HM Revenue and Customs is seeking feedback on proposals to significantly expand its power to collect data on taxpayers and permit the department to access information and systems stored in the cloud.
The department has published a range of ideas and questions concerning “how HMRC’s information and data-gathering powers… could be updated to enable digital transformation of taxpayer services, improve HMRC’s compliance capabilities, and reduce administrative burdens”.
HMRC said that the legislation on which it currently relies – some of which dates from the 1980s – seeks to provide the department, where applicable, with the “same access to records held on computer, or in any other modern form, as was then possible with hard-copy records”.
But existing laws do not reflect the amount of data that is held, not on individuals’ devices, but by cloud storage firms or software providers, according to HMRC. The department indicated that it would like to be empowered to obtain such third party-hosted information.
“HMRC would like to explore options to expand the scope of current legislation to encompass a broader set of powers that [would] enable HMRC to obtain and access any type of information and data – including software – from any system that stores or processes information or data relevant to UK tax administration”.
The department also suggested an extension of its powers to interrogate the systems of specialist financial software providers.
“Current legislation allows HMRC to check the operation of a computer system in prescriptively specific circumstances, but not to have any influence on how the system operates,” the department said. “HMRC would like to analyse and investigate the software of third-party and intermediary software providers. The aim is to work with these providers to identify any flaws in their software in terms of compliance.”
The department claimed that these expanded powers of access would ultimately “could benefit taxpayers and software providers alike”.
HMRC – which has opened a consultation on its proposals – also floated the idea of providing for greater flexibility in its data-gathering powers. This could be enabled by the adoption of a legal framework which “sets out generalised information and data-gathering powers in primary legislation, supported by secondary legislation and guidance” dedicated to specific issues.
The department also proposed changes to UK legislation so that “rather than focus on separate categories of data-holders, [it] instead specifies record-keeping and reporting obligations for all parties within its tax system”.
Data matching
HMRC said a core objective of its proposed measures was to improve its ability to quickly and accurately match people and organisations with the correct tax data and, where possible, enable the department to “pre-populate tax returns” with this information.
Proposals put forward as part of the consultation include a new “mandatory requirement for data-holders to collect and provide HMRC with common information and data fields to support better matching”.
The tax agency also outlined its intention to create a system in which each individual taxpayer is assigned a unique identification code.
“[This] will allow HMRC to bring together and match all relevant information and data items collected from a range of sources, including third parties, into one single record, unique to each individual taxpayer, across HMRC systems,” the department indicated.
The consultation – which is open until 11:45am on 20 July 2023 – is also seeking feedback on the frequency with which tax information should be submitted to HMRC, as well as what any additional data-protection safeguards might be required if the department’s information-gathering powers are expanded.
“HMRC welcomes engagement from any taxpayer or interested party with views on the efficacy and reform of HMRC’s information and data powers and taxpayer safeguards,” the consultation documents said.
“This is likely to be of particular interest to accountants, tax agents, third parties and data-holders, legal professionals, payroll professionals, bookkeepers, insolvency practitioners, software providers, intermediaries, financial advisers, and their clients. Taxpayer representative bodies, charities, and other voluntary organisations that support people with their tax affairs will also have an interest. We would also be interested in hearing from stakeholders with a wider interest in the government’s National Data Strategy and use of information and data to administer public services.”
The proposals are intended to support the ambitions of a 10-year strategy, which was published in 2020 and outlined an intention to reform and modernise the UK’s tax-administration system. HMRC has previously sought views on how to improve the data it collects from citizens and organisations.
The transformation of administration systems also takes place alongside the digitisation of taxation services and initiatives – such as the National Data Strategy – to improve government’s sharing of data and its use in decision-making and service-delivery.
Sam Trendall is editor of CSW's sister title PublicTechnology, where this story first appeared