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HMRC consults on updating civil information powers

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HMRC is consulting on whether its civil information powers, contained in FA 2008 Sch 36, are still relevant and effective, and suggests several possible targeted improvements. No review of these powers has been carried out since 2007/08. Powers to inspect premises and other property are not within the scope of the consultation.

HMRC sees a number of anomalies in the current rules, which it believes could be addressed. These include:

  • much more information is held electronically now than when these powers were originally developed;
  • the common reporting standard (CRS) requires UK financial institutions to collect data on all relevant customers and pass it to HMRC, without the need for an information notice or right of appeal, in contrast to the current procedure for obtaining third party information notices; and
  • automatic exchanges under the CRS are likely to increase the volume of requests from international partners for additional information to support domestic tax investigations, which will increase the burden on the resources of both HMRC and the tribunal service.

The UK’s procedure for third party information notices is cumbersome by international standards. The OECD has noted that the UK’s requirement for tribunal approval slows the response to requests for banking information from other jurisdictions, and requires more information to justify these requests than is expected under the international standard. The annex to the consultation document contains a table comparing procedures for issuing third party notices in other G20 countries, most of which do not require tribunal or court approval.

Compared to other tax provisions, HMRC regards the safeguards attached to third party notices (involving taxpayer agreement and tribunal approval) as disproportionate.

Schedule 36 does not allow HMRC to obtain information for debt collection purposes. The ability to obtain such information would be a ‘useful tool’ and would, HMRC believes, also help the UK meet the international standards for exchange of information.

The consultation contains several proposals for reform of these information powers.

The first would be to align the process for issuing third party notices with that for taxpayer notices. This option would include:

  • removing the requirement to seek approval from the tribunal or the taxpayer before a third party notice could be issued;
  • allowing third parties a right of appeal against the notice on the grounds that it is too onerous;
  • continuing to allow HMRC to seek approval from a tribunal to issue the notice;
  • continuing to allow HMRC to approach the tribunal to waive the requirement to notify the taxpayer; and
  • requesting the same types of information, with the same restrictions (such as legal professional privilege) as now.

In addition, HMRC would put an obligation on the third party not to inform the taxpayer about the notice where the tribunal has disapplied the requirement to send a summary to the taxpayer.

The next proposal would introduce a new notice specifically for banking information: the ‘financial institution notice’. This would define ‘banking information’ to include bank statements, information about transactions on the account, and information held about the legal and beneficial ownership of the account (similar to current requests under Sch 36 para 34 for ‘statutory records’). There would be no need to get tribunal approval for the issue of such notices and no right of appeal.

Another proposal would allow HMRC to obtain information for other functions, such as debt collection.

The document also proposes that the wording around increased daily penalties under Sch 36 should be amended to make it explicit that HMRC seeks permission from the tribunal to ‘assess’ increased daily penalties.

HMRC would also like to see the scope of increased daily penalties extended to cover all notices contained in Sch 36, not just persons whose identity is unknown.

The deadline for responses to the consultation is 2 October 2018. See