New data-gathering powers set to help tax investigations

The government has launched a consultation on plans to give HM Revenue & Customs (HMRC) access to new sources of information to help support its tax investigations.

HMRC already has powers to collect data from businesses that process credit and debit card transactions, enabling it to identify traders not registered for tax but receiving income and those who are registered but who under-declare income to HMRC.

The consultation document, published on 22 July, said that in 2012-13, tax due but not collected as a result of the hidden economy – businesses not registered for tax and people who do not declare a source of income – was estimated at £5.9 billion. To help tackle the hidden economy, the proposals set out in the consultation would extend HMRC powers to gather information held by:

  • electronic payment providers, such as those offering “digital wallets”
  • business intermediaries, such as online booking platforms or ticket resellers.

The document said: “Non-compliant taxpayers continue to exploit the gaps in HMRC’s data-gathering powers. HMRC is seeking to acquire data to help to close the tax gap and create a level playing field between compliant and non-compliant businesses.”

The consultation, which closes on 14 October, was flagged up in the Summer Budget on 8 July, which also announced that the government would invest £800 million by 2020 in HMRC’s work on non-compliance and tax evasion, including increasing criminal investigations into serious and complex tax crime and tackling non-compliance by small and mid-sized businesses and wealthy individuals.

The government’s focus on maximising tax revenue through measures such as those included in the Summer Budget is likely to create an enhanced risk of tax investigations.

With this in mind, any taxpayer concerned about their own tax affairs, and who believes they might become subject to a tax investigation, would be wise to seek expert advice. 

Our specialists at Taxation-Investigation can provide specialist advice to clarify the situation and on the options available, so that the taxpayer can make informed decisions about the best way forward. We can also assist in mitigating outcomes or presenting a robust defence where tax affairs are in order. For more information, please contact us.