A new measure that will provide HMRC with additional civil information powers is expected to take effect when the Finance Bill 2020-21 receives Royal Assent. The new measure known as a Financial Institution Notice (FIN) will be used to require financial institutions to provide information to HMRC, when requested, about a specific taxpayer and without the need for approval from either the taxpayer or the independent tribunal that considers tax matters. These provisions will take the form of an amendment to HMRC current powers under schedule 36 of the Finance Act 2008.
What powers does HMRC currently have to obtain information?
HMRC, under Schedule 36 of FA2008 gives HMRC the power to make a written request ("an information notice") for a taxpayer to provide information or produce a document provided that the information or document is "reasonably required" by the officer for the purpose of checking the taxpayer's tax position.
- An information notice can be used to allow the checking of past, present and future tax liabilities out of a check, investigation or enquiry of any kind.
- The notice must be in writing and specify the period for the information or document to be provided and by what means and or form.
There are restrictions as to the use of this power and a taxpayer may appeal such a notice.
Why are these new powers being introduced?
Currently it takes HMRC on average 12 months to respond to requests for third party financial information from other tax authorities when an information notice is needed, whereas the target under international standards is six months. The introduction of the new FIN will remove the current requirement for HMRC to obtain approval from the tax tribunal before obtaining information from financial institutions and therefore bring the UK into line with international standards on tax transparency and on the quality and speed of exchange of tax information.
What will the FIN be used for?
Information received in response to a FIN will be used for the purpose of checking the tax position of a taxpayer and used for debt collection purposes. The FIN will be balanced by a number of taxpayer safeguards, including:
- The information sought will have to be reasonably required for the purpose of checking a known taxpayer’s tax position. For international requests the information in the FIN will need to be relevant to the administration or collection of tax and the jurisdiction requesting the information would need to have exhausted all reasonable domestic ways to get the information;
- Documents subject to legal professional privilege cannot be requested;
- HMRC will be required to tell the taxpayer why the information is needed, unless a tax tribunal rules this condition should not apply;
- An authorised officer of HMRC (someone with the relevant experience and training) will need to approve the decision to issue a FIN;
- If a Financial Institution does not comply with a FIN and as a result HMRC charges penalties, the Financial Institution will be able to appeal against the penalties
HMRC will report to Parliament annually on the use of the FIN.
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