Money service businesses face new data reporting obligations in tax crackdown

The UK's tax authority has proposed (26-page / 401KB PDF) extending existing powers to gather data from MSBs to help identify businesses that use MSBs to avoid paying "their fair share of tax".

In its consultation paper, HMRC explained the kind of data that MSBs could be expected to share with it under new legislation. The precise data reporting obligations would be set out in new regulations, it said. The data gathered would be matched with "other taxpayer data". MSBs would only be required to hand over data that was in its "possession or power to provide", it said.

"HMRC acknowledges that many customers are likely to conduct one-off, relatively low-value transactions through an MSB," HMRC said. "The aim of this proposal is to allow HMRC to discover the aggregate activity of MSB customers. This will help to identify where more significant amounts of money, which may have been earned in the hidden economy, have been transacted through an MSB."

"This data would include identifying details of MSB customers, such as names and addresses, or the registration number and registered address of business customers. It would also include data relating to the number and aggregated value of transactions by the customer through the MSB, and may include other details related to the transactions," it said.

HMRC said it intends to "agree standard data fields and formats" with MSBs so as to "minimise the cost of complying with a data notice".

A 'money service business' is defined, under UK anti-money laundering regulations, as "an undertaking which by way of business operates a currency exchange office, transmits money (or any representations of monetary value) by any means or cashes cheques which are made payable to customers".

HMRC said that its new powers would not apply to credit institutions such as banks and building societies.

In recent years HMRC has had its bulk data-gathering powers extended so that they apply to businesses processing credit and debit card transactions. New legislation will also be introduced later this year to ensure digital wallet providers are also subject to the data reporting obligations.

"By collecting this data, HMRC’s ability to tackle the hidden economy would be improved, creating a level playing field for compliant businesses and ensuring that the government receives the revenue it is owed to fund vital public services," HMRC said. "By enabling HMRC to better target compliance activity, the proposed powers would deter the exploitation of MSB services for illicit purposes."

HMRC's proposals are open to consultation until 21 October.

Financial secretary to the Treasury Jane Ellison said: "Our message to those operating in the hidden economy is clear – it is getting harder to hide your activities, come forward before HMRC catches up with you and join the vast majority of businesses that pay their fair share of tax."