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Access to tax agent files: New provisions

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14th Mar 2013
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Schedule 38 of Finance Act 2012 not only contains sanctions for dishonest tax agents but gives powers to HMRC to obtain files. John Flood explains.

From 1 April Part 3 Sch 38 will replace s20A of the Taxes Management Act 1970 with a structure similar to the old law but with important new wording.

To get papers HMRC must first obtain a ‘file access order’. To secure an order a tax agent has to have been the subject to a determination by the FTT that his conduct has been dishonest or the allegations were not contested. Alternatively, HMRC can rely on a conviction for an offence of dishonesty or fraud provided that this occurred after the person became a tax agent but applies whatever the capacity in which the offence occurred.

HMRC may seek “relevant documents” from the tax agent or a person believed to be holding them. These are working papers and includes assistance to former clients as well as current ones. Exclusions extend to documents older than 20 years, not in a person’s possession or power, journalistic material and personal records. Further, documents which relate to the conduct of a pending tax appeal or legally privileged documents (in Scotland documents covered by “confidentiality of communications”) need not be produced.

An application has to be made by an authorised officer to the first tier tribunal and it must be satisfied that the pre-conditions mentioned above have been met and that the recipient of a notice has been given an opportunity to make representations about it. The tribunal must receive a summary of those representations, if any. Any decision on the application is final.

A ‘file access notice’, if approved, should be then served. It gives details of what is required and when. The notice may be met by the giving of copies of documents or HMRC may take the originals. Compensation is available in the event of damage while in HMRC’s possession. If the recipient of a notice is not a tax agent then they may challenge it on the basis that it is unduly onerous. Any tribunal decision is final.

To ensure that relevant documents are preserved, criminal offences are created imposing a duty on persons who know about an enquiry, or have been served with an access notice, to keep documents. A civil penalty of £300 is available in the event of non-compliance with a notice together with a daily penalty of up to £60 for continued default.

John Flood is a retired barrister and was formerly a deputy director of Specialist Investigations, HMRC.

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