This helpsheet provides further guidance on the application of the Fundamental Principles and Standards covering information on HMRC’s rights to access data and Schedule 36 Finance Act 2008 statutory notices. It also covers informal and statutory requests to both members and clients, as well as what data is covered under legal privilege.
For the purposes of this Chapter the term ‘data’ includes documents in whatever form (including electronic) and other information. While this guidance relates to HMRC requests, other government bodies or organisations may also approach the member for data. The same principles apply.
A distinction must be drawn between a request for data made informally and those requests for data which are made in exercise of a power to require the provision of the data requested (‘statutory requests’).
Similarly, requests addressed to a client and those addressed to a member require different handling.
Where a member no longer acts for a client, the member remains subject to the duty of confidentiality. In relation to informal requests, they should refer the enquirer either to the former client or to their new agent. In relation to statutory requests addressed to the member, the termination of their professional relationship with the client does not affect their duty to comply with that request, where legally required to do so.
A member should comply with reasonable statutory requests and should not seek to frustrate legitimate requests for information. Adopting a constructive approach may help to resolve issues promptly and minimise costs to all parties.
Whilst a member should be aware of HMRC’s powers in relation to the access, inspection and removal of data, given the complexity of the law relating to information powers, it may be appropriate to take specialist advice.
Revenue Scotland will have separate powers under the Revenue Scotland and Tax Powers Act 2014.
Disclosure in response to informal requests not made under any statutory power to demand data can only be made with the client’s permission.
Sometimes the client will have authorised routine disclosure of relevant data, for example, through the engagement letter. However, if there is any doubt about whether the client has authorised disclosure or about the accuracy of details, the member should ask the client to approve what is to be disclosed.
Where an oral enquiry is made by HMRC, a member should consider asking for it to be put in writing so that a response may be agreed with the client. A member is reminded of the importance of confirming the identity and authority of any caller seeking information about clients so as to minimise the risk of breaching client confidentiality.
Although there is no obligation to comply with an informal request in whole or in part, a member should advise the client whether it is in the client’s best interests to disclose such data.
Informal requests may be forerunners to statutory requests compelling the disclosure of data. Consequently, it may be sensible to comply with such requests or to seek to persuade HMRC that a more limited request is appropriate. The member should advise the client as to the reasonableness of the informal request and likely consequences of not providing the data, so that the client can decide on their preferred course of action.
From time to time HMRC chooses to communicate directly with clients rather than with the appointed agent.
HMRC recognises the significant value which tax agents bring to both their clients and to the operation of the tax system. However, HMRC has also made it clear that on occasions it may deal with the taxpayer as well as, or instead of, the agent.
Examples of where HMRC may contact a member’s client directly include:
- Where HMRC is using ‘nudge’ techniques to encourage taxpayers or claimants to re-check their financial records or to change behaviour;
- Where HMRC has become aware of particular assets, such as offshore investments, and the taxpayer is encouraged to consider whether a further tax disclosure is required;
- Where the taxpayer has engaged in what HMRC considers to be a tax avoidance scheme, as HMRC considers that this will better ensure that the client fully understands HMRC’s view.
HMRC has given reassurances that it is working to ensure that initial contact on compliance checks will normally be via the agent and only if the agent does not reply within an appropriate timescale will the contact be direct to the client.
When the member assists a client in dealing with such requests from HMRC, the member should apply the principles outlines above (see section: Informal requests addressed to the member).
In advising the client a member should consider whether the notice is valid, how to comply with the request and the consequences of non-compliance. Specialist advice may be needed, for example on such issues as whether the notice has been issued in accordance with the relevant tax legislation, whether the data requested is validly included in the notice, legal professional privilege and human rights.
Even if the notice is not valid, in many cases the client may conclude that the practical answer is to comply. If the notice is legally effective the client is legally obliged to comply with the request.
The member should also advise the client about any relevant right of appeal against the statutory request if appropriate and of the consequences of a failure to comply.
The same principles apply to statutory requests to the member as statutory requests to clients.
If a statutory request is valid it overrides the member’s duty of confidentiality to their client. The member is therefore obliged to comply with the request. Failure to comply with their legal obligations can expose the member to serious civil and criminal penalties. Any doubt about whether the statutory request overrides the member’s duty of confidentiality to their client can be addressed by either:
- Obtaining the client’s consent to the disclosure; or
- Seeking specialist advice as to the validity of the notice.
In cases where the member is not legally precluded by the terms of the notice from communicating with the client, the member should advise the client of the notice and keep the client informed of progress and developments.
The member remains under a duty to preserve the confidentiality of their client, subject to the general points in the Fundamental Principles (see the second paragraph in the confidentiality section), so care must be taken to ensure that in complying with any notice the member does not provide information or data outside the scope of the notice.
If a member is faced with a situation in which HMRC is seeking to enforce disclosure by the removal of data, the member should consider seeking immediate advice from a specialist adviser or other practitioner with relevant specialist knowledge, before permitting such removal, to ensure that this is the legally correct course of action.
Where a Schedule 36 notice is in point a member should note that it does not allow HMRC to inspect business premises occupied by a member in their capacity as an adviser. Specialist advice should be sought in any situation where HMRC asserts otherwise.
Legal privilege arises under common law and may only be overridden if this is expressly or necessarily implicitly set out in legislation. It protects a party’s right to communicate in confidence with a legal adviser. The privilege belongs to the client and not to the member. If a document is privileged:
- The client cannot be required to make disclosure of that document to HMRC and a member should be careful to ensure that their reasons for advising a client nevertheless to make such a disclosure are recorded in writing.
- It must not be disclosed by any other party, including the member, without the client’s express permission.
There are two types of legal privilege under common law, legal advice privilege covering documents passing between a client and their legal adviser prepared for the purposes of obtaining or giving legal advice and litigation privilege for data created for the dominant purpose of litigation. Litigation privilege may arise where litigation has not begun, but is merely contemplated and may apply to data prepared by non-lawyer advisers (including tax advisers) if brought into existence for the purposes of the litigation.
Communications from a tax adviser who is not a practising lawyer will not attract legal advice privilege but other similar protections exist under statute law, including:
- A privilege reporting exemption which applies to the reporting of money laundering in certain circumstances. See Chapter 6 of the CCAB guidance for further details.
- A privilege under Schedule 36 whereby a tax adviser does not have to provide data that is their property and which constitute communications between the adviser and either their client or another tax adviser of the client. Information about such communications is similarly privileged. However, care should be taken as not all data may be privileged.
Whether data is or is not privileged and protected from the need to disclose is a complex issue, which will turn on the facts of the particular situation.
A member who receives a request for data, some of which they believe may be subject to privilege, should take independent legal advice on the position, unless expert in this area.