UK: UK Proposes Further Extension To HMRC's Information Powers

Given the current economic and political climate, the continued global focus on tax transparency is hardly surprising. It is clear that many governments increasingly regard the ability to obtain and exchange information as a key tool in protecting tax revenues and combating evasion.

In the UK, as in many other countries, developments in this area show no sign of slowing down. In addition to the ongoing Liechtenstein Disclosure Facility and bilateral negotiations with Switzerland and various other jurisdictions, draft legislation has recently been published to extend the powers of H.M. Revenue & Customs ('HMRC') to obtain information from third parties - which were already significantly increased in 2009. If enacted, the new proposals will (inter alia) increase HMRC's ability to obtain information about certain foreign as well as UK taxes.

Summary of proposals

General description

The proposals are intended to modernise and simplify HMRC's third party information-gathering powers, with a view to supporting more effective risk assessment and enabling resources to be targeted at non-compliant taxpayers. This is to be achieved by introducing a single set of general rules specifying:

  • the categories of third party 'relevant data-holders' from whom information could be requested and the 'relevant data' which could be required from each category of data-holder. Unsurprisingly, the terms 'relevant data-holder' and 'relevant data' are widely defined;
  • the form of a notice and how it must be complied with. The new rules will allow HMRC to specify the form in which information has to be provided and the address to which it must be sent. In contrast to the current law, the address specified need not necessarily be an HMRC office (this change is apparently intended to reduce risks to data security by allowing information to be sent directly to the place where it will be used, e.g. HMRC's data centre or the office of an HMRC information technology partner); and
  • the penalties applicable for failing to comply with a notice or providing inaccurate data. The draft legislation does not impose a separate penalty for providing incomplete data. It is unclear whether this is an oversight, or whether it is assumed that the provision of incomplete data will constitute non-compliance or inaccuracy.

If enacted in their current form, the new rules will replace and extend a number of existing third party information powers which are currently spread across the tax legislation and governed by separate sets of rules. However, they will not replace the rules in Schedule 36 of the Finance Act 2008 ('Schedule 36'), which will be retained in a slightly amended form. Schedule 36 was introduced by the previous UK government following an earlier review, and itself significantly extended HMRC's information-gathering powers. HMRC used this power to great effect in 2009 when they successfully served notices on more than 300 UK and foreign banks and financial institutions to disclose information to HMRC about clients who have offshore accounts.

The intention is that Schedule 36 will continue to be the primary tool for checking the tax position of a taxpayer who has already been identified by HMRC. To the extent that the rules overlap, Schedule 36 will apply in priority to the new rules.

International scope

  • The most eye-catching feature of the proposals in an international context is that they will allow HMRC to seek information for the purposes of 'relevant foreign taxes' as well as UK taxes, even in relation to taxpayers who have not already been identified by HMRC. (Although some of HMRC's powers under Schedule 36 already extend to relevant foreign taxes, most of their current information powers only apply in relation to specified UK taxes.) For these purposes a foreign tax is 'relevant' if it is imposed by an EU Member State or a country with which the UK has entered into a Tax Information Exchange Agreement (TIEA) or a double tax treaty providing for information exchange.

    The stated purpose of this potentially significant change is to enable the UK to meet its international obligations to exchange information, which can often apply even where the information requested by the other state is not also required for UK tax purposes. Also, HMRC anticipate that the current requirements regarding exchange of information within the EU are likely to increase in the near future. Apart from that, HMRC hope that including foreign tax in the new law will have the indirect effect of improving their prospects of obtaining more useful data from overseas tax authorities for use in tackling UK avoidance and evasion (since foreign tax authorities are generally not obliged to provide information to the UK unless the UK would broadly be able to reciprocate if it were to receive a similar request).

    Although the precise implications of the proposed change remain to be seen, they could well be considerable. On the face of it, HMRC will be able to use the extended power to obtain and exchange bulk information from UK banks relating to the foreign tax position of non-UK residents, if the foreign tax is imposed by an EU Member State or a country with which the UK has a double tax treaty/TIEA.

    In addition to exchanging information pursuant to an international obligation, the UK increasingly also exchanges information with other countries on a spontaneous basis. HMRC's published guidance on information exchange already encourages HMRC staff to be alert to opportunities for providing information spontaneously to overseas tax authorities. It is possible that in some cases the extension of their information powers relating to foreign taxes will increase their ability to do exactly that.
  • It should also be noted that there is nothing in the proposed new rules - or the existing rules in Schedule 36 - to prevent HMRC from requesting information from a data-holder who is not resident in the UK. Banks, trustees, nominees etc. are within the scope of the rules regardless of where they are resident.

Increased maximum penalties

Although the proposed standard penalties for failure to comply with a notice are relatively modest (an initial fixed penalty of £300 plus a daily penalty of up to £60 for continuing failure to comply), HMRC will have power to apply to the tribunal to increase the maximum daily penalty to £1,000 where the default continues beyond 30 days. The draft legislation also inserts a corresponding provision into Schedule 36.

Right of appeal

For the first time, the draft legislation includes a right of appeal against a data-holder notice on specified grounds. However, the right to appeal is disapplied in cases where HMRC have obtained advance approval from the tribunal before issuing the notice (which they are entitled but not required to do).

Effective date

HMRC are currently consulting on the proposals. Subject to the outcome of the consultation, the intention is that the draft legislation will be included in the Finance Bill 2011 and will take effect on 1 April 2012. The existing rules will continue to apply in relation to notices issued before that date.


The extension of HMRC's powers to seek information, if enacted, will increase their ability to obtain data regarding UK (and potentially non-UK) taxpayers and their assets. Given EU developments and the UK's wide network of double tax treaties, we can expect the collection and exchange of information to come even higher up the agenda than in the past.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Lindsay Brown
In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.