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The government wants the power to investigate your finances without your permission

2-minute read

Sam Bromley

23 July 2018

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The government wants the power to obtain financial information about self-employed taxpayers without getting their permission first.

It’s part of its aim to ‘maximise revenues due’ and tackle non-compliance, but experts say it’s a breach of privacy.

HMRC’s current powers

HMRC has the power to obtain relevant information from taxpayers to check they’re paying the right amount of income tax, Capital Gains Tax, Corporation Tax and VAT. This information is sometimes held by third parties, and if they want to see it, they can issue a ‘third party notice.’

Third parties include banks and other financial institutions, as well as lawyers, accountants, and estate agents.

HMRC can’t issue a third party notice without the approval of the taxpayer or a tax tribunal. It also needs to prove that the information is ‘reasonably required’.

And if HMRC has got permission from the tribunal to keep its investigation secret, the third party is still legally allowed to tell the taxpayer they’ve been asked for the information.

But all this could be set to change. In a consultation document launched quietly in mid-July, HMRC proposes they remove these safeguards. This could give them the ability to look at your bank account and financial information without your permission.

HMRC’s new proposals

Tax officials say the current process is bureaucratic and too resource-intensive, and that the safeguards are disproportionate.

So, HMRC’s key proposals are:

  • to remove the need to get approval from the taxpayer or tribunal before issuing a third party notice (the taxpayer would be given a summary of the information needed)
  • if the tribunal gives permission for the taxpayer to be kept in the dark about an investigation, the third party would be legally prevented from telling the taxpayer they’ve been asked for the information

Both of these proposals are significant. The first one means that HMRC would no longer need to prove the requested information is ‘reasonably required’, which experts argue is an important safeguard.

The second proposal means that, while they do need approval to keep the investigation a secret, HMRC could dive into financial information from your bank or other third party without you knowing.

A ‘sinister step’

There were 215 requests for tribunal approval of a third party notice in 2016-17, but this number could rise if the proposals become law.

James Daley, the managing director of Fairer Finance, told the Daily Mail: "The idea that HMRC can request information from people’s bank, from state agents, and other third parties without notifying the individual is shocking.

“They are bypassing checks and balances that are there to protect people.”

And John O’Connell, chief executive of the TaxPayers’ Alliance, said: “Giving the taxman powers to access taxpayers’ bank accounts without notifying them is a sinister step that would undermine fundamental freedoms.”

HMRC says that nothing has been decided, and if the proposals become law, they would only apply to a few hundred cases each year.

You can read the HMRC consultation document here.

What do you think of these proposals? Let us know in the comments below.

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