Government consultation is currently in progress on further steps to tackle the hidden economy by increasing HMRC powers to access data from third parties.
At present, HMRC can access data on bank and credit/debit card transactions. The plan is to extend that to include data held by third party trade facilitators such as electronic payment providers and business intermediaries (including those allowing customers to make orders, purchases or reservations relating to goods, services or digital content).
The move comes as a response to the perceived £5.6bn of missing tax from the hidden economy, of which HMRC plans to utilise its data gathering powers to recoup £860m by 2020/21.
It has been highlighted that the data would be used for identifying compliance issues with businesses, and not the transactions of individual customers. Although, bulk information can be used as an independent check against the data that taxpayers themselves report to HMRC.
HMRC also believes that gathering this information will “reduce errors and improve overall compliance”. Since the start of HMRC’s existence, they have been increasingly pushing for more powers and capturing more data has been important to clamping down on tax avoidance.
Although this may not directly affect you, this highlights the progress HMRC are making in their acquisition of personal data. Having spent years developing software (known as Connect) that seeks links between individual taxpayers and businesses, income, assets and transactions. This will be another stepping stone in HMRC’s plans to seek out discrepancies and recoup some of the missing £5.6bn tax.
The exact format of the new powers and the date they will come into effect is not yet known. It seems inevitable, however, that HMRC’s powers will increase.
For compliant businesses, the new measures should, in theory, not be an issue. However, the problem is that access to more data can cause tax enquiries to take even longer and cost more in professional fees whilst taxpayers prove to HMRC that all their affairs are above board.
For more information or advice on protecting your business from any fees that come with an HMRC investigation, please get in touch with our tax team by emailing firstname.lastname@example.org or call Julie Walsh on 01254 679131.