Better use of new and improved third-party data – LITRG response

This consultation builds on previous calls for evidence and consultations on the topic of third-party data. This particular consultation is mainly concerned with how the quality of data that HMRC already gathers can be improved. The focus is financial account information, including bank and building society interest, and data on card sales.

LITRG is supportive of initiatives that make it easier for taxpayers to comply with their tax obligations and get their tax right. We also support the principle of using third-party data to improve the taxpayer experience with HMRC. Using data to help taxpayers get their tax affairs trust should help build trust in HMRC and the tax system, thus improving compliance.

We take the opportunity to remind HMRC of some of our key concerns in respect of the increased use of third-party data and pre-population by HMRC. In particular, whether the balance of responsibility that comes from the existing statutory framework continues to be appropriate, since the taxpayer will no longer be the originator for much of the data in their tax return. Also, the question of what happens when the data provided by a third party to HMRC is incorrect.

We welcome some of the proposals in the consultation, such as the proposal to introduce new legislation to establish standing reporting obligations for financial account information and card sales data. We note however, that there should be an obligation on HMRC to use the data they receive in a timely manner; and HMRC should only collect data according to the frequency to which they will make use of it.

We also suggest that, if the policy intention is to help taxpayers get their taxes right first time, HMRC should require third-party data suppliers to share a copy of the data they provide to HMRC with the taxpayer, for example as is required under the OECD Reporting Rules for Digital Platforms. This data should be ‘translated’ for taxpayers, so that it is easy to understand.

We agree with the intention to use the National Insurance number (NINO) as a unique identifier for individual customers. However, there are areas that will require careful consideration, as not all customers have a NINO. It is important that people are not excluded from opening a savings account if they do not have a NINO.

We welcome the exploration of methods of improving the quality of third-party data. To improve the customer experience, it is vital that the data HMRC use is accurate and complete, or where it is not, HMRC recognise this and there is a prompt that further action is needed. However, we question whether HMRC have the resources and / or expertise to judge whether data reports provided by, for example, a bank, are complete and accurate. We are also keen to understand if the determination of penalties under the categories listed in the consultation document is linked to or separate from HMRC’s interactions with individual taxpayers whose data is included in a report.