Tax & Accounting News

Questions from HM Revenue and Customs

12/05/2010

Under the increasing powers held by HM Revenue and Customs (HMRC), the department is continuing to demand information from companies about the tax affairs of employees.

The law states that HMRC is entitled to ask for ‘something that is reasonably required where it could affect a person’s tax position now or in the future’. Crucially, it is not just entitled to ask about the tax affairs of the company concerned, but also anyone else on which it holds information – such as employees or business contacts.

However, HMRC cannot place an undue burden on employers – so businesses are entitled to refuse a request for information which would involve excessive time or cost to obtain.

A bigger problem concerns ‘personal’ information, since employers normally have an obligation to protect employee data under the Data Protection Act 1998 – but this is overridden by the legal powers given to HMRC under the Finance Act 2008.

Clearly, this gives rise to a moral dilemma, but from a legal point of view it is advisable for the employer to insist HMRC submits its request in writing to protect their position in case of any challenge from the employee concerned or the Information Commissioner.

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