In the draft Finance Bill for 2021 published at the end of July, HMRC are being given substantial new powers to enable the issuing of financial institution notices (FINs), without the need for permission from either the taxpayer or tax tribunal.
Being brought in to meet the information exchange requests from foreign governments, HMRC cites the amends to the finance bill as necessary; in order to comply with the target international standards for sharing information of six months. It currently takes the UK up to twelve months to obtain the relevant information.
FINs are issued when HMRC need a financial institution or bank to disclose information on a specified taxpayer. Going forward, the only FIN limitations will be that the office issuing the notice must have a 'reasonable opinion' that it will not be overly time consuming for the financial company to provide the relevant information. In addition, the request must be 'reasonably required,' to enable the taxpayers position to be checked or their debt collected.
However, the issuing HMRC officer must provide the taxpayer with a copy of the FIN notice and an outline of the reasons behind it. But, the new legislation does not currently state when this should take place, and it can be waived, should HMRC obtain permission from the tax tribunal to ignore them. Papers that are subject to legal professional privilege may not be requested.
In all FIN cases, a collection refers to any measures being taken to recover the money owed in taxes, and this is regardless of whether an alternate individual has ever been responsible for the outstanding taxes, or other amounts. By default, the FIN could also be used to enforce and speed up payments and follower notices, in addition to any established tax liabilities.
The new clauses which are an amendment to HMRC's existing Schedule 36 powers in Finance Act 2008, would take effect from 6 April 2021.
Currently, the UK is the sole G20 jurisdiction to require taxpayer or tribunal consent in advance of a third-party information notice being used. The removal of this stipulation, will be aligning the UK with the international standards on tax transparency, along with the speed and accuracy of the exchanged information.
However, many in the industry believe that the new legislation goes over and above that which is required and are anticipating an increase in HMRC notices when the new regulations come into play. It has also been noted that the FINs will back HMRC's domestic compliance activity and aide the process of determining a taxpayer’s liability position, including any outstanding tax.
For further guidance on financial institution notices (FINs), or assistance in managing your tax compliance and reporting obligations, please contact our dedicated team on 01932 320800 or email firstname.lastname@example.org.