Clause 222 extends the information powers in schedule 26 of the Finance Act 2008. The current rules were introduced by the Labour Government in 2008 as part of an alignment exercise following the merger of HM Customs and Excise and the Inland Revenue. They allow HMRC to obtain details of a taxpayer whose identity is not known, but only when HMRC can persuade a tribunal to issue a notice on the basis that there has been a serious likelihood of tax loss by the taxpayer. Under this clause, these rules have been extended to obtain these details without the need of a tribunal notice nor any expectation of a serious likelihood of tax loss. May I ask the Minister why he has removed that requirement?

The request for information must be relevant to the collection of tax covered by the agreement rather than just a fishing expedition. How will a fishing expedition be defined and identified? Overall, there is very poor definition of when HMRC should be allowed to request the identity information from third parties. The clause states simply that HMRC should already hold “sufficient data”, but what is “sufficient”? How will that be clarified? Without proper detail on how much data HMRC must already hold, there is a risk that it could be subject to appeals and litigation when it makes an application that it feels is “sufficient” but has not been legally defined as such. Given that recent reports state that the backlog of  tribunal cases at HMRC would take 38 years to clear at the current rate, clearly such a situation must be avoided. Will the Minister publish guidance on that matter? Will the Government design a better way for third parties to notify HMRC that records have been destroyed, so that they do not have to go through an incredibly bureaucratic procedure that involves a long wait for a penalty notice? We strongly urge the Minister to address the weakness of the appeal system.

Another potential safeguarding problem is the lack of clarity over how the clause will interact with confidentiality laws. Data protection laws would not allow banks, for example, to disclose their clients’ details without express authorisation. Will the measure override that? Will notices be allowed that will force banks to disclose data to HMRC? Clarification on that point would be welcome.

Other aspects of the drafting of the clause may have unintended consequences. New paragraph 5A(7), which was introduced after the initial consultation, may enable HMRC to check the tax position of a class of persons as well as an individual taxpayer. We understand that the provision was intended to cover situations where information is required about joint accounts, but it is written far more widely than that and it could in theory extend to all bank customers with UK addresses but overseas bank accounts.

Although we welcome attempts to strengthen HMRC’s hand in uncovering the details of people who are trying to avoid it, the legislation must be properly drafted. I hope the Minister will be able to respond to my queries about the potential problems in clause 222, and I would be grateful for his comments on whether it might be appropriate to require HMRC to report on the functioning of the new requirement so that a proper assessment can be made of how much difficulty the issues raised in Committee have caused.