HMRC have issued a policy paper ‘Amendments to HMRC's civil information powers’ together with responses to their 2018 consultation ‘Amending HMRC’s Civil Information Powers’ and draft legislation which proposes introducing a new Financial Institution Notice (FIN).
In July 2018 a consultation, 'Amending HMRC’s Civil Information Powers' was launched to consider possible improvements to make things easier for HMRC to obtain certain types of information and to charge higher penalties for non-compliance.
This relates to Schedule 36 Finance Act 2008 which gives HMRC the power to make a written request (‘an information notice’) for a taxpayer to provide information or produce a document provided it is ‘reasonably required’ for the purpose of checking the taxpayer's tax position. Under schedule 36 HMRC can also require a third party to provide information or produce a document in relation to a taxpayer.
HMRC have now, two years later, issued their summary of the 29 responses to the consultation, highlighting an overriding view amongst respondents that:
- Proposed changes which would remove the requirement for First Tier Tribunal (FTT) and taxpayer approval before issuing third-party information notices are too wide.
- The suggested introduction of a new Financial Institution Notice is a preferable option.
Following the consultation, HMRC have issued a policy paper and draft legislation in Finance Bill 2020-21 which proposes measures, effective from Royal Assent to Finance Bill 2020-21, to:
- Introduce a new Financial Institution Notice (FIN) requiring financial institutions to provide information to HMRC about a specific taxpayer, without the need for approval from the FTT.
- The information must be ‘reasonably required’ to check the taxpayer’s tax position.
- An authorised officer of HMRC will need to approve the decision to issue a FIN.
- Penalties can be charged if the financial institution fails to comply. These can be appealed to the tribunal.
- Extend HMRC’s powers under schedule 36 to allow them to give a taxpayer or third party an information notice for the purpose of collecting a tax debt.
- Prevent third parties from informing the taxpayer of a third party information notice or FIN where the FTT has decided it may prejudice the assessment or collection of tax, with failure to comply resulting in penalties of £1,000.
Comments are invited on the draft legislation by 15 September 2020 to be sent to
Schedule 36 information notices
What are HMRC's powers to obtain information about taxpayers?
Schedule 36 Third Party information notices
When can HMRC ask a third party for information about a taxpayer? What are the taxpayer's rights?
Policy paper: Amendments to HMRC's civil information powers