Policy paper

TIIN - HMRC’s Information and International Exchange Powers

Published 13 June 2023

This was published under the 2022 to 2024 Sunak Conservative government

Who is likely to be affected?

Businesses, and third-party data-holders subject to Information Notices under Schedule 36 to the Finance Act 2008 and Schedule 23 to the Finance Act 2011, and other HMRC general information powers that may be issued to third parties.

General description of the measure

The Investigatory Powers Act (IPA) 2016 provides a framework for the acquisition of Communications Data (CD). CD is information and data that is generated, held, or obtained in the provision, delivery, and maintenance of postal or telecommunications services. Guidance from Home Office (HO) provides that information and data acquired during mandatory registration for online services may constitute CD, which can include name, address, and phone number.

This measure clarifies that HMRC can use its existing civil powers to acquire information and data for its civil functions to assess and collect tax.

Policy objective

This legislative change clarifies the application of section 12 of IPA 2016 to HMRC’s civil information powers so that current practices with regards to data collection and exchange to and from businesses and third parties in respect of CD can be used to support HMRC’s functions to support tax compliance and reduce the tax gap.

This legislative change ensures the efficient administration of the tax system. HMRC’s civil information powers, such as those provided for under Finance Acts 2008 and 2011, are key in enabling HMRC to carry out its functions. Information Notices issued using these powers allow HMRC to verify tax returns, obtain information and data on non-compliant individuals/businesses and help ensure they pay the correct tax.

The purpose of this amendment is to clarify the scope of HMRC’s existing civil powers and provide certainty to third party data holders (such as banks and other financial institutions) in light of HO guidance. The amendment does not confer new powers but puts beyond doubt HMRC’s continued use of its existing, civil powers for its routine civil tax compliance work.

International treaty obligations concerning the exchange of tax information, such as under the Common Reporting Standards (CRS) and the Foreign Account Tax Compliance Act (FATCA) are reporting obligations on financial institutions (a duty, rather than the exercise of an HMRC information power). Information provided in this way is outside the scope of the IPA 2016.

Background to the measure

Earlier this year, the HO issued guidance to financial institutions regarding what CD falls within scope of the IPA 2016. Whilst clarification of the definition of CD is welcomed, this measure will ensure stakeholders, such as banks and other financial institutions, are able to provide HMRC with CD when required for its civil taxation functions.

Detailed proposal

Operative date

The measure will have effect on and after the date of Royal Assent to the Spring Finance Bill 2023. This measure is formally retrospective as always having had effect, with the consequence that it applies in practice from 22 July 2020.

Current law

The IPA 2016, sections 11 and 12, and Part 3 regulate how officers of public authorities can lawfully obtain CD from Telecommunications and Postal Operators (TOs and POs).

The IPA 2016 also inserted into Schedule 36 to Finance Act 2008, subsections 19(4) and (5), the effect of which means, that Schedule 36 information notices cannot compel a TO to provide CD.

Proposed revisions

Legislation will be introduced to amend Spring Finance Bill 2023 to exempt HMRC’s civil tax functions imposed by section 12 of IPA 2016. These amendments not only ensures that HMRC maintains its ability to acquire CD from TOs but also restores HMRC’s information powers to what they were before IPA 2016 came into force. It will enable HMRC’s discharge of its civil functions to assess tax liabilities and collect tax revenues on behalf of the Exchequer.

Schedule 36 to Finance Act 2008 had subsections 19(4) and 19(5) inserted by paragraph 10, Schedule 2 to IPA 2016, which in turn were brought into force by IPA 2016 (Commencement No. 12) Regulations 2020 (SI 2020/766). This amendment to the Finance Act 2008 will be reversed, as it provides that an information notice does not require a TO to provide or produce CD.

Summary of impacts

Exchequer impact (£m)

2023 to 2024	Nil
2024 to 2025	Nil
2025 to 2026	Nil
2026 to 2027	Nil
2027 to 2028	Nil
2028 to 2029	Nil

This measure is not expected to have an Exchequer impact.

Economic impact

The measure is not expected to have any significant macroeconomic impacts.

Impact on individuals, households, and families

There are expected to be no impacts for individuals as this measure clarifies that the legislation works as intended for the efficient administration of the tax system.

The measure is not expected to impact on family formation, stability, or breakdown.

Equalities impacts

It is not anticipated that there will be impacts on those in groups sharing protected characteristics.

Impact on business including civil society organisations

There are expected to be no impacts for businesses and civil society organisations, as this measure clarifies that the legislation works as intended for the efficient administration of the tax system.

Operational impact (£m) (HMRC or other)

This change should not be expected to have any operational impact.

Other impacts

No other impacts have been identified.

Monitoring and evaluation

The measure will be kept under review through communication with affected taxpayer groups, businesses, and the HO.

Further advice

If you have any questions about this change, please contact Anis Chowdhury on email: anis.chowdhury@hmrc.gov.uk.

Declaration

Victoria Atkins MP, Financial Secretary to the Treasury, has read this tax information and impact note and is satisfied that, given the available evidence, it represents a reasonable view of the likely costs, benefits, and impacts of the measure.