Financial Institution Notices proving a valuable weapon for HMRC

Hugh Gunson, legal director, Charles Russell Speechlys, 31/07/2020

Recent years have seen a major increase both in HMRC's powers and also the information at HMRC's disposal. The Finance Bill 2020/21 published this July introduces a further measure giving HMRC a significant new power to obtain information.

The draft rules introduce the concept of a Financial Institution Notice (FIN), as an addition to HMRC's existing formal information powers. This will allow HMRC to issue notices to banks and other financial institutions (including credit card companies) placing them under a legal obligation to provide documents or information about a particular taxpayer. Importantly, HMRC will be able to do this themselves, without the taxpayer's agreement or the approval of the tax tribunal (as is the case under the existing rules).

There are various safeguards, including that (in HMRC's reasonable opinion) the production of the documents or information is not onerous. Generally, a taxpayer must be notified of a FIN, together with the reasons for it, although HMRC can apply to the tax tribunal to dispense with this requirement if to do so might prejudice the assessment of tax. A number of the existing safeguards in the information notice regime also apply to FINs, including importantly that they cannot require the production of legally privileged material.

The stated purpose of the changes is to speed up HMRC's information-gathering process, in particular where HMRC is co...

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