Data-gathering powers: providers of payment or intermediary services

Part of Finance Bill – in a Public Bill Committee am 3:15 pm ar 7 Gorffennaf 2016.

Danfonwch hysbysiad imi am ddadleuon fel hyn

Photo of David Gauke David Gauke The Financial Secretary to the Treasury 3:15, 7 Gorffennaf 2016

Clause 164 will extend HMRC’s existing bulk data-gathering powers, allowing it to require data from two additional categories of data holder. The first category relates to business intermediaries that facilitate transactions, particularly online, between a supplier and a customer. The category covers providers of electronic stored-value payment services, also known as digital wallet transactions, a method of transferring payments to a retailer or trader. Comparing those new data with information that it already holds will enable HMRC to identify businesses that have failed to register with it or that are not declaring the full amount of tax they owe. HMRC will not seek data about individual transactions.

Clause 165 makes minor technical corrections to schedule 23 to the Finance Act 2011, which covers the bulk data-gathering powers mentioned in clause 164. Businesses are increasingly using intermediaries to provide custom or take payments, in some cases without registering for tax. New payment models are evolving quickly and are moving away from cash and card transactions towards other electronic payment groups, which means that some businesses can trade digitally while remaining beyond HMRC’s view.

Clause 164 updates HMRC’s data-gathering powers to keep pace with those changes and futureproofs legislation by including emerging new data sources of a similar type. Those data will help HMRC to crack down on the hidden economy, which the Government are committed to addressing. The powers that enable HMRC to collect third-party data from a range of data holders is subject to appeal. When a data holder does not comply with a notice, HMRC may levy penalties.

Clause 165 corrects provision by which increased daily penalties can be approved and assessed. As drafted, the existing provisions are not sufficiently clear and may lead to confusion for data holders and obstacles to the administration of the penalties. Clause 165 gives clarity to the legislation regarding HMRC’s application to the first-tier tribunal and adds an appeal right for the data holder over the number of days the increased penalties can be assessed.

The changes made by clause 164 will affect business intermediaries, particularly those online and operators of digital wallets. Compliant business should benefit, as the clause ensures a level playing field between businesses that comply with their tax obligations and those that do not. There will be some impact, as there will be additional administrative burdens for the data holders. However, before an information notice is served, HMRC will always work closely with the data holder to understand their data in order to minimise the burden on the data holder and to ensure that the data are usable when they are passed to HMRC.

Clause 165 will affect only data holders who do not comply with a schedule 23 third-party bulk data information notice. The changes made by the clause will allow HMRC to issue data-gathering notices to two new categories of data holders. Data holders can appeal against a notice, if they deem it to be burdensome. New regulations will specify the types of data to be collected. However, the policy intention is not to capture data about individual transactions. The clause adds an appeal right for the data holder over the number of days for which the increased penalties can be assessed. That appeal right did not previously exist.

On the questions raised by the hon. Lady, it is correct that the measure will raise revenue by £220 million a year by 2021. The yield comes from tackling the hidden economy, which is very important. It is not HMRC’s intention to impose the penalties. Before a notice is issued, HMRC will always work closely with data holders to understand the data they hold, how the data are collated and what format they are in. That ensures that HMRC’s requirements are reasonable.

The hon. Lady asked whether the data holder has a right of appeal against an HMRC request. The answer is yes. The data holder can appeal against a notice to the tribunal on the grounds that the request is too onerous to comply with, they are not a data holder or the data requested are not relevant. Before a notice is served, HMRC will always work closely with data holders to ensure that HMRC’s requirements are reasonable and to minimise the burden on the data holder.

On the concern that powers could be used to disadvantage owner-managed businesses of low income, the measures should not affect low-income groups. The powers relate to businesses that fail to register for tax or significantly under-declare their income. It is right that we take action on such businesses, but compliant businesses should have nothing to fear.

Data from data holders will enable HMRC more accurately to target their compliance checks in the area of highest risk and conclude them quicker. The technical corrections will give clarity to the legislation and add an appeal right for the data holder. That will help to provide a level playing field for the majority of legitimate businesses that register with HMRC and pay what they owe. I hope that the clauses stand part of the Bill.