HMRC’s Civil Information Powers Consultation Document was published this week and contains a particularly controversial proposal. It raises the tricky issue of balance between citizens’ right to privacy and the ability of government bodies to fully implement the law. There are lots of clickbait headlines around this story, along the lines of HMRC starts covert operations against you. But we prefer to calmly present you with the actual facts, alongside a couple of expert opinions.
What is the new proposal from HMRC?
The proposal contains several points for consideration and the reasoning behind them. There are two main elements that are giving rise to some consternation. One is around having legal checks and balances about investigation access; the other is about the taxpayer’s right to be informed that HMRC are investigating them. In many cases it will involve tax payers who complete a self assessment tax return for one reason or another.
Legal checks and balances
It is important to put the suggested changes into context. If HMRC suspect that you are deliberately hiding money to avoid paying tax, they can request that you give them access to all of your financial information. Currently, you are entitled to refuse that access and then HMRC can apply for a third party information order. This means that the judge at a tribunal decides whether or not to grant access. If the court rules in HMRC’s favour, then you must comply or you are breaking the law.
In this consultation paper, HMRC are asking for this judiciary level to be eliminated for cases where the individual is aware an investigation is happening. This would be called a financial institution information request.
Right to be informed
HMRC would like to be given the authority to directly contact third parties for information about the individuals they are investigating and remove their right to tell you that you are being investigated by the Tax Office. At the moment, banks, other financial institutions, estate agents, lawyers and accountants must comply with HMRC demands for your information, but are also allowed to let you know it has been requested. Also, Schedule 36 requires HMRC to send you a summary of why they need your documentation when they apply for a third party information order.
Effectively, it could mean that HMRC can investigate you and access all your private financial information without you knowing. This type of investigation would still need a judge to sign off on the collection of your information.
Why are HMRC asking for this increase in investigative power?
These are HMRC’s main aims:
- Maximise revenues due and bear down on avoidance and evasion
- Transform tax and payments for our customers
- Design and deliver a professional, efficient and engaged organisation
This proposal seeks to update the process for our digital age and, therefore, speed up the retrieval of unpaid tax by deliberate avoiders. Streamlining the system will also improve international information gathering and sharing. As the consultation document states, “A comparative review has been made of the information powers of tax authorities across the G20 to obtain third party banking information to exchange with other jurisdictions;…None of the 18 countries reviewed require tribunal or court approval before issuing a third party notice.” This improves Britain’s ability to meet the requirements of international agreements to share information that prevents tax dodging.
What do experts think?
There are voices on both sides of the argument.
As reported by Lucy Warwick-Ching in the Financial Times, a partner at Pinsent Masons, Jason Collings, said: “If anyone was alarmed at HMRC’s reach then these new powers will feed their concerns. HMRC is essentially asking for unfettered access to information on taxpayers from third parties with no advance independent oversight.” He continued to express a concern that “fishing expeditions” into people’s finances would become easier without the current level of judicial oversight.
The Chief Executive of the Taxpayers’ Alliance, John O’Connell, told Jack Doyle and James Burton of the Mail Online: “Giving the taxman powers to access taxpayers’ bank accounts without notifying them is a sinister step that would undermine fundamental freedoms. ‘HMRC gets basic tax information incorrect for millions of people every single year, so the thought of bungling bureaucrats having direct access to people’s bank accounts is deeply troubling.”
An HMRC spokesman said: ‘’We are considering a range of options to improve the flow of information to help establish the right tax has been declared. Nothing has been decided. If these powers became law, we expect they would only apply to a few hundred cases each year.”
What do you think about HMRC’s proposed new powers?
None of us want anyone to get away without paying their taxes and most of us support HMRC’s drive to catch blatant tax dodgers. But how comfortable are we with a government department having unrestricted access to our private financial information?
For most of us with nothing to hide, this change is unlikely to have any real impact on our tax affairs. Get your self assessment tax return done correctly, get it to HMRC by the deadline and pay your tax bill promptly and you’ll be fine. We can understand why those trying to get away without paying tax could be concerned that they’re more likely to get caught if these changes are finalised.
The consultation closes on 2 October 2018 so there’s plenty of time to express your opinion to HMRC. Just follow the instructions in section 19 of the consultation document.
