Wendy Bradley is not impressed with the consultation on proposals to give HMRC wider powers to compel third parties to provide information relevant to specific taxpayers.
What is proposed?
The consultation on Amending HMRC’s Civil Information Powers proposes an update to the powers in Schedule 36 FA 2008, which set out how HMRC can issue information notices.
Essentially, this is a consultation about giving HMRC wider powers to compel third parties to provide information relevant to enquiries about specific taxpayers, particularly those enquiries originating from other tax authorities.
Whilst I have sympathy for HMRC in its constant battle against tax evaders, and the proposals in this regard look fairly reasonable, I have to say that the process of this consultation not what it should be.
What is the impetus for this change? HMRC last looked at its information powers during the “Review of Powers” 2007/2008. “There has been no recent engagement on this issue.” (page 1 of the new consultation, my emphasis).
The change proposed is essentially to bring HMRC’s powers in line with those of tax authorities in the rest of the G20 group of countries. This consultation explains that a comparative review of the information powers of the tax authorities across the G20 countries was made and "none of the 18 countries reviewed require tribunal or court approval before issuing a third party notice." The other two G20 members are the UK and the EU.
HMRC would like to be able to issue third party notices subject only to its own internal procedures and to post-issue judicial review rather than, as currently, to pre-issue tribunal approval.
Is this fair?
There may be arguments in favour of making this move, but this consultation is hardly a fair and transparent way of eliciting them.
I feel it would have been reasonable for HMRC to be more honest with a statement such as:
We have been taking a lead in international cooperation to counteract tax avoidance but we are being embarrassed at the G20 by the fact that we are the outlier in terms of supplying information to other authorities. We have to go through a court, and that takes up time and resources, so we would like to align our powers with those of other countries.
This would have been an open-ended stage one consultation, the start of a conversation about policy. However, this consultation looks a lot more like a stage two consultation, including detailed policy design – for example suggesting alignment of the legislation around the issue of third party notices with the rules for taxpayer notices.
It appears to me that the decision has already been made, and this consultation is about going through the motions.
What is proposed?
The proposals appear to be:
- To "align" the powers used for information notices issued to third parties with the powers over taxpayers – subject to HMRC internal process controls rather than to external tribunal.
- To treat banks differently – effectively to treat bank records as "statutory records", so such records must be delivered to HMRC in all circumstances.
- Extending HMRC’s powers for information gathering to "other functions" ie debt recovery and joint and several liability.
There is also an interesting hole in the penalties legislation that HMRC wants to plug:
"4.16. The current wording is misleading. Tribunals do not impose penalties; instead they grant permission for HMRC to assess penalties. This lack of clarity in the legislation results in neither tribunal nor HMRC actually being able to assess the penalty."
HMRC also wants the power to compel the third party not to tell the taxpayer about the information notice, and views on appropriate penalties.
No impact assessment
At this point in the policy development, there should at least be some rudimentary assessment of the number of people and organisations affected and the likely impact on them of the changes.
This consultation tries to have its cake and eat it by claiming to be a preliminary (stage one) consultation to avoid having to consider the impacts, but in fact it puts forward detailed proposals (stage two) with token questions that amount to: do you have any better ideas?
Is it all about HMRC’s resources?
In paragraph 3.9 it says: “In recent years HMRC has more than doubled the resource it employs to handle requests for information to and from its overseas partners."
I suspect that HMRC doubling this resource may take the number of people involved into double figures, or perhaps above 20. I am left with the impression that this consultation represents a fig-leaf over a decision that has already been taken.
About Wendy Bradley
Wendy Bradley is a retired tax inspector, now working as a freelance journalist.