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Can HMRC do that?

Can HMRC do that?

Where prospective lenders suspect mortgage fraud they can contact HMRC for confirmation that income declared on a mortgage application equals income declared to HMRC.

On the face of it a good thing.

But what gives HMRC the right to give this information to third parties?

My enquiry to HMRC reveals their authority is s18(2)(a) Commissioners for Revenue & Customs Act 2005.

I have had a look and to be honest I don't understand it.

Does that indeed give them the authority to disclose information to third parties?


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20th Oct 2011 17:15

Wrong authority?

On reading it, it looks to me as though the citation should be s18(2)(b). Even then, there doesn't appear to be anything specific enough to cover disclosure to a lender. I wonder if it is covered by s20(1)(b)(ii)

David W, if you're listening - can you shed any light on this?

EDIT : Meanwhile, I found quite an interesting article on the subject, which addresses my last point above:


Given the doubt expressed by that authour, I wonder why HMRC are so certain that they are covered by s18? Especially since the author's opinion is that the information would be limited such that it falls outside the ambit of s18.

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20th Oct 2011 17:47

A number of possibilities

There are a number of possibilities.

It may be that permission has been given by the person applying for the mortgage (for example by some standard wording in the mortgage application form which he has signed), or (as has already been mentioned) by authority under s18 or s20 Commissioners for Revenue & Customs Act 2005.

It could be argued that the scheme is part of HMRC's methods of preventing or detecting tax evasion, which is one of their functions (hence the disclosure falls within s18).

Another obvious candidate is s19 Anti-terrorism, Crime & Security Act 2001 which is extensively used in connection with crime or suspected crime (although usually in relation to disclosures made to bodies which have powers to investigate crimes such as the police, DWP, local authorities, etc.).

The point is that the information is being disclosed in connection with the prevention or detection of crime - see also s29 Data Protection Act 1998.

So I am sure HMRC have the necessary authority by one means or another.

The topic came up last month in the Money Laundering & Crime discussion group.


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25th Oct 2011 23:18

Disclosure of Information

Sadly I cannot agree with the arguments put forward that HMRC is able to enter into any agreement with Mortgage Companies or associations etc in order to supply them with verification information regarding mortgage applications.

Any request made by any person, including a mortgage lender that relates to personal information held by any body public or private, can only be a Subject Access Request and as such Section 44 Freedom of Information Act 2000 is irrelevant.

Rights of access for this information are covered by Sections 7 to 9 Data Protection Act 1998.

At the same time Section 18(1) Commissioners for Revenue and Customs Act 2005 quite clearly states that disclosure by HMRC is prohibited unless one of the subsequent subsections applies.

It is also quite clear, from these subsections, that a mortgage lender and especially a governing association does not constitute any of the organisations mentioned in the Act.

Consequently, unless a mortgage lender has actually instituted legal proceedings against an applicant then HMRC is precluded from disclosing any information and, to this end, Section 20 CRCA 2005 is applicable.

If a mortgage lender is using its association for disclosure purposes then this organisation would be specifically precluded as it has not direct connection to the person whose data has been requested.

Thus, it would appear that, unless a mortgage lender has actually taken up litigation against an applicant or refers the matter to the police, HMRC is prohibited from disclosing any information that relates to a taxpayer in any form.

Counter terrorism legislation is, in my view, totally irrelevant for the simple reason that it is necessary to show that the mortgage application had been made for terrorism purposes.

If HMRC has entered into an agreement with any mortgage lender or an association to supply Subject Access information then that agreement is illegal and the provision of any information under that agreement is, therefore, illegal and any person disclosing that information would be committing an offence under Section 19 CRCA 2005.

By the same token, a further question arises as to whether any person using any information that was obtained illegally would themselves be committing an offence?

Rest assured, I do not condone any actions whereby anyone obtains money by deception but I am seriously concerned about HMRC entering into agreements to provide personal information to third parties when they have no legal right to do so.  To this end, can I remind you of the DVLA selling personal data about drivers, which in my view is totally illegal!

As a note, during a recent case, HMRC claimed that they were prohibited from disclosing information to the actual taxpayer by virtue of Section 18 CRCA 2005 but it appears, as reported, they are not precluded from such disclosure to unrelated third parties.

I wonder what price the mortgage lender had to pay for this illegal service?




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26th Oct 2011 08:20

I disagree


With great respect to your carefully considered post, I disagree with your conclusions.

With regard to the Data Protection Act 1988, s29 specifically permits disclosure of data for "the prevention or detection of crime" notwithstanding sections 7 to 9 of the Act.

A disclosure for "the prevention or detection of crime" is clearly not limited to circumstances in which legal proceedings have commenced - since by that time the crime has not been prevented and has been detected.

Whilst s18(1) CRCA 2005 prohibits disclosure in a wide range of circumstances that is subject to exceptions under 18(2) where the disclosure is "made for the purposes of a function of the Revenue and Customs" or  "made with the consent of each person to whom the information relates" and under 18(3) in relation to "any other enactment permitting disclosure".

The provisions of s19 Anti-terrorism, Crime and Security Act 2001 are applicable in cases of terrorism related crime and in cases of non-terrorism related crime.  Every day HMRC is making numerous disclosures to police, DWP, local authorities etc in cases of, for example, suspected Housing Benefit fraud, under the powers of s19 ACSA 2001.

This permits disclosure "for the purposes of any criminal investigation whatever which is being or may be carried out" and "for the purpose of facilitating a determination of whether any such investigation or proceedings should be initiated or brought to an end".  So again this covers suspected crime of any nature and begins to operate even before any investigation has commenced.

The mortgage lenders are charged £14 plus VAT for each application they make for information.


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26th Oct 2011 08:53

Worth pointing out

It's worth pointing out that HMRC aren't disclosing anything particularly significant to the mortgage company.  As I understand it, they basically say "yes" or "no" as to whether the mortgage company has disclosed information which matches that individual's SA record.  In my mind that's not a very significant disclosure - the disclosure is by the mortgage provider to HMRC - which the applicant would have signed up for when applying for the mortgage.

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