Proposals for new powers to break down ‘hidden economy’ include access to digital wallet records and app stores
HM Revenue & Customs is pressing to extend its data gathering powers to ensure that more businesses fulfil their tax obligations.
It has published a consultation document as a step towards legislation that could give it more access to data held by electronic payment providers and business intermediaries, the companies that provide a bridge between buyers and sellers.
The move is part of Chancellor George Osborne’s long running campaign to ensure that fewer people and businesses dodge their tax obligations, and is aimed at closing a “tax gap” in the hidden economy that was estimated at £5.9 billion for 2012-13.
“Data can be particularly powerful when it is collected from third parties who facilitate trade, either between businesses, or between businesses and consumers,” it says. “This is because they can provide information in bulk about the activity of large numbers of traders, and because third party data can be used as an independent check against the data that taxpayers themselves report to HMRC.
“Targeted data-gathering powers also minimise the burden on business, obtaining data in bulk from a few sources rather than imposing broad-based reporting requirements.”
HMRC obtained new powers in 2013 to collect data from companies that process credit and debit card transactions. This has helped it to identify traders who have not registered for tax or are under-declaring their income.
It now wants similar powers to access the data of electronic payment providers and business intermediaries, both of which are making heavy use of digital platforms.
These could include aggregated and transactional level data from the use of digital wallets, which can be used to make payments from smart phones using funds loaded from the buyer’s bank account.
The document asks for suggestions on other types of payment providers that should be included, and says HMRC wants to future-proof the legislation to cover new models as they emerge.
Similarly, it identifies a handful of types of business intermediaries that could hold relevant data – app stores, advertising platforms and booking and reservation companies – and asks how frequently it should request their data and for suggestions on others.
The document also poses questions on whether indirect payment providers – companies with indirect access to a payment system – should be included, how to minimise the costs to the businesses affected, how it will affect data holders with a limited presence in the UK, and whether existing safeguards are sufficient.
It also aims to allay any concerns about individual privacy, emphasising that the proposals are aimed at identifying the activities of businesses selling goods and services rather than individuals who are buying.
The consultation is open until 14 October.