What the two tax authorities may ask each other for

An obligation on each authority to help the other. Article 27 says the competent authorities shall exchange information necessary for carrying out the convention, or the domestic laws on the taxes it covers. The word is shall.

So it is a duty rather than a courtesy. The word is shall. So scope matters.

More than assessment. The article names assessment, collection, enforcement, prosecution and the determination of appeals in relation to the covered taxes. Ask which tax first.

It also names two purposes directly. Preventing fraud, and facilitating the administration of statutory provisions against legal avoidance. Both governments publish the convention and its supporting documents. Residence is no filter.

So a request need not relate to suspected dishonesty. Ordinary administration of anti-avoidance rules falls inside the article. So expect an answer.

So read the purposes before assuming a request is improper. The exchange of information duty is drawn widely on purpose. Secrecy has limits.

The taxes the convention covers, which links straight back to its own scope article. The exchange of information duty attaches to those rather than to taxation in general. Courts are the exception.

So the first question on any request is which tax it concerns. That answer sets the boundary for everything that follows it. Three refusals, no more.

The article says so expressly. The exchange is not restricted by the general scope provision that confines most of the convention to residents of one or both countries. Convenience is not one.

So a request can concern somebody who is not a resident of either country. That is a deliberate widening, and it is easy to miss. Originals, not summaries.

So check who the request actually concerns. The usual residence filter does not apply here. Keep the paper.

No, and this is the provision with real teeth. Where one country requests information, the other must obtain it in the same manner and to the same extent as it would for its own tax. Consent is required.

The article then removes the obvious objection. That duty applies notwithstanding that the requested country may not need the information for its own tax purposes at the time. Notice is required too.

So the usual answer is not available. A country cannot decline simply because the question is of no interest to it. Two channels, not one.

So plan on the basis that it will be obtained. Arguing about the requesting country's motives rarely gets anywhere. So keep both in mind.

It becomes secret, to the same standard as domestic material. The receiving country must treat it as secret in the same manner as information obtained under its own laws. The limit is purpose.

Role then restricts access. Only persons or authorities involved in assessment, collection, administration, enforcement, prosecution or appeals, or in oversight of those, may see it. Read it closely.

Use narrows too. Those persons shall use the information only for those purposes. That is the whole article.

So the protection is real but bounded. It is secrecy within a tax administration rather than secrecy in general.

Yes, in one defined way, and the article says so plainly rather than by implication. Those authorised to see the information may disclose it in public court proceedings, or in judicial decisions.

So confidentiality is not absolute. It is confidentiality within the tax administration, with a litigation exception written into the same sentence.

A specific question about a specific taxpayer, rather than a trawl through the files. The article speaks of information necessary for carrying out the convention, or the domestic laws on the covered taxes.

So necessity does some quiet work in that sentence. A request still has to connect to a real administrative purpose.

The article sets out what a country is never obliged to do. First, carry out administrative measures at variance with the laws and administrative practice of either country.

Second, supply information not obtainable under the laws or in the normal course of administration of either country. So a request cannot create a power that neither country has.

Third, supply anything that would disclose a trade, business, industrial, commercial or professional secret or trade process, or whose disclosure would be contrary to public policy.

Note what unites them. None of the three turns on whether answering would be inconvenient.

Narrower than most people hope, because it protects a category of thing rather than a relationship between people. The article names trade, business, industrial, commercial and professional secrets, alongside trade processes.

It is not a general privilege for anything an adviser holds. The protection attaches to the secret itself, so ordinary records of a transaction rarely qualify.

In our practice that distinction disappoints people who assumed anything held by an accountant was out of reach.

A specific request can go further than a narrative answer. Where asked, the other authority shall provide authenticated copies of unedited original documents.

The article lists what that includes. Books, papers, statements, records, accounts and writings all appear by name.

One limit applies. The obligation runs only so far as that country could obtain such documents under its own laws and practices for its own taxes.

So keep originals in order. An exchange of information request can reach the underlying paper rather than a tidy summary of it.

A narrow collection provision sits in the same article, and its purpose is specific. Each country shall endeavour to collect on behalf of the other such amounts as are necessary to ensure treaty relief does not reach people not entitled to it.

So this is not general debt collection across borders. It exists to stop relief leaking to the wrong claimants.

A sovereignty limit applies as well. Neither country must take measures contrary to its sovereignty, security or public policy.

So read the purpose clause carefully. It limits the provision far more than its opening words suggest.

Yes, with two conditions attached, and both matter. Officials of one country may travel to the other to interview individuals and examine books and records, but only with the consent of the persons subject to examination.

The other condition is procedural. The authority intending to send officials must notify the other country's competent authority of that intention.

So this is co-operative rather than coercive. Consent sits in the provision itself.

They are separate channels doing different work. Automatic reporting by financial institutions runs on its own rules, and our guide to a FATCA letter from your bank covers what that looks like from the customer's side.

This article is request-driven instead. One authority asks, and the other answers, rather than data flowing automatically.

So both can be in play at once. Information already reported automatically does not stop a specific request.

So treat them as separate obligations. One is automatic and the other follows a question.

A great deal, long before any treaty request arrives. Our guide to how HMRC knows your income sets out the domestic sources it draws on.

The article adds a cross-border layer on top of that. It is the route for information that domestic sources cannot reach.

The final paragraph tells them to talk. The competent authorities shall consult with each other to co-operate and advise on implementing the article. That is the rule.

Those are the same offices that handle treaty disputes, as our guide to the mutual agreement procedure describes. The IRS sets out its side on its competent authority page, with the governing procedure in Internal Revenue Bulletin 2015-35. One channel, two very different uses. So act early.

Take an illustrative case. The IRS is examining a US return and wants bank records held in Britain for a company with no US presence. Ask what it protects.

HMRC has no interest of its own in those records. Under the article it must still obtain them in the same way it would for its own tax. The answer is narrow.

If the IRS asks specifically, HMRC must supply authenticated copies of the originals rather than a summary. The limits would only bite if a listed refusal genuinely applied. So plan for disclosure.

Notice what decided it. Not HMRC's own interest, which was none, but the terms of the article. Keep it tidy.

The commonest is assuming a country will refuse because the matter does not concern it. The article removes that objection in terms. Records are not secrets.

The second is treating anything held by an adviser as protected. The refusal covers secrets and trade processes, not routine records. So check the wording.

After those comes the assumption that the information stays inside the tax authority. Authorised recipients may disclose it in public court proceedings and in judicial decisions. Then apply it.

A fourth is assuming exchange of information only reaches residents. The article lifts that restriction in terms. Scope decides it.

First we work out what the other authority could actually request, because that usually sits narrower than the worry and wider than the hope. Then we check whether any of the three refusals genuinely applies to your facts. So test the category.

We also help you keep records that answer a request cleanly. Start with our treaty relief service, or reach us through our contact page. Not the adviser.