Schedule 36 Consultation: HMRC to increase their information powers
13 July 2018
13 July 2018
Currently, Schedule 36 of the Finance Act 2008 allows a HMRC officer to formally request information that they consider to be reasonably required to check the taxpayers’ position via a Schedule 36 information notice (‘notice’). Usually, the taxpayer must comply with the notice within a reasonable time-limit which is usually 30 days. The powers can be extended to search business premises for reasonably required information.
HMRC can ask for relevant information from the taxpayer directly or through a third party. The administration involved in issuing a third party notice is time-consuming as HMRC needs the consent of either the taxpayer in question or a tribunal.
Proposed reforms
1. Remove tribunal approval for third party notices
Aligning third party notices with taxpayer notices so that the requirement to seek a tribunal’s approval is removed. The requirement to seek approval from tribunal is very time consuming and costly for HMRC, therefore removal of this requirement would save taxpayers’ money. The relevant third party would still have the right of appeal on the grounds that the request is too onerous.
2. Financial Institution Notice
HMRC would like to create separate rules for third party information requests, the majority of which are for banking information. A financial institution notice would not need tribunal approval, however, it is still necessary to alert the relevant taxpayer unless doing so would prejudice the collection of tax.
3. Penalties
Under current legislation increased daily penalties, not exceeding £60, can only be charged following a fixed penalty of £300 for failure to provide information/comply with a notice where the identity of a person is unknown. Certain conditions must be complied with before a tribunal can allow an increased daily penalty of up to £1,000. HMRC want to implement penalties to cover all notices. HMRC envisage the change would create consistency across the penalty regime and deter taxpayers from being non-compliant.
4. Third party requirement not to ‘tip off’ the taxpayer
As mentioned above, HMRC may be given permission not to name the taxpayer in the third party notice, or to send a copy of the third party notice to the taxpayer. However, there is currently no legislation stopping the third party from ‘tipping off’ the taxpayer even if the tribunal decided that notifying the taxpayer would prejudice the collection of tax.
HMRC propose a requirement for the third party not to tip off the taxpayer if the tribunal decided that sending the taxpayer a copy of the notice was not necessary.
Aspire Comment
HMRC are trying to make it easier to access information needed to assess a taxpayer’s position by removing the need to seek tribunal approval. It is important to remember that if you think the information required is not necessary and it is not statutory records that you have a right to appeal the notice. However, where a notice is issued with tribunal approval, there is no right of appeal against the notice.
The consultation closes on 2 October 2018.