Finance Bill (HC Bill 49)

(3) After subsection (4) insert—

“(4A) No liability to income tax arises in respect of earnings if—

(a) they are paid by the government of a designated country to a
person belonging to the EU civilian staff, and

(b) 5that person is not a British citizen, a British overseas
territories citizen, a British National (Overseas) or a British
Overseas citizen.”

(4) In subsection (6)—

(a) omit the “and” before the definition of “designated”, and

(b) 10after that definition insert “, and

• “the EU civilian staff” means—

  (a)

  civilian personnel seconded by a member
  State to an EU institution for the purposes of
  activities (including exercises) relating to the
  15preparation for, and execution of, tasks
  mentioned in Article 43(1) of the Treaty on
  European Union (tasks relating to a common
  security and defence policy), as amended
  from time to time, and

  (b)

  20civilian personnel (other than locally hired
  personnel)—

  (i)

  made available to the EU by a member
  State to work with designated
  international military headquarters or
  25a force of a designated country, or

  (ii)

  otherwise made available to the EU by
  a member State for the purposes of
  activities of the kind referred to in
  paragraph (a).”

(5) 30Accordingly, in the heading for that section for “and staff of designated
allied headquarters” substitute “etc”.

ITA 2007

5 (1) Section 833 of ITA 2007 (visiting forces and staff of designated allied
headquarters: residence, etc) is amended as follows.

(2) 35In subsection (2), in paragraph (a) for “allied” substitute “international
military”.

(3) After that subsection insert—

“(2A) This section also applies to an individual within subsection (3) or
(3A).”

(4) 40In subsection (3), for “This section also applies to an individual who—”
substitute “An individual is within this subsection if the individual—”.

(5) After that subsection insert—

“(3A) An individual is within this subsection if the individual—

(a) belongs to the EU civilian staff,

(b) is in the United Kingdom, but only because of serving as part
of that staff, and

(c) is not a British citizen, a British overseas territories citizen, a
British National (Overseas) or a British Overseas citizen.”

(6) 5In subsection (7)—

(a) omit the “and” before the definition of “designated”, and

(b) after that definition insert “, and

• “the EU civilian staff” means—

  (a)

  civilian personnel seconded by a member
  10State to an EU institution for the purposes of
  activities (including exercises) relating to the
  preparation for, and execution of, tasks
  mentioned in Article 43(1) of the Treaty on
  European Union (tasks relating to a common
  15security and defence policy), as amended
  from time to time, and

  (b)

  civilian personnel (other than locally hired
  personnel)—

  (i)

  made available to the EU by a member
  20State to work with designated
  international military headquarters or
  a force of a designated country, or

  (ii)

  otherwise made available to the EU by
  a member State for the purposes of
  25activities of the kind referred to in
  paragraph (a).”

(7) Accordingly, in the heading for that section for “and staff of designated
allied headquarters” substitute “etc”.

Section 221

SCHEDULE 37 30Tax agents: dishonest conduct

Part 1 Introduction

Overview

1 This Schedule is arranged as follows—

(a) 35this Part explains who is a tax agent and what it means to engage in
dishonest conduct,

(b) Part 2 sets out the process for establishing whether someone is
engaging in or has engaged in dishonest conduct,

(c) Part 3 confers power on HMRC to obtain relevant documents,

(d) 40Part 4 sets out sanctions for engaging in dishonest conduct,

(e) Part 5 provides for assessment of and appeals against penalties, and

(f) Parts 6 and 7 contain miscellaneous provisions and consequential
amendments.

Tax agent

2 (1) A “tax agent” is an individual who, in the course of business, assists other
persons (“clients”) with their tax affairs.

(2) Individuals can be tax agents even if they (or the organisations for which
5they work) are appointed—

(a) indirectly, or

(b) at the request of someone other than the client.

(3) Assistance with a client’s tax affairs includes—

(a) advising a client in relation to tax, and

(b) 10acting or purporting to act as agent on behalf of a client in relation to
tax.

(4) Assistance with a client’s tax affairs also includes assistance with any
document that is likely to be relied on by HMRC to determine a client’s tax
position.

(5) 15Assistance given for non-tax purposes counts as assistance with a client’s tax
affairs if it is given in the knowledge that it will be, or is likely to be, used by
a client in connection with the client’s tax affairs.

Dishonest conduct

3 (1) An individual “engages in dishonest conduct” if, in the course of acting as a
20tax agent, the individual does something dishonest with a view to bringing
about a loss of tax revenue.

(2) It does not matter whether a loss is actually brought about.

(3) Nor does it matter whether the individual is acting on the instruction of
clients.

(4) 25A loss of tax revenue would be brought about for these purposes if clients
were to—

(a) account for less tax than they are required to account for by law,

(b) obtain more tax relief than they are entitled to obtain by law,

(c) account for tax later than they are required to account for it by law, or

(d) 30obtain tax relief earlier than they are entitled to obtain it by law.

(5) “Tax” is defined in Part 6 of this Schedule.

(6) “Tax relief” includes—

(a) any exemption from or deduction or credit against or in respect of
tax, and

(b) 35any repayment of tax.

(7) A reference in this paragraph to doing something dishonest includes—

(a) dishonestly omitting to do something, and

(b) advising or assisting a client to do something that the individual
knows to be dishonest.

Part 2 Establishing dishonest conduct

Conduct notice

4 (1) This paragraph applies if HMRC determine that an individual is engaging
5in or has engaged in dishonest conduct.

(2) An authorised officer (or an officer of Revenue and Customs with the
approval of an authorised officer) may notify the individual of that
determination.

(3) The notice must state the grounds on which the determination was made.

(4) 10For the effect of notifying the individual, see paragraphs 7(2) and 29(2).

(5) A notice under this paragraph is referred to as a “conduct notice”.

(6) In relation to a conduct notice, a reference to “the determination” is to the
determination forming the subject of the notice.

Appeal against determination

5 (1) 15An individual to whom a conduct notice is given may appeal against the
determination.

(2) Notice of appeal must be given—

(a) in writing to the officer who gave the conduct notice, and

(b) within the period of 30 days beginning with the day on which the
20conduct notice was given.

(3) It must state the grounds of appeal.

(4) On an appeal that is notified to the tribunal, the tribunal may confirm or set
aside the determination.

(5) Subject to this paragraph, the provisions of Part 5 of TMA 1970 relating to
25appeals have effect in relation to an appeal under this paragraph as they
have effect in relation to an appeal against an assessment to income tax.

(6) Setting aside a determination does not prevent a further conduct notice
being given in respect of the same conduct if further evidence emerges.

Offence of concealment etc in connection with conduct notice

6 (1) 30A person (“P”) commits an offence if, after a relevant event has occurred, P—

(a) conceals, destroys or otherwise disposes of a material document, or

(b) arranges for the concealment, destruction or disposal of a material
document.

(2) A “relevant event” occurs if—

(a) 35a conduct notice is given to an individual, or

(b) an individual is informed by an officer of Revenue and Customs that
a conduct notice will be or is likely to be given to the individual.

(3) A “material document” is any document that could be sought under
paragraph 8 as a result of the giving of the conduct notice.

(4) If P acts after the event described in sub-paragraph (2)(a), no offence is
committed if P acts—

(a) after the determination has been set aside,

(b) more than 4 years after the conduct notice was given, or

(c) 5without knowledge of that event.

(5) If P acts before that event but after the event described in sub-paragraph
(2)(b), no offence is committed if P acts—

(a) more than 2 years after the individual was, or was last, so informed,
or

(b) 10without knowledge of the event described in sub-paragraph (2)(b).

(6) P acts without knowledge of an event if P—

(a) is not the individual with respect to whom the event has occurred,
and

(b) does not know, and could not reasonably be expected to know, that
15the event has occurred.

(7) A person guilty of an offence under this paragraph is liable—

(a) on summary conviction, to a fine not exceeding the statutory
maximum, and

(b) on conviction on indictment, to imprisonment for a term not
20exceeding 2 years or to a fine, or both.

Part 3 Power to obtain tax agent’s files etc

Circumstances in which power is exercisable

7 (1) The power in paragraph 8 is exercisable only in case A or case B and only
25with the approval of the tribunal.

(2) Case A is where a conduct notice has been given to an individual and
either—

(a) the time allowed for giving notice of appeal against the
determination has expired without any such notice being given, or

(b) 30notice of appeal against the determination was given within that
time, but the appeal has been withdrawn or the determination
confirmed.

(3) Case B is where—

(a) an individual has been convicted of an offence relating to tax that
35involves fraud or dishonesty,

(b) the offence was committed after the individual became a tax agent
(whether or not the individual was still a tax agent when it was
committed and regardless of the capacity in which it was
committed),

(c) 40either—

(i) the time allowed for appealing against the conviction has
expired without any such appeal being brought, or

(ii) an appeal against the conviction was brought within that
time, but the appeal has been withdrawn or the conviction
45upheld, and

(d) no more than 12 months have elapsed since the date on which
paragraph (c) was satisfied.

(4) For the purposes of this paragraph, a determination or conviction that is
appealed is not considered to have been confirmed or upheld until—

(a) 5the time allowed for bringing any further appeal has expired, or

(b) if a further appeal is brought within that time, that further appeal has
been withdrawn or determined.

(5) In this Schedule, a reference to “the tax agent” is—

(a) in a case falling within case A, a reference to the individual
10mentioned in sub-paragraph (2), and

(b) in a case falling within case B, a reference to the individual
mentioned in sub-paragraph (3).

(6) It does not matter whether the individual is still a tax agent when the power
in paragraph 8 is to be exercised.

15File access notice

8 (1) Subject to paragraph 7, an officer of Revenue and Customs may by notice in
writing require any person mentioned in sub-paragraph (2) to provide
relevant documents.

(2) The persons are—

(a) 20the tax agent, and

(b) any other person the officer believes may hold relevant documents.

(3) “Relevant documents” is defined in paragraph 9.

(4) A notice under this paragraph is referred to as a “file access notice”.

(5) The person to whom a file access notice is given is referred to as “the
25document-holder”.

Relevant documents

9 (1) “Relevant documents” means the tax agent’s working papers (whenever
acting as a tax agent) and any other documents received, created, prepared
or used by the tax agent for the purposes of or in the course of assisting
30clients with their tax affairs.

(2) It does not matter who owns the papers or other documents.

(3) The reference in sub-paragraph (1) to clients—

(a) includes former clients, and

(b) is not limited to the clients with respect to whom the tax agent is
35engaging in or has engaged in dishonest conduct.

Content of notice

10 (1) A file access notice may require the provision of—

(a) particular relevant documents specified in the notice, or

(b) all relevant documents in the document-holder’s possession or
40power.

(2) A file access notice does not need to identify the clients of the tax agent.

(3) A file access notice addressed to anyone other than the tax agent must name
the tax agent.

Compliance

11 A file access notice may require documents to be provided—

(a) 5within such period,

(b) by such means and in such form, and

(c) to such person and at such place,

as is reasonably specified in the notice or in a document referred to in the
notice.

12 10Unless otherwise specified in the notice, a file access notice may be complied
with by providing copies of the relevant documents.

Approval by tribunal

13 (1) The tribunal may not approve the giving of a file access notice unless—

(a) the application for approval is made by or with the agreement of an
15authorised officer,

(b) the tribunal is satisfied that the case falls within case A or case B (see
paragraph 7),

(c) the tribunal is satisfied that, in the circumstances, the officer giving
the notice is justified in doing so,

(d) 20the document-holder and (where different) the tax agent have been
told that relevant documents are to be required and given a
reasonable opportunity to make representations to an officer of
Revenue and Customs, and

(e) the tribunal has been given a summary of any representations so
25made.

(2) Nothing in sub-paragraph (1) requires the tribunal to determine whether an
individual is engaging in or has engaged in dishonest conduct.

(3) A decision by the tribunal under this paragraph is final (despite the
provisions of sections 11 and 13 of the Tribunals, Courts and Enforcement
30Act 2007).

Documents not in person’s possession or power

14 A file access notice only requires the document-holder to provide a
document if it is in the document-holder’s possession or power.

Types of information

15 (1) 35A file access notice does not require the document-holder to provide—

(a) parts of a document that contain information relating to the conduct
of a pending appeal relating to tax, or

(b) journalistic material (as defined in section 13 of the Police and
Criminal Evidence Act 1984).

(2) 40A file access notice does not require the document-holder to provide
personal records (as defined in section 12 of the Police and Criminal
Evidence Act 1984).

(3) But a file access notice may require the document-holder to provide
documents that are personal records, omitting any information whose
inclusion (whether alone or with other information) makes the original
documents personal records.

5Old documents

16 (1) A file access notice does not require the document-holder to provide a
relevant document if—

(a) the whole of the document originated before the back-stop day, and

(b) no part of it has a bearing on tax periods ending on or after that day.

(2) 10“The back-stop day” is the first day of the period of 20 years ending with the
day on which the file access notice is given.

Privileged communications between professional legal advisers and clients

17 (1) A file access notice does not require the document-holder to provide any
part of a document that is privileged.

(2) 15For the purposes of this paragraph a document is privileged if it is a
document in respect of which a claim to legal professional privilege, or (in
Scotland) to confidentiality of communications between client and
professional legal adviser, could be maintained in legal proceedings.

(3) Regulations under paragraph 23 of Schedule 36 to FA 2008 (information
20powers: privileged communications) apply (with any necessary
modifications) to disputes under this paragraph as to whether a document
is privileged.

Power to copy documents

18 If a document is provided pursuant to a file access notice, an officer of
25Revenue and Customs may take copies of or make extracts from the
document.

Power to retain documents

19 (1) If a document is provided pursuant to a file access notice, HMRC may retain
the document for a reasonable period if an officer of Revenue and Customs
30thinks it necessary to do so.

(2) While a document is retained—

(a) the document-holder may, if the document is reasonably required
for any purpose, request a copy of it, and

(b) an officer of Revenue and Customs must comply with such a request
35without charge.

(3) The retention of a document under this paragraph is not to be regarded as
breaking any lien claimed on the document.

(4) If a document retained under this paragraph is lost or damaged, the
Commissioners are liable to compensate the owner of the document for any
40expenses reasonably incurred in replacing or repairing the document.

Appeal against file access notice

20 (1) If the document-holder is a person other than the tax agent, the document-
holder may appeal against the file access notice, or any requirement in it, on
the ground that it would be unduly onerous to comply with the notice or
5requirement.

(2) Notice of appeal must be given—

(a) in writing to the officer by whom the file access notice was given, and

(b) within the period of 30 days beginning with the day on which the file
access notice was given.

(3) 10It must state the grounds of appeal.

(4) On an appeal that is notified to the tribunal, the tribunal may confirm, vary
or set aside the file access notice or a requirement in it.

(5) If the tribunal confirms or varies the notice or a requirement in it, the
document-holder must comply with the notice or requirement—

(a) 15within such period as is specified by the tribunal, or

(b) if the tribunal does not specify a period, within such period as is
reasonably specified in writing by an officer of Revenue and
Customs following the tribunal’s decision.

(6) A decision by the tribunal under this paragraph is final (despite the
20provisions of sections 11 and 13 of the Tribunals, Courts and Enforcement
Act 2007).

(7) Subject to this paragraph, the provisions of Part 5 of TMA 1970 relating to
appeals have effect in relation to an appeal under this paragraph as they
have effect in relation to an appeal against an assessment to income tax.

25Offence of concealment etc in connection with file access notice

21 (1) A person (“P”) commits an offence if P—

(a) conceals, destroys or otherwise disposes of a required document, or

(b) arranges for the concealment, destruction or disposal of a required
document.

(2) 30A “required document” is a document within sub-paragraph (3) or sub-
paragraph (4).

(3) A document is within this sub-paragraph if at the time when P acts—

(a) P is required to provide the document by a file access notice, and

(b) either—

(i) 35the notice has not been complied with, or

(ii) it has been complied with, but P has been notified in writing
by an officer of Revenue and Customs that P must continue
to preserve the document (and the notification has not been
withdrawn).

(4) 40A document is within this sub-paragraph if at the time when P acts—

(a) P is not required to provide the document by a file access notice,

(b) P has been informed by an officer of Revenue and Customs that P
will be or is likely to be so required, and

(c) no more than 6 months have elapsed since P was, or was last, so
informed.

(5) A person guilty of an offence under this paragraph is liable—

(a) on summary conviction, to a fine not exceeding the statutory
5maximum, and

(b) on conviction on indictment, to imprisonment for a term not
exceeding 2 years or to a fine, or both.

Penalty for failure to comply

22 (1) A person who fails to comply with a file access notice is liable to a penalty of
10£300.

(2) Failing to comply with a file access notice also includes—

(a) concealing, destroying or otherwise disposing of a required
document, or

(b) arranging for any such concealment, destruction or disposal.

(3) 15“Required document” has the same meaning as in paragraph 21.

Daily penalty for failure to comply

23 If the failure continues after notification of a penalty under paragraph 22 has
been issued, the person is liable to a further penalty, for each subsequent day
on which the failure continues, of an amount not exceeding £60 for each such
20day.

Failure to comply with time limit

24 A failure to do anything required to be done within a limited period of time
does not give rise to liability to a penalty under paragraph 22 or 23 if the
thing was done within such further time (if any) as an officer of Revenue and
25Customs may have allowed.

Reasonable excuse

25 (1) Liability to a penalty under paragraph 22 or 23 does not arise if the person
satisfies HMRC or (on an appeal notified to the tribunal) the tribunal that
there is a reasonable excuse for the failure.

(2) 30For the purposes of this paragraph—

(a) an insufficiency of funds is not a reasonable excuse unless
attributable to events outside the person’s control,

(b) if the person relies on another person to do anything, that is not a
reasonable excuse unless the first person took reasonable care to
35avoid the failure,

(c) if the person had a reasonable excuse for the failure but the excuse
has ceased, the person is to be treated as having continued to have
the excuse if the failure is remedied without unreasonable delay after
the excuse ceased.