Increase in use of data harvesting powers

HMRC is making use of its data-gathering powers to harvest data from a range of online sources as it opens a stream of new 'nudge' campaigns targeting different types of taxpayer. HMRC has the power to request bulk data in the form of lists of users of suppliers and their customers from websites and app platforms. 

HMRC has now set up ongoing campaigns, which include sending out letters in order to nudge taxpayers in certain trades and business towards tax compliance:

• Landlords: HMRC has details are obtained of landlords and the deposits that they receive which are registered under the statutory tenants' deposit scheme as well as from companies such as Airbnb.
• Taxi and mini-cab drivers: HMRC can obtain details of names and income from App companies such as Uber and Lyft. All these drivers are only entitled to operate in the UK if they have fulfilled their obligations with HMRC, under the Conditionality measures which commenced in April 2022.
• Company owners: HMRC's latest powers allow it to obtain details of individuals who are listed on the Persons of Significant Control (PSC) register.

As we noted last week, HMRC are also launching a new campaign to tackle non-compliance linked to offshore corporates owning UK property. Beneficial owners of offshore entities now have to be listed on the Register of Overseas Entities. The register has only been open since 1 September 2022 and existing property owners have until 31 January 2023 to enter their details on the Register.

Those individuals who receive a nudge letter should decide whether they need to be registered for Self Assessment and if they are already registered, to ensure that they are reporting their income and expenditure fully.

Taxpayers who have undisclosed profits or Capital Gains Tax have to decide the basis on which they are making disclosures, those that declare should make use of the Digital disclosure facility.

It's expensive getting caught out...

A recent case before the First Tier Tribunal illustrates the cost in terms of tax and tax geared penalties for those who fail to fully declare their online income. In Adspec Ltd and Adil Hussain (2022) TC8537, HMRC used data from Ebay to make 'best judgement' assessments on a company importing and selling tablets from China for VAT and Corporation Tax. Due to the fact that the director was unhelpful and also totally failed to discharge the evidential burden of displacing the direct and indirect tax assessments raised, the assessments together with substantial tax penalty assessments were confirmed by the tribunal. Fearful that the company would go into liquidation to escape its tax debts HMRC also issued Personal Liability Notices which enable HMRC to pass on tax debts to the director.

New powers: The Economic Crime and Corporate Transparency Bill 

This bill, once enacted, gives new information sharing powers:

• The Registrar of Companies is being given new powers to proactively share data with any persons for purposes connected with the Registrar’s functions or with other public authorities for purposes connected with their functions. Professionals.
• Businesses in the AML regulated sector will be able to share information for the purposes of preventing, detecting and investigating economic crime, disapplying the civil liability for breaches of confidentiality.
• AML business will also be able to share data indirectly via financial service companies, such as cryptocurrency exchanges.
• The Solicitors Regulation Authority will also be able to issue unlimited fines in the case of a failure to prevent or detect economic crime.

Useful guides on this topic

A Landlord: Start here
This freeview 'At a glance' guide is essential reading for landlords: our guides take you step-by-step through planning your business for tax purposes and complying with your different tax obligations during the life of your rental business.

Conditionality: taxi, private hire & scrap licences
The renewal of certain licences, to drive taxis and private hire vehicles or deal in scrap metal, will be conditional on applicants confirming that they are appropriately registered for tax.

Register of Persons with Significant Control (client briefing)
What is the Register of Persons with Significant Control (PSC)? Who must complete it? How must it be completed? Who is a Person with Significant Control?

Non-resident landlords and offshore investors index
What taxes are relevant for non-resident property investors?  What are the reporting requirements for non-resident investors? A freeview signpost to our non-resident landlords and offshore investor tax guides.

Capital Gains Tax reporting: when & how?
There are different ways for individuals to report capital gains depending on whether you are resident or non-resident, and whether you are in or out of Self Assessment.

External links

Economic Crime and Corporate Transparency Bill 2022: Factsheets

Adspec Ltd and Adil Hussain (2022) TC8537