HMRC Compliance Checks FAQ

Information powers

20. What about the other existing information powers?

These are being reviewed. Many repeals are planned as part of this year’s Finance Act and many other taxes and duties will be aligned, Ministers willing. We will continue to review other powers and will repeal or reform them as appropriate after full consultation in accordance with Cabinet Office guidelines (minimum 12 week public consultation).

21. How have the existing VAT powers been restricted?

The existing VAT powers allowed officers to require any person concerned in the supply of goods or services to supply relevant information. There was no statutory requirement to say who was being investigated, to give notices in writing or for pre-authorisation. Nor is there any concept of third party powers. VAT officers can also currently visit homes.

This is replaced by a clear framework of information notices, and clearer restrictions on visiting homes.

22. Does this mean that HMRC can no longer ask for things informally?

Co-operation and sharing of information is still HMRC‘s preferred way of working where possible.

23. Does this mean an HMRC officer can ask for information once the enquiry window is shut? Does discovery still apply?

An information power can be used after the enquiry window is closed where an officer has reason to suspect that tax has not been assessed. The discovery assessing provisions have not changed.

24. Is there a right of appeal against an information notice?

There is a right of appeal against an information notice but not against any requirement to produce statutory records. There is no right of appeal if the independent tax Tribunal has approved the issue of a notice.

25. Why is there no right of appeal on statutory records?

There is a statutory obligation to keep tax records. So HMRC must be able to see them.

26. Has anything changed on legal professional privilege?

No

27. Will precursor letters still be used?

Yes. They are currently required in some direct tax investigations where there is no appeal and the notice needs pre authorisation from the tribunal. There is a similar pre authorisation process to support new compliance checks but it will be used in more limited circumstances.

In the future, supplementary information powers will mostly have a right of appeal for taxpayers and this will replace the need for pre authorisation.

In other cases, where the issue of the notice has been authorised by the independent Tribunal and there is no appeal right, there will be a safeguard similar to the precursor letter. The person will need to be told that information or documents are required and will have a new right to make representations. This is a stronger safeguard.

28. Are the penalty levels for information failures changing?

Yes. The current penalty levels have not changed for many years, and some are now ineffective as a deterrent against a failure to provide information. The levels are being aligned with the higher of the existing penalties. The standard penalty is now £300 and the maximum penalty for continuing failure is £60 per day.

29. What is the new unlimited tax-related penalty?

In some cases, normal penalties are ineffective. This might be because the benefit to the taxpayer of withholding information is far greater than the cost of the penalty, for example when a large amount of unpaid tax is at stake.

In these circumstances there will be a new deterrent – a penalty related to the likely amount of the improper tax advantage gained by not providing the required information. This type of penalty can only be imposed by the upper Tribunal, which is equivalent to the High Court.

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