Since June 2021, HMRC have the power to issue “Financial Institution Notices’ (FINs). FINs require financial institutions to provide information to HMRC such as bank statements or transactions details for tax investigation or collection. After one year of this significant extension, are HMRC new powers a “data grab” or a simplification?
HMRC data collection before the FINs
HMRC have always had access to personal information such as bank accounts but these new powers give them access to an increase amount of data.
A significant, and concerning, extension to HMRC’s information gathering powers.Previously, HMRC had the ability to collect UK taxpayers data by issuing ‘Information Notices’ under schedule 36 to the Finance Act 2008. These included:
- “Taxpayer Notices”, issued directly to the taxpayer,
- “Third Party Notices” issued to third parties such as financial institutions to obtain information about a taxpayer, or
- “Identity Unknown Notices” issued when the taxpayer is unknown.
These notices contains strict controls and safeguards that apply before a notice can be issued.
In the case of the Third Party Notices applying to financial institutions, the mains safeguard is HMRC must get in advance the approval of a First-tier Tribunal (Tax Chamber). This safeguard is waived if the taxpayer gave its consent. The Tribunal must ensure that various conditions are met before giving its approval. If the taxpayer has not given its consent, the decision of the Tribunal is final and none of the parties can appeal against the notice.
New, faster access to Financial Information
HMRC new powers have been introduced by Financial Institution Notices (FINs). This is a new type of Information Notices allowing HMRC to request information from Third Parties, most particularly financial institutions. The purpose of data collection is tax investigations or the collection of tax debts, in the UK or abroad.
FINs have are two main differences with the other notices:
- HMRC no longer need the permission of a Tribunal or consent from the taxpayer to collect data.
- There is no right of appeal for the taxpayer or the financial institution.
There are new conditions built in the FINs but for some observers, these will not replace the objective scrutiny of a Tribunal.
HMRC must give a copy of the FIN to the taxpayer. They must also provide a “summary of the reasons” why the information is required. However, HMRC can make an application to the tribunal to waive this requirement, on the basis that doing so might prejudice the assessment or collection of tax
HMRC remains unable to request documents subject to legal professional privilege.
HMRC position
HMRC explained the necessity of the new notices to speed up the access to data that under the previous system was taking too long.
The debate: “Data Grab” or Simplification?
Voices expressing concerns about the FINs are still there. On one side of the debate there are those for whom the data collection is a “data grab”. The new rules are concerning, given the absence of effective safeguards for taxpayers.
On the other side, there are those who see a simplification as part of the Making Tax Digital (MTD) project.
FINs are applicable since the date the Finance Bill 2021 passed into law (10 June 2021) regardless of when the tax liability or tax debt arose.
Source & References
- HMRC Guidance Privacy Notice: Information HMRC can access and how they can use them.
- HMRC Policy Paper: Amending HMRC’s Civil Information Powers
- House of Lords Economic Affairs Committee: 4th report of session 2019-21 New Powers for HMRC: fair and proportionate?
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