HMRC consults on changes to civil information powers

HMRC has launched a 12-week consultation on potential changes to its civil information powers, with a focus on the way it which it requests information from third parties, and the penalty regime

The consultation reviews a number of aspects of HMRC’s information powers under schedule 36 Finance Act 2008.

HMRC says the current process for issuing a third party notice, which requires obtaining approval from a tribunal, can add a great deal of time to the information gathering process, and ultimately prolongs the course of a domestic enquiry or the time taken to exchange information internationally.

It says these processes leave the UK out of line with the rest of the world and are also out of step with new internationally-agreed approaches to sharing information, such as the common reporting standard (CRS).

One proposal is to align the process for issuing third party notices with that for taxpayer notices. This change would see the removal of the requirement to seek approval from the tribunal or the taxpayer before a third party notice could be issued. An authorised HMRC officer would still have to authorise the issue of a third party notice, and the taxpayer would be given a summary of why the information or documents are being sought.

The third party would have a right of appeal against the notice on the grounds that it is too onerous. HMRC would still retain the ability to seek approval from a tribunal to issue the notice, and says it is most likely to do so in cases where it believed, based on previous experience, that a particular third party was likely to seek to deliberately delay the provision of information or documents.

Alternatively, since the majority of third party information requests received by HMRC are requests for banking information, a more targeted option would be to introduce a new notice specifically for this type of information. HMRC says many other countries can require the production of third party information, by issuing an information notice to the bank within, for example, around one month. Such a notice does not have to be approved by a court and there is no right of appeal.

This option would only be available to obtain banking information reasonably required to check a taxpayer’s tax position. The issue of the notice would have to be approved by an authorised officer and HMRC would be required to notify the taxpayer of the issuing of the notice.

HMRC is also consulting on a change to allow it to obtain information for debt collection purposes or where a company, usually created in contrived circumstances, has no tax liability.


The consultation seeks feedback on changes to the penalty regime for failure to comply with a notice which requires information or documents about a person whose identity is not known, which allows HMRC to charge increased daily default penalties of up to £1000.

HMRC says the increased daily default penalties legislation, as currently drafted, is not sufficiently clear, may lead to confusion and has created difficulties with the administration of these penalties.

Under the current rules, HMRC may make an application to the tribunal for an increased daily penalty to be ‘imposed’ on the person who has failed to comply.  The tribunal will also give an indication of the amount which should be charged per day.

HMRC says 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.

The proposed change proposes will make it explicit that HMRC seeks permission from the tribunal to assess increased daily penalties. If the tribunal agrees HMRC would then notify the person that, from the date specified by the tribunal, they would be liable for an increased daily penalty of the amount determined by the tribunal.

Currently increased daily penalties can only be charged upon a failure to comply with a notice which requires information about a person whose identity is unknown. HMRC would like to explore harmonising the penalty regime by extending the scope of increased daily penalties to cover all of the notices contained in Schedule 36.

HMRC also wants to put an obligation on the third party not to inform the taxpayer about the notice where the tribunal has disapplied the requirement to send a summary to the taxpayer.

The deadline for commenting on the consultation is 2 October.

Consultation on amending HMRC’s civil information powers is here.

Report by Pat Sweet

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