HMRC’s powers to gather data from businesses, local authorities, charities and settlements changed on 1 April 2012.
The new powers, contained in Schedule 23 Finance Act 2011, bring together and modernise the old powers under the Taxes Management Act.
These powers do not replace HMRC’s primary information powers under Schedule 36 Finance Act 2008 where a taxpayer is under enquiry and are intended to be used only for:
- bulk information, such as requests such as obtaining details of interest paid to customers of UK financial institutions; and
- special information, such as requests such as to charities suspected of being involved in tax avoidance.
The main points to remember are that HMRC can:
- specify the format of the data to be provided and/or request it be made available for its inspection;
- copy or retain certain documents;
- charge an initial £300 penalty and daily penalties of up to £60 per day for not complying with a notice; and
- charge a penalty of up to £3,000 if the data-holder supplies inaccurate information or documents.
In most cases the data-holder has 30 days to appeal against the notice if they believe that the request is unduly onerous or the data specified is not relevant. The grounds for the appeal must be stated.
In some circumstances, HMRC may ask the tribunal to approve the notice, thereby removing the right to appeal – for example, where they perceive that there is tax at risk and that the appeal process might prejudice the recovery process, or where the information leading to the request is sensitive.
There are limitations on the information HMRC can request. The notice cannot ask for information or documents that are more than 4 years old (from the date of the notice) and the information must be in the possession (or power) of the data-handler.
HMRC also acknowledges that in the future it may be required to exchange information with other fiscal authorities to comply with paragraph 1, Article 26 of the OECD Model Convention concerning cross-border tax enforcement. The new powers therefore allow HMRC to request information in relation to relevant foreign taxes.
These powers are very specifically drawn and we would not expect HMRC to use them in the course of a normal enquiry. Advisers therefore need to check any notice issued to their clients to ensure that:
- the notice is correctly addressed
- their client is a data-handler; and
- the information is relevant data, as defined by the new legislation.
If the adviser has any doubts as to the validity of the notice, specialist advice should be sought to protect the client’s interests and avoid the unnecessary investment of time spent in complying with an invalid notice.
Gabelle can advise on all aspects of information notices and can help you ensure that the client is not commercially exposed when complying with an information notice.