Tax Administration: New Powers for Information & Data condoc

HMRC's new 'The Tax Administration Framework review – information and data', explores options for substantially widening and updating HMRC information and data-gathering powers. These include new powers co-joining data information requests from both companies and their owners, and amending its powers to allow it to obtain data from cloud applications and data centres. 

We have summarised the key points of in the consultation, it's worth reading to the bottom, as the intended powers ramp up as the document progresses.

As HMRC notes, 'tax administration needs to keep pace with modern life and business practices and take advantage of opportunities presented by new technology' and it's a fact that many of HMRC's established powers data back to 2008 and earlier and they now require an update.

HMRC's 2021 Tax Administration Framework Review (TAFR) identified specific themes for further exploration:

• Increased use of third-party information and data to pre-populate tax returns.
• Safeguarding data integrity, acquisition and its use, including ways for taxpayers to amend information and data automatically provided to HMTC.
• The need for clear-cut obligations and responsibilities if tax administration will increasingly depend on a greater number of parties (including taxpayers, agents, third-party data-holders and software providers).

This new consultation starts off reviewing international practices in terms of tax reporting, data gathering and information and inspection powers and then looks at what HMRC wants to develop and change, be this in adjusting old powers to do the job more efficiently or creating new legislation to meet new challenges.

1. Learning from other countries

• Many international tax authorities have introduced digital and data-based reforms to simplify tax administration and deliver tailored services to promote compliance and make paying tax easier. 
• HMRC is keen to learn from other tax authorities’ information and data power reforms, both as part of planned transformation programmes and as part of the government’s 10-year Tax Administration Strategy. It lists examples from Estonia, France, Australia, Ireland, Portugal, and Slovenia.

Question 1: Do you have any other examples of international approaches to data-gathering, information and inspection powers you think it would be helpful for HMRC to explore? Are you aware of any drawbacks or advantages in the international approaches mentioned within the examples that you would like to draw our attention to?

2. Pre-population of tax returns

• Taxpayers in other countries are responsible for reviewing the pre-populated information and data in their return(s), approval of its accuracy and submitting changes to, or advising the relevant tax authority of any amendments they believe should be made to pre-populated content.
• The way that taxpayers approve and adjust the pre-populated data varies across different countries.

Question 2: UK taxpayers are responsible for the overall accuracy of their return(s), including supporting information and data. This reflects practice in OECD partner countries, which pre-populate taxpayer return(s):

A. What are your views on retaining the principle that taxpayers are responsible for the accuracy of their return(s)?

B. What process(es) should be available for challenging and resolving discrepancies in information and data pre-populated in taxpayer return(s)?

C. Are there any specific alternative approaches to accountability HMRC should consider?

3. Scope of HMRC’s information and data-gathering powers and taxpayer safeguards

HMRC are keen to explore different legislative approaches and build a simplified and more flexible information and data-gathering framework

It is considering the approaches used by Australia and Estonia or Slovenia.

Question 3: In considering potential reforms by HMRC of its information and data-gathering powers, and applicable safeguards:

A. What are your views on the prescriptive framing of HMRC’s current information and data powers?

B. What are your views on HMRC adopting a flexible approach to its powers, such as that used by Australia and Estonia?

C. What are your views on alternative approaches, such as the Slovenian approach set out above?

D. Would it be beneficial to taxpayers for HMRC’s current, and/or reformed powers to be consolidated into a single piece of legislation?

4. Standardisation of regulations governing data-holders

• HMRC’s information and data-gathering powers have evolved piecemeal and in tandem with the evolution of data protection and UK GDPR rights that have been required to protect the use of information and data.
• There is potential scope to adopt a more harmonised approach, standardising requirements for groups of information and data-holders and making legislation simpler for data-holders to comply with.

Question 4: What are your views on aligning data-holder requirements and considering a mandatory requirement for data-holders to collect and provide HMRC with common information and data fields to support better matching?

5. Unique identifiers

• A unique taxpayer identifier will enable the matching of third-party information and data with a taxpayer’s Single Customer Account.
• The OTS suggested National Insurance Numbers (NINOs) as a potential unique identifier, but they are not a robust unique identifier for tax administration, as not every taxpayer has a NINO, and there are instances of NINO duplication.
• A proposal is for a Unique Customer Record (UCR), that will seek to improve HMRC's ability to match taxpayer information and data.

Question 5: What are your views on:

A. The advantages, disadvantages, or any specific considerations of HMRC introducing unique taxpayer identifier(s) to enable more accurate information and data-matching to improve tax administration, including fuller pre-population of taxpayer returns?

B. Similar approaches used by partner OECD countries?

C. Alternative unique identifier(s), or data-matching mechanisms which could be utilised to improve tax administration, including fuller pre-population of taxpayer returns?

6. Standardisation of information and data provision

• HMRC would like to explore the merits of standardising reporting of third-party information and data in the UK: for example, through the use of a ‘schema’. A schema is a structure used for holding and transmitting information and data in bulk.
• The OECD’s CRS rules, incorporated into UK law under the International Tax Compliance Regulations 2015 (as amended), prescribe one such schema that financial institutions must use when submitting information and data to HMRC. 

Question 6: What are your views on the advantages and disadvantages of adopting a set of ‘schema’ like the OECD model, to standardise information and data reporting from third parties? If HMRC were to explore this further, how should any new obligations in this area be structured?

7 & 8. Simplifying the current information and data-holder notice regime

HMRC is interested in views on the merits of adopting a different approach for data-holders who already submit third-party information and data on a regular basis, as an alternative to manually issuing notices. This could include, for example:

• Standing reporting obligations for some third parties, to provide specified information and data on a regular basis.
• Multi-period or indefinite data-holder notices in other cases, possibly supplemented by the use of one-off data-holder notices where the value of the information and data is yet to be assessed.

Question 7: What are your views on adopting a different approach for submitting information and data on a regular basis to HMRC, including alternatives to the current notice regime?

Question 8: What are your views on the frequency with which information and data should be reported to HMRC, particularly with a view towards the increasingly real-time nature of tax reporting, and other taxpayer services?

9. Information and data powers and taxpayer safeguards: challenges

There are a number of challenges with the current Schedule 36 process:

• An imbalance between HMRC’s ability to request information and data within a set timeframe from a recipient, who must then wait for extended periods for HMRC to process the information and data provided and respond.
• The current approach has not always kept pace with modern technology, including the advent of digital record-keeping. Requests can sometimes involve multiple resource-intensive exchanges of correspondence, and delay issue resolution.
• Penalties may not incentivise compliance, often being relatively small compared to the size of the tax under dispute and/or the size of the taxpayer/business.
• There are occasions when non-compliant individuals and businesses appear to actively seek to delay providing requested information and data for as long as possible. This includes exploiting safeguards such as reviews and appeals to the Tribunal, only to withdraw appeals at the last moment. This generates unnecessary costs, puts pressure on the Tribunal system and is unfair to other taxpayers who try to get things right the first time.
• As technology evolves HMRC may in future be able to better verify a customer’s tax position by using information and data from third-party sources, which may mean the role of information and data powers changes.

Question 9: Do you agree that these are the main challenges with the information notice process as set out in Schedule 36 Finance Act 2008? In your view, are there any additional challenges HMRC should consider?

10. Alternative approaches to data gathering

• Are alternative approaches to gathering information and data that could streamline the provision of additional information and data and reduce administrative burdens for all parties?
• One such alternative approach could be introducing a more graded power. It could operate with the aim of simplifying the process, making it less burdensome for taxpayers and supporting a more collaborative relationship. This would allow HMRC more scope to tackle or use other means to reduce delay for those thought to be displaying, more seriously non-compliant behaviour.
• This could include differentiated information and data powers depending on a taxpayer’s circumstances. For example, HMRC could deploy greater flexibility in the timescales, scope and format of the information and data it requests, where taxpayers engage in a collaborative way.
• Conversely, HMRC could apply a different set of penalties, or bypass the internal review process, before an appeal to a Tribunal, in instances where the taxpayer has a history of non-compliance with previous information notices, or there is evidence of deliberate non-compliance.

Question 10: What are your views on HMRC exploring the introduction of a more graded information and data power to reduce administrative burdens and delays for taxpayers and HMRC? Do you have any suggested alternative approaches that could help to improve the process for taxpayers and HMRC?

11. A coordinated approach to notices

• Notices are currently issued on an individual basis (to a specific taxpayer, business or third party). Each taxpayer must be treated separately under this approach.
• There are circumstances where a multi-user approach such as issuing a single notice to a class or group of taxpayers who share common attributes, may help simplify the process of obtaining information, reduce costs and risk to the Exchequer. For example, a blanket notice could be issued to all users of the same avoidance arrangements (for example, the same Disclosure of Tax Avoidance Schemes reference number). That notice could cover the promoter, all users, and beneficiaries, rather than HMRC needing to issue separate, individual notices to all parties linked to the scheme.

Question 11: Are there cases where a more coordinated approach to issuing information notices (for example, issuing one notice to a class of taxpayer and/or to a third party about a class of taxpayers) could improve the experience for taxpayers and third parties? What challenges could this present and how could taxpayer safeguards mitigate these challenges?

12. A new category of information notice for companies and their owners

• In some cases, the affairs of the ‘taxpayer’ and the ‘third party are closely intertwined. For example, in the case of an owner-managed business, the tax affairs of the director and the company are closely linked, even though they are considered separate legal entities. The requirement to obtain taxpayer or Tribunal consent to ask the director for information and data about their company (or vice-versa) may be unnecessary and complicate the process, adding delay and increasing costs for all involved.

Question 12: What are your views on creating a category of information notice that covers connected persons or third parties (this could cover the ‘person with significant control’, in the case of a company)?

13. Computer records: updating Section 114 Finance Act 2008

HMRC would like to analyse and investigate the software of third-party and intermediary software providers and has its eye on data stored 'on the cloud'.  It would like to explore options to expand the scope of current legislation to encompass a broader set of powers that enable HMRC to obtain and access any type of information and data (including software) from any system that stores or processes information or data relevant to the UK tax administration. 

• It is increasingly rare for information and data to be held only on a personal computer, at a single, physical location, within desktop applications. With the advent of cloud and server technology, information and data, including software is more dispersed away from the end user’s personal computer (or smartphone or tablet), with much of it now being held online (often outside the UK by a third party).
• Furthermore, the marketplace for taxation has moved onto digital technology platforms. This includes the fast-developing use of machine learning and artificial intelligence tools, as well as highly mechanised commercial shared service centres that turn taxpayers’ information and data into tax returns at low cost.

Finance Act 2008

Currently, Section 114 (3) of the Finance Act 2008 refers to HMRC’s ability to:

"Obtain access to, and inspect and check the operation of, any computer and any associated apparatus or material which is or has been used in connection with a relevant document."

Question 13: What are your views on updating Section 114 Finance Act 2008 to take into account the issues set out above?

Responses should be sent by 20 July 2023, by email to This email address is being protected from spambots. You need JavaScript enabled to view it..

External links

The Tax Administration Framework review – information and data