HMRC have introduced new provisions relating to the administration of taxes in FA 2011 ss 85–87 and Schs 23–25. These are part of HMRC's ever widening compliance powers. Section 85 requires the giving of financial security from tax payers for payment of PAYE. Section 86 contains new provision for HMRC officers to obtain data from data-holders which can include both general data relating to a particular person and personal data such as the names and addresses of individuals. Section 87 gives effect to Council Directive 2010/24/EU concerning the mutual assistance for the recovery of claims relating to taxes, duties and other measures. This Directive expands the situations in which a Member State may obtain assistance from another Member State in recovering taxes owing to it.
Finance Act 2011 contains provisions relating to the administration of taxes in ss 85–87 and Schs 23–25.
These are part of HMRC's ever widening compliance powers.
FA 2011 s 85 amends ITEPA 2003 s 684 to enable HMRC to require the giving of financial security from taxpayers for payments of PAYE (see new ITEPA 2003 s 684(2) item 4B inserted by FA 2011 s 85(2)).
Section 85 also provides that a person who fails to provide such a security commits an offence if the failure continues for a specified period.
These are important new powers for HMRC. In the March 2010 budget, the previous Labour government confirmed its intention to enact enabling legislation to require such financial security from employers where amounts due under PAYE (and NICs) are ‘seriously at risk’. The legislation does not expressly impose a reasonableness requirement or state that it is targeted at employers who have engaged in serious non-compliance where PAYE is at risk. There is also no requirement for HMRC to seek judicial approval before the security is imposed.
Some guidance on the ambit of the new legislation is, however, available. ITEPA 2003 s 684(1) enables the Commissioners to make PAYE regulations in respect of an enclosed list which now includes the new inserted item 4B. On 9 December 2010, HMRC published draft regulations together with the draft legislation and these provide guidance on the persons from whom HMRC may require security. These include the employer, a director or other officer of the employer and, if the employer is a limited liability partnership, a member of that partnership.
FA 2011 s 86 refers to the FA 2011 Sch 23 which contains provisions for HMRC officers to obtain data from data-holders.
The purpose of this new power is to assist with the efficient and effective discharge of HMRC's tax functions and is in addition to the key information powers contained in FA 2008 Sch 36.
Under Sch 23 para 1, an HMRC officer may by notice require a relevant data-holder to provide relevant data. Relevant data will be of a kind specified for that type of data-holder in regulations made by the Treasury (para 1(3)). The data that a relevant data-holder may be required to provide can include general data relating to a particular person or matters or personal data such as the names and addresses of individuals (para 1(4)(b)).
The notice must specify the relevant data to be provided and can relate to chargeable periods going back no more than four years ending with the day on which the notice is given (para 3).
Who is a 'data-holder'?
FA 2011 Sch 23 Part 2 contains a description of who is a relevant data-holder. The net is cast very widely and includes:
Appeals
There is a right of appeal against a data-holder notice on the grounds (these mirror the third party information notice provisions found in FA 2008 Sch 36):
A Notice of Appeal must be given in writing and within 30 days beginning with the day on which the data-holder notice was given. See Example 1.
Example 1
Smith Ltd provides loans, mortgages and other financial products and services and regularly makes payments to brokers, agents and other intermediaries who are in a position to introduce possible new sources of work.
HMRC serve a data notice on Smith Ltd requiring production of relevant data going back four years. Two years previously, however, the company changed its operating system and it is proving difficult to access data for data held on the system prior to the change. If the expense in data retrieval is considerable and the exercise would be time consuming the company may be able to appeal on the grounds that it would be unduly onerous to comply with the notice.
Penalties
Part 4 sets out a regime for penalties if the data-holder fails to comply with a data-holder notice. If so, the data-holder is liable to a penalty of £300 and if the failure in question continues after having been notified of the assessment there is a further £60 payable for each day subsequently (paras 30–31).
The legislation does not expressly
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There is a also penalty if the data-holder provides inaccurate information or documents in circumstances where either of three conditions (A), (B) or (C) is met. Condition (A) is that the inaccuracy is due to a failure by the data-holder to take reasonable care or is deliberate on his part; condition (B) is that he knows of the inaccuracy at the time the data is provided but does not inform HMRC and condition (C) is that the data-holder discovers the inaccuracy at a later time but fails to take reasonable steps to inform HMRC.
If so, the data-holder is liable to a penalty not exceeding £3,000. There is a right of appeal against the penalty (para 36).
FA 2011 s 87 introduces Sch 25 which gives effect to Council Directive 2010/24/EU which concerns the mutual assistance for the recovery of claims relating to taxes, duties and other measures.
This directive was adopted by the EU to expand the situations in which a member state (the applicant) may obtain assistance from another member state (the requested state) in recovering taxes owing to the applicant state. The new directive covers all taxes and essentially boosts member states' ability to enforce tax recovery crossborder.
In essence, the directive provides that the requested state must treat the applicant state claim as a domestic claim and enforce it accordingly, including charging interest for late payment and recovery of costs even if, in certain circumstances, the applicant state has not exhausted all domestic means of recovery. The claim is subject to the limitation rules of the applicant state rather than the requested state. The directive also provides obligations on the requested state to provide the applicant state with information relevant to the claim.
In pursuance of this aim, Sch 25 provides, that where the applicant authority of another member state makes a ‘foreign claim’, ie, a request in accordance with the directive for the recovery in the UK of a claim for taxes, HMRC may take such steps to enforce a foreign claim as might be taken to enforce a corresponding UK claim. ‘Steps’ includes any legal or administrative steps whether by way of legal proceedings, distress, diligence or otherwise.
The taking of such steps by HMRC may be suspended if the person affected shows, however, that ‘relevant proceedings’ are pending or are about to be instituted before a court, tribunal or other competent body in the member state in question. Relevant proceedings are proceedings relevant to the person's liability on the foreign claim and are ‘pending’ so long as an appeal may be brought against any decision in the proceedings (para 11).
It should be noted, however, that if the foreign jurisdiction provides for the tax to be collectable pending any appeal the debt can still be enforced (para 11(4)). It should also be noted that no question may be raised by the foreign taxpayer on the foreign claim unless a final decision on that claim has been given in his favour by a court, tribunal or other competent body in the member state in question (para 12).
See Example 2.
Example 2
Monsieur Smith has business interests in France, and also owns a number of properties in the UK. The French authorities, having had no success in enforcing a tax debt in France against Smith, ask the UK authorities to enforce the claim in the UK. HMRC obtain judgment in the County Court against Smith and enforce the judgment against the proceeds of a bank account held by Smith in the UK.
Jonathan Levy, Head of Tax Disputes Group, Reynolds Porter Chamberlain LLP
Matthew Greene, Associate, Tax Disputes Practice, Reynolds Porter Chamberlain LLP
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