If and when Finance Bill 2020-21 gets Royal Assent next year, the civil information powers of HM Revenue & Customs (HMRC) will be amended to include a new financial institution notice (FIN) that will enable the UK’s taxman to easily obtain information from insurers and others.
According to HMRC, FIN will be used to require financial institutions, such as banks and building societies, to provide data to the government department when requested, for the purposes of checking the tax position of specific taxpayers. Under the measure, approval will not have to be sought from the independent tribunal that considers tax matters.
“The introduction of a new FIN will remove the current need for HMRC to obtain approval from the tax tribunal before obtaining information from financial institutions,” noted the taxman in July in a policy paper, which described the UK as the only G20 jurisdiction that requires tribunal approval or taxpayer consent when seeking information from a third party.
“The new process will speed up the time HMRC takes to deal with international exchange of information requests and bring the UK into line with international standards on tax transparency and on the quality and speed of exchange of tax information. It will also support HMRC’s domestic compliance activity by helping to establish an individual’s tax position, including any tax debt.”
While the measure was developed through an earlier consultation – which reviewed several changes to civil information powers to ensure they remain effective and that the corresponding safeguards are still proportionate and appropriate – a new report by the Financial Times has cited concerns raised by stakeholders.
Representative body UK Finance, for instance, believes introducing FIN translates to safeguards being watered down. The Chartered Institute of Taxation, meanwhile, was quoted by the publication as expressing its worries over the removal of independent tribunal oversight from the equation.
In its policy paper, however, HMRC said the information sought will have to be “reasonably required” for the purpose of checking a known taxpayer’s tax position – meaning it shouldn’t have unjustified access to client data.
The department will also be obligated to tell the taxpayer why the information is needed, unless it is ruled by a tax tribunal that this condition should not apply. As an added safeguard, documents subject to legal professional privilege cannot be requested as well.
Meanwhile HMRC may charge penalties in the event a financial institution does not comply with a FIN.
