeguards, such as requiring HMRC to either use first party powers initially or to seek tribunal approval for domestic cases for example, may be effective in ensuring a balance between providing HMRC with the powers they need and protecting taxpayers from unreasonable requests, however these would need to be carefully considered.

For further information please contact:

Kevin Elliott

Chris Davidson

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