HMRC has had considerable success in using third party data to better target compliance activity and to tackle the hidden economy. A current consultation by HMRC proposes that these data gathering powers be extended in order to combat tax evasion. We have extracted the following comments from the formal consultation document.
Many businesses use intermediaries to handle transactions and route custom through to their businesses. With the development of the digital economy, there has been a proliferation of such business models. Intermediaries operate across many industries, for example for restaurants supplying take away food; for hotel bookings; or to enable ticket resale for events. These intermediaries provide a framework for smaller businesses to trade.
Where a business is using an intermediary to offer goods and services, HMRC believes that the intermediary will be able to provide valuable information that can identify sellers that have not registered with HMRC or who have not declared the full value of their sales. Using such data will allow HMRC to match data received with registration data and compliant business’ tax returns, helping to identify unregistered businesses and target resources more effectively on the
non-compliant. This will support the growth of compliant businesses, protecting them against unfair competition from a minority who do not register for and pay the tax they owe.
The types of intermediary which are likely to hold such data include:
- Advertising boards or platforms provide a service where advertisements for goods or services are displayed with the intention of linking a supplier with a potential customer.
- App stores provide a platform to advertise applications for devices such as smart phones or tablets. Customers set up a store account with a connecting payment method attached. Some apps also provide in-app purchases which are paid for via the app store.
- Booking and Reservation Intermediaries facilitate a booking or a reservation of goods or services, and may facilitate taking of deposits or other payment in respect of the goods or services booked and or reserved.
These increased powers will provide HMRC with much needed information to better target taxpayers who may not be declaring all their income.
The powers will also be an additional compliance burden for the organisations that provide the information to HMRC.