UK Paypal still deny *that* affair with HMRC, but let your details slip anyway

22 August 2011

this is a genuine photo from Paypal's media library. Seriously.

You probably remember us reporting on HMRC claiming they could magically tie up people’s eBay usernames with their self assessment record a little while ago. We ponitifcated on the matter, as did you, and some suggested that it might be eBay-owned Paypal who was sharing the pillow talk with HMRC.

Now, new reports that Paypal in the US are sharing information with the IRS seemed to add further weight to speculations of a sordid little affair here in the UK.

In the US, owing to new IRS rules, PayPal has started asking users to provide a tax ID number, which is either a Social Security number, Individual Tax Identification Number or an Employer Identification Number. PayPal (US) will use this tax ID number to send tax Form 1099-K to you and the IRS when the payments you receive exceed both of these milestones in a calendar year:

> $20,000 in gross payment volume for goods and services
> 200 payments

Clearly most ‘normal’, non-trading PayPal users, will not breach theses limits, so Paypal will not need to report them to the IRS. But they’ll still need to enter their tax ID just in case. Hmmm.

So we asked Paypal UK about this. At first they were baffled, knowing nothing of the US, but when pressed we were given the following responses:

Paypal takes data protection seriously and would never volunteer account information, but they do work with law enforcement and will provide any information requested by law. They also confirmed that there are no plans to request self-assessment of other tax reference numbers from UK Paypal users.

So that’s good, right? Paypal only gives HMRC information when required to do so by law. Nothing shady going on here.

Er. Almost.

You see, back in 2008, some new rules were introduced in the Finance Act 2008, specifically Schedule 36. And Schedule 36 FA 2008 gives HMRC some fairly hefty powers to request information. The law states:

“An officer of Revenue and Customs may by notice in writing require a person

(a) to provide information, or

(b) to produce a document,

if the information or document is reasonably required by the officer for the purpose of checking the tax position of another person whose identity is known to the officer (the taxpayer).”

Strictly speaking HMRC should get consent from the taxpayer first (known as an informal request), but they don’t always have to. Their own manuals of best practice state the following:

“We may need extra information or to carry out an inspection in order to check a person’s tax position. The vast majority of people co-operate with our requests...However, we are not obliged to make an informal request. We may decide to use our legal powers straight away where we have good reason to believe it will be more effective or efficient to do so. For example, we might not make an informal request where there is a history of non-cooperation or where tax evasion is a feature of the case.

We might also not make an informal request to obtain information from third parties, even where a person is co-operating fully and tax evasion is not suspected. This may be because ...there is no informal way of obtaining the information. For example, there may be confidentiality or Data Protection issues for the third party.”

So even if you have done nothing wrong, or are not suspected of doing anything wrong, HMRC can ‘formally request’ information on your Paypal account. And Paypal will tell them everything. Looks like the Mystery of the Taxman and the eBay seller is now solved.

Still, if you have nothing to hide, there’s no need to worry about huge invasions of privacy or anything is there?

TOPICS:   Banking   Privacy

7 comments

  • clive j.
    What does the image have to do with the substance of this piece? I think you'll find that it was part of a promotion used by PayPal to reinforce with shops that if they don't accept PayPal it's the equivalent of telling the prospective customer to go away. Bottom line: the photo may be from the PayPal media library, but the context of why the image is in the library is also important.
  • Brad
    Fancy a beer clive? You sound like a blast!
  • dvdj10
    Who give's a toss? Lets catch the tax dodging scum and string them up. Yes and that does include the likes of Vodafone, Google and eBay. Poll it!
  • Ian
    Clive, you're a twat
  • Alexis
    I don't know what you're on about Clive, but the photo is clearly the door to the PayPal call centre. She's grinning because she's just frozen the account of some innocent who just received £200 from selling something on ebay, completely legitimately.
  • Repo
    It's the only ressponse to "customers" that PayPal Customer Unassistants use these days. Unhelpful lying scum, just like their eBay counterparts.
  • Pip R.
    Thanks for every other informative blog. Where else could I am getting that type of information written in such an ideal manner? I have a mission that I'm just now running on, and I've been at the glance out for such information.

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