Overview of the Act
5.The Act establishes HMRC and RCPO. It includes provisions for the effective governance and operation of the new organisations. The following overview paragraphs summarise the purpose of the sections, with the detail of how each section achieves this set out in the commentary section.
HM Revenue and Customs general (sections 1, 2, 4, 9, 11 to 14)
6.The new department, like its predecessor departments, is a non-ministerial government department. The Queen appoints Commissioners for Her Majesty’s Revenue and Customs who exercise statutory functions on behalf of the Crown. They are able to appoint officers of Revenue and Customs, who work under their directions. Officers, subject to and acting under the direction of the Commissioners, are able to exercise any of the Commissioners’ functions, apart from the making of statutory instruments; the giving of general instructions about on classes of disclosure of information under section 20(1)(a); and approving the making of applications for search warrants relating to former Inland Revenue functions.
7.The Act provides that, in the exercise of their functions, the Commissioners will comply with directions of a general nature given to them by the Treasury. It provides the legislative structure within which the Commissioners have the operational discretion to organise in the most appropriate way, and to make changes over time as necessary. With the agreement of at least half the Commissioners, they may decide on arrangements for the conduct of proceedings and of their committees, including matters such as quorum and delegations.
Functions and powers (sections 5 to 7 and 16 and Schedules 1 and 2, Part 1)
8.The Commissioners are responsible for all the functions (bar prosecutions as a result of section 35), which were previously the responsibility of the Commissioners of Inland Revenue and the Commissioners of Customs and Excise. Officers of Revenue and Customs may exercise all of the functions of Inland Revenue and Customs and Excise officers, unless stated otherwise.
9.The Act identifies all of the functions previously carried out by the Inland Revenue (see Schedule 1). It provides that powers previously available to the Commissioners of Customs and Excise and their officers may not be used for these former Inland Revenue functions, while powers previously available to the Commissioners of Inland Revenue and their officers may only be used for these functions. This is to prevent any inadvertent widening of powers in the new department.
Power to transfer functions (section 8) and Agency functions (section 15)
10.Section 8 enables HMRC functions (other than revenue(6) or tax credit functions) to be transferred out of HMRC to a ministerial department, and any functions to be transferred into HMRC from such departments by Order in Council (rather than primary legislation). This is achieved by amending the Ministers of Crown Act 1975. Equivalent provisions apply to the Scotland Act 1998 and the Government of Wales Act 1998. And the Act also allows HMRC to enter into ‘agency’ arrangements with Scotland and Northern Ireland, where a function may be exercised on behalf of HMRC by a Scottish Minister or Northern Ireland Department, or HMRC may exercise a function on behalf of the Scottish Minister or Northern Ireland Department.
Valuation Office (section 10)
11.The Act puts on a statutory footing functions formerly undertaken by officers of the Inland Revenue through the Valuation Office Agency in respect of the valuation of property.
Use of information (section 17 and Schedule 2, part 2)
12.These enable information acquired by HMRC in connection with a function to be used for any of its other functions. Prior to the formation of HMRC information could be passed between the Inland Revenue and Customs and Excise through statutory gateways. This section enables the department to pool all its information, irrespective of the purpose for which it was originally obtained. The use of such information within the organisation is subject to any prohibition imposed by other enactments, including by the Data Protection Act 1998 and the Human Rights Acts 1998. Management controls ensure that the use of the information is appropriate and proportionate.
13.The Act also provides for HMRC to have the same statutory gateways for information to be passed to other government departments as Inland Revenue or Customs and Excise had.
Confidentiality and wrongful and public interest disclosure (sections 3 and 18 to 23)
14.Section 18 sets out the statutory duty of officers, Commissioners (and others acting on their behalf, and their committees) not to disclose information held by HMRC unless authorised to do so – and sets out the circumstances where disclosure may be allowed. Section 3 provides that Commissioners and officers newly appointed to HMRC shall make a declaration acknowledging this duty.
15.Section 19 makes unauthorised disclosure of information relating to an identifiable person a criminal offence carrying a maximum penalty of imprisonment for up to 2 years and an unlimited fine. This widens the previous criminal offence of unauthorised disclosure of information held in relation to tax and other functions, which did not cover information obtained in the course of Customs’ non-revenue functions.
16.Section 20 introduces a provision enabling the Commissioners to instruct officers to disclose confidential information where it is in the public interest to do so, and sets out the conditions and circumstances under which such disclosures may be made. An affirmative regulation making power is provided enabling Treasury Ministers to respond to changes in circumstances.
17.Section 21 covers the circumstances when Revenue and Customs officials may disclose to a prosecuting authority, for advice or for the commencement of proceedings. Information disclosed in this way is subject to ongoing confidentiality safeguards.
18.Section 22 confirms that nothing in the confidentiality section contravenes the provisions of the Data Protection Act 1998 or the Regulation of Investigatory Powers Act 2000. Similarly, section 23 clarifies the interaction between the confidentiality sections and the Freedom of Information Act 2000.
Proceedings (sections 24 to 26)
19.These sections make provision for the effective working of HMRC and replace provisions which applied in a different way to the Inland Revenue and Customs and Excise:
Evidence (section 24): provides for the legal admissibility of official departmental documents in court;
Conduct of civil proceedings (section 25): This sets out the rights of officers to conduct civil proceedings in respect of HMRC functions; and
Rewards (section 26): The Commissioners may pay rewards, at their discretion, for services to HMRC (e.g. to a member of the public who went out of their way to report suspicious circumstances that turned out to be drug smuggling).
Inspection and complaints (section 27 to 29)
20.The Act provides for HM Inspectors of Constabulary (HMIC) to scrutinise how HMRC ensures compliance with the laws, rules and procedures of the criminal justice system in the United Kingdom. It also provides for the expansion of the Independent Police Complaints Commission’s (IPCC) remit to include investigations into complaints made about HMRC officers when conducting criminal investigations; and alleged criminal conduct or gross misconduct by an HMRC officer.
21.The Act provides that, in relation to information obtained in the course of their HMRC functions, HMIC and IPCC should be bound by a duty of confidentiality, and unauthorised disclosure should be an offence carrying a maximum penalty of 2 years imprisonment and an unlimited fine.
22.The Act provides regulation-making powers, with the detail of the inspection and complaints provisions to be in regulations. The regulations made under the section 27 powers (in relation to HMIC) are in force from 29 April 2005 and may be obtained from HM Stationery Office (The Revenue and Customs (Inspections) Regulations 2005 No. 1133). The regulations in respect of IPCC will be brought forward later in 2005.
Offences (sections 30 to 33)
23.The Act consolidates former criminal offence provisions relating to the Inland Revenue and HM Customs & Excise, to create a single framework for these offences within HMRC. In addition to consolidating those offence provisions, the Act brings their penalties into line with the equivalent Police offences. The offences are assaulting, obstructing or impersonating an officer of Revenue and Customs. Section 33 provides HMRC officers, where authorised by Commissioners, with the power of arrest for these offences.
24.The Act also repeals the existing offence of bribery and collusion in respect of Customs and Excise matters, without replacement. Matters of corruption are covered within HMRC by the Prevention of Corruption Act 1906 and the common law offences of misbehaviour in public office and bribery.
Revenue and Customs Prosecutions Office (sections 34 to 42, 49 and Schedule 3)
25.These sections put the independent prosecutions office (RCPO) on a statutory footing. A Director, appointed by the Attorney General, heads the Office and employs all RCPO staff. The remit of the Office is to provide legal advice and institute and conduct criminal prosecutions (and related proceedings such as the restraint and confiscation of assets) in England and Wales where there has been an investigation by HMRC. It does so in accordance with the Code for Crown Prosecutors and publishes an Annual Report detailing the exercise of the Director’s functions during the previous financial year. The Director exercises his functions under the superintendence of the Attorney General.
26.Section 40 sets out that RCPO may not disclose information relating to an identifiable person except in specified circumstances. It provides that unauthorised disclosure is an offence carrying a maximum penalty of two years’ imprisonment and an unlimited fine.
27.The Office is also subject of external inspections by HM Crown Prosecution Service Inspectorate. The Act (section 49) also made provision for the Treasury to identify Customs and Excise and Inland Revenue property, rights and liabilities which transferred to RCPO, and not to HMRC. Additionally, section 49 transferred to the Director those legal proceedings which, prior to commencement of the Act, were being conducted by the Commissioners of Customs and Excise and Inland Revenue, and which fall within his functions (being criminal prosecutions and related proceedings).
Money (section 43 to 47)
28.HMRC is funded by monies voted by Parliament. The Commissioners pay all money received on account of taxes, duties etc. into the Consolidated Fund, other than money that is required by law to be otherwise accounted for e.g. National Insurance Contributions, Student Loan repayments and National Minimum Wage fines. They may deduct disbursements from payments into the Fund, in particular for tax credits and tax (mainly VAT) repayments. Where it is likely that the amount of such disbursement and other contributions will exceed HMRC’s receipts, the Treasury may make payments to the Commissioners out of the Consolidated Fund, such payments being subject to oversight by the Comptroller and Auditor General. The Commissioners must send daily accounts of the monies they receive, and the disposal of those monies, to the Comptroller and Auditor General.
Transfer of property etc; transitional arrangements and consequential amendments and repeals. (Sections 48, 50, 52, 54 and 55; Schedules 4 and 5)
29.The Act made provision for the effective transfer of Customs and Excise and Inland Revenue property, rights and liabilities etc. to HMRC. Transitional provisions ensured that all the authorisations, decisions, and actions that were valid within the two predecessor departments continued in the new department. Consequential amendments were made to other enactments, and section 50(4) also provides for further consequential amendments to be made through Treasury regulations. Obsolete provisions were repealed.
Commencement (Section 53)
30.The Act came into force by the Commissioners for Revenue and Customs Act 2005 (Commencement) Order 2005 No. 1126 (C.51). All sections except those listed below were brought into force from 7 April 2005. Sections 5 to 8, 16 and Schedule 2 Part 1, 35, 36, 50 and Schedule 4, 52 and 54 come into force on 18 April 2005 – the launch day of HMRC and RCPO. This enabled preparation for launch of the new departments to commence straight after Royal Assent.
Revenue is defined as taxes, duties and national insurance contributions
