HMRC wants to issue third-party data notices without having to ask

The taxman has not made a strong enough case to either remove safeguards on his third-party data requests or to extend hefty daily penalties to many more cases, a body of advisers says.

Currently, before HMRC can issue a notice to a third-party for material it deems ‘reasonably required’ for its enquiries, it must get taxpayer or tribunal permission, points out the ATT.

But in a HMRC consultation on its civil information powers, the department says it is concerned at the length of time it can take to obtain approval from a tribunal.

The Revenue therefore believes that a radical solution would be to remove altogether the requirement for either tribunal or taxpayer-approval before a third-party notice is issued.

“We do not believe that HMRC have provided sufficient evidence to justify the erosion of important safeguards for both taxpayers and third parties,” said the Association of Taxation Technicians (ATT).

“[The safeguards were] introduced for two reasons -- to protect the privacy of taxpayers and to prevent undue burdens being imposed on third parties.”

But the Revenue also wants to extend tribunal-determined penalties -- of up to £1,000 a day – to every type of information notice that taxpayers and third parties can be issued with.

“The consultation refers to harmonisation,” reflected ATT’s John Stride.

“Expanding the reach of a severe penalty which currently only affects one narrow aspect of a regime to cover a much wider remit is not what many might class as harmonisation.”

He added HMRC have failed to provide “any evidence” to support its assertion that the extension would ‘help deter long periods of non-compliance’ with an information notice.  

“We would encourage HMRC to go back to the drawing board on [both] these proposals,” the association said.

“While we agree that HMRC should be given the powers they need to do their job, this should not be at the expense of taxpayer safeguards that prevent undue burdens being placed on third parties and assure taxpayers of a reasonable degree of privacy.”

The legislation covering HMRC’s civil information powers is in Schedule 36 of Finance Act 2008. It allows HMRC, subject to specific safeguards, to issue information notices in order to access information and documents from various parties in a number of different situations, including:

• From the taxpayer directly.
• From a third-party about a known taxpayer (third party notices).
• From a third-party about a taxpayer whose identity is not known to HMRC.
• From a third-party whose identity can be ascertained.