Finance Bill 2020-21: amendments to HMRC’s civil information powers

HMRC is to be given new powers to issue a financial institution notice (FIN) requiring financial institutions to provide information about a specific taxpayer when requested, without the need for approval from the tax tribunal, in a bid to bring the UK into line with international standards on the quality and speed of exchange of tax information

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.

Removing the need to apply to a tax tribunal will make this process quicker and more transparent. The UK is the only G20 jurisdiction that requires the approval of a tribunal, or the consent of the taxpayer, before a notice requiring information from a third party can be used.

Information received in response to a FIN will be used for the purpose of checking the tax position of a taxpayer, and for debt collection purposes.

HMRC said the FIN will be balanced by a number of taxpayer safeguards, including the requirement that 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, and an authorised officer of HMRC 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 institution will be able to appeal against the penalties.

In addition, HMRC will report to Parliament annually on the use of the FIN.

This measure will also correct a drafting error in the Schedule 36 Finance Act 2008 legislation that governs increased daily penalties for failure to comply with an information notice.

It also introduces a rule to prevent a third party telling the taxpayer about a third party information notice, where the tribunal has decided that is appropriate.

The measure will have effect on and after the date of Royal Assent to Finance Bill 2020-21.

Amendments to HMRC's civil information powers is here.

By Pat Sweet

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