Tax deduction scheme
Request:
1. All information routinely supplied to banks and building societies regarding:
- a) the processing of R85 forms
- b) disclosure of information about customers who receive their interest gross.
2. A copy of the Tax Deduction Scheme for Interest Investor Compliance Guide.
3. Copies of all policies and procedures used by the HMRC unit that deals with the Tax Deduction Scheme for Interest.
Response:
Under section 21 of the Act, a public authority is not required to provide information in response to a request if it is already reasonably accessible to the applicant. The information at item (1) of your request is available as described in the next paragraph.
HMRC issues guidance for banks and other deposit takers and building societies about how to operate the tax deduction scheme for interest. This includes how they should deal with R85 forms and information that should be reported to HMRC. Updates to the guidance are available through bulletins issued to banks and building societies. This is the only information that is routinely supplied to banks and building societies as per your first request. This information is available through the following links on our website:
Bank and building society interest - Detailed Guidance
2. HMRC does not have a Tax Deduction Scheme for Interest Investor Compliance Guide and consequently does not hold information falling in the description of item (2) of your request. However, information available to individuals about the tax deduction scheme for interest is available on our website here:
Bank and building society interest - Key information
3. HMRC confirms that it holds information meeting the description of item (3) but that information is being withheld under the Freedom of Information Act. The exemption that applies is at section 31(1) (d) of the Act.
Section 31(1) (d) allows public authorities to withhold information if its disclosure would or would be likely to prejudice the assessment or collection of tax. It is HMRC’s view that disclosure would be likely to undermine the compliance programme that the department undertakes with regard to the Tax Deduction Scheme for Interest and therefore would prejudice the assessment and collection of tax. HMRC has reached this conclusion as it our belief that the requested information could be used by opportunistic individuals to fraudulently claim gross payment of interest or understate investment income in an attempt to pay less tax. Furthermore, if we put information about our compliance regime and risks in the public domain it would allow those individuals intent on abusing the system to arrange their affairs or rehearse arguments to make it less likely that they would be detected. For these reasons we conclude there is a real and probable risk to our ability to assess and collect tax and the exemption applies.
Section 31 is a qualified exemption which means that, if it applies, we must consider whether it is in the public interest to override the exemption and release the information. After careful consideration we have decided that on balance it is not in the public interest to release this information. In coming to this conclusion we considered a number of factors.
HMRC accepts that there is strong public interest in ensuring that the department is accountable for its decisions and is as transparent as possible about the ways in which it reaches them. Publishing the information requested would, on the face of it reassure the public, that our compliance activities are fair and robust and applied equitably. This would increase the public’s confidence in the tax system. There is also a general public interest in the public being aware of and being able to challenge our decisions; knowledge of our procedures would assist this. But we also take into account that the department is subject to review by external bodies such as the National Audit Office, the Adjudicators Office and on an individual level the Appeal Commissioners so the public interest in our accountability is met by the oversight of those bodies.
But there is also a strong public interest in HMRC being able to enforce the law properly so that the tax burden is shared equally. Anything that might assist those intent on avoiding tax is not in the public interest. Evasion and avoidance unfairly shifts the tax burden onto honest taxpayers and that is not in the public interest. Anything that puts at risk our compliance activities could undermine public confidence in the tax system. This could damage the general climate of honesty among the overwhelming majority of taxpayers who use the system properly and that is not in the public interest.
On balance we conclude that it is not in the public interest to set aside the exemption.
