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New HMRC data powers

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New powers allow HMRC to obtain credit and debit card data in relation to merchants. The rules compel acquirers to produce card turnover data in respect of their merchants to HMRC. This will be done on an annual basis, and the data will be delivered in bulk to HMRC by each acquirer. The idea is that HMRC will use that data, as well as data from other sources, to ascertain whether income is being declared by merchants.

There has been a lot of commentary in the press about personal data being disclosed, as well as ‘big brother’ concerns. They are all misplaced. Personal data, such as names and addresses of consumers, will not be, and cannot be, disclosed under a request from HMRC to an acquirer because, quite simply, the acquirers do not have, and never have, that personal data. The legislation is aimed at turnover data, not the disclosure of individual cardholder details or individual transactions.

As with any new legislation, it is going to take time before HMRC will be able to meaningfully interpret the data it receives and be able to spot where a business looks to be not declaring revenue. HMRC is going to have to be very sophisticated in the way it analyses the data in order to spot trends and work out whether a business is indeed engaged in some form of tax avoidance. Further, looking at the sheer volume of data HMRC will be receiving, despite the existence of software to analyse the data, it is not difficult to see this being a situation where HMRC obtains too much data which it is unused to processing, therefore it may be some time before any meaningful progress is made.

One by-product might be that businesses which want to avoid paying tax will simply look to use other payment solutions, in addition to cash and cheque. The legislation does not affect card users at all, except that the ‘rogue’ plumber might now be keener than ever to be paid in cash.

Interview by Guy Skelton. The new rules are in FA 2013 s 228 and came into effect on 1 September 2013 (SI 2013/1811).