On 27 April 2023 the UK government published a consultation document with the title The Tax Administration Framework Review – Information and Data.  The government requested input on HMRC’s information and data-gathering powers, and how they can be updated to enable digital transformation of taxpayer services, improve compliance and reduce administrative burdens.

In July 2020 the UK set out a ten-year strategy to build a modern tax administration system and called for evidence on the tax administration framework. The latest consultation document builds on the previous feedback. Comments are invited by 20 July 2023.

Accountability

In some countries tax authorities centrally pre-populate taxpayer returns and make them available directly to taxpayers. The relevant tax authority is the originator of the return instead of the taxpayer. The taxpayer must review the pre-populated information and data in the return and send in any changes to the pre-populated content.

In the countries that use pre-population there are various ways to allow taxpayers to have final accountability for the tax return. For example, in some countries a pre-populated return is treated as automatically correct unless the taxpayer raises a concern. Most other tax authorities require the taxpayer to review the information and data pre-populated in their return and make the necessary amendments themselves or agree that the return is accurate.

In the UK, the taxpayer originates the return and is responsible for the final sign-off of the return. The taxpayer is responsible for the provision and accuracy of supporting information and documentation. The UK considers that final taxpayer responsibility should continue; but is prepared to review the balance of responsibilities for ensuring accuracy of information and data as it moves towards pre-population of returns.

Scope of HMRC information and data gathering powers

A data-holder can appeal against a notice to provide information if it is considered to be unduly burdensome; if they do not hold the data; or if the data requested is not ‘relevant data’ under the Regulations. HMRC will generally work with a data-holder to ensure the notice is met and there is no undue burden; however penalties can be charged if the data holder does not comply with the relevant notice. HMRC is responsible for ensuring the security of the taxpayer information and data.

HMRC routinely compares information and data provided by taxpayers with third-party information and data relevant to their tax position, helping to simplify tax administration and identify potential non-compliance. New technology provides greater opportunities to improve information and data quality and to expand the use of pre-population.

Different legislative approaches

There are possibilities for different legislative approaches. Generalised information and data-gathering powers could be included in the primary legislation, supported by secondary legislation and guidance. This could increase the flexibility of UK tax administration as there would be no need to update primary legislation to incorporate new information required from data-holders.

Unique identifiers

A report from the Office of Tax Simplification (OTS) advised HMRC to consider using a unique taxpayer identifier to enable matching of third-party information and data with a taxpayer’s Single Customer Account. HMRC recognises the need for a robust method for identifying and matching taxpayer information and data. They will look at improving the ability of the Unique Customer Record (UCR) to match taxpayer information and data.