HMRC believes that an extension in the types of third party data it has access to will aid it in tackling the £5.9 billion tax gap created by businesses who fail to register for tax and individuals who fail to declare a source of income.
“Data can be particularly powerful when it is collected from third parties who facilitate trade, either between businesses, or between businesses and consumers,” the consultation document claims.
“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,” it adds.
In 2013, the government body was given new powers to collect data from merchant acquirers to help identify traders receiving income but not register for tax and those who are registered but under declare their income.
It wants to extend this access to two similar sorts of data: information held by electronic payment providers and business intermediaries which often allow customers to make orders, purchases or reservations relating to goods, services or digital content.
Simplifying Tax Returns
However, HMRC doesn’t want access to the data just to track tax related fraud, should the increased powers be granted, it hopes to use the data to aid its digital ambitions.
“Third party data also plays an important part in HMRC’s ambition, where possible, to present its customers with data to check rather than forms and tax returns to complete,” the consultation document claims.
“Pre-filling or pre-populating information in this way will help to reduce error and improve overall compliance,” it adds.