One theme of the Budget speech was truth and honesty, virtues that were repeatedly cited in the chancellor’s speech. Indeed, the speech’s closing words contained the pledge ‘to be honest and fair in all that we do’. With many people’s trust in HMRC at an all-time low, this is quite an ask. I will focus on just one example.
In 2018, HMRC first consulted on a proposal to allow it to obtain bank statements and other taxpayer information direct from financial institutions without the taxpayer’s consent, without the tribunal’s prior approval and without the financial institution having any statutory right of challenge.
The removal of three fundamental safeguards met considerable opposition, most notably from the House of Lords Economic Affairs Committee’s Finance Bill Sub-Committee which recommended earlier this year that the proposal be dropped. HMRC claimed to need a fast-track process so as to comply with international standards when it comes to addressing the few dozen requests made by overseas tax authorities, because the requirement to obtain the tribunal’s approval was too time consuming. However, their Lordships realised that the tribunal process added only about six weeks to the process time and that HMRC’s turnaround time was six months longer than the international standard.
Notwithstanding the widespread condemnation of the proposal, HMRC will continue with it.
Many commentators consider that HMRC’s real reason for pursuing the change is that their attempts to obtain domestic taxpayers’ bank statements are frequently thwarted by taxpayers exercising the statutory protections within FA 2008 Sch 36 and the tribunal recognising that taxpayers are entitled to privacy about their expenditure (see, for example, Taylor v Bratherton [2005] STC (SCD) 230 and Perfectos Printing Inks Co Ltd v HMRC [2019] UKFTT 388). The new proposals allow taxpayers’ rights to be sidestepped in one fell swoop.
In the impact statement, HMRC states: ‘This measure is not expected to have a direct impact on individuals as it affects financial institutions, such as banks and building societies. There is expected to be no impact on family formation, stability or breakdown.’
However, that overlooks the fact that HMRC will newly be able to obtain a copy of a taxpayer’s bank statements and start challenging every entry, long beyond the taxpayer’s obligations to retain records. This could lead to additional enquiries and disputes if the taxpayer is unable to prove that credits were not undisclosed business receipts.
If the chancellor is sincere about his pledge to be honest and fair in all that they do, a good start would be to reconsider the plan to introduce the new kind of notice.
Home >Articles > The new financial institution notice
The new financial institution notice
One theme of the Budget speech was truth and honesty, virtues that were repeatedly cited in the chancellor’s speech. Indeed, the speech’s closing words contained the pledge ‘to be honest and fair in all that we do’. With many people’s trust in HMRC at an all-time low, this is quite an ask. I will focus on just one example.
In 2018, HMRC first consulted on a proposal to allow it to obtain bank statements and other taxpayer information direct from financial institutions without the taxpayer’s consent, without the tribunal’s prior approval and without the financial institution having any statutory right of challenge.
The removal of three fundamental safeguards met considerable opposition, most notably from the House of Lords Economic Affairs Committee’s Finance Bill Sub-Committee which recommended earlier this year that the proposal be dropped. HMRC claimed to need a fast-track process so as to comply with international standards when it comes to addressing the few dozen requests made by overseas tax authorities, because the requirement to obtain the tribunal’s approval was too time consuming. However, their Lordships realised that the tribunal process added only about six weeks to the process time and that HMRC’s turnaround time was six months longer than the international standard.
Notwithstanding the widespread condemnation of the proposal, HMRC will continue with it.
Many commentators consider that HMRC’s real reason for pursuing the change is that their attempts to obtain domestic taxpayers’ bank statements are frequently thwarted by taxpayers exercising the statutory protections within FA 2008 Sch 36 and the tribunal recognising that taxpayers are entitled to privacy about their expenditure (see, for example, Taylor v Bratherton [2005] STC (SCD) 230 and Perfectos Printing Inks Co Ltd v HMRC [2019] UKFTT 388). The new proposals allow taxpayers’ rights to be sidestepped in one fell swoop.
In the impact statement, HMRC states: ‘This measure is not expected to have a direct impact on individuals as it affects financial institutions, such as banks and building societies. There is expected to be no impact on family formation, stability or breakdown.’
However, that overlooks the fact that HMRC will newly be able to obtain a copy of a taxpayer’s bank statements and start challenging every entry, long beyond the taxpayer’s obligations to retain records. This could lead to additional enquiries and disputes if the taxpayer is unable to prove that credits were not undisclosed business receipts.
If the chancellor is sincere about his pledge to be honest and fair in all that they do, a good start would be to reconsider the plan to introduce the new kind of notice.
.tmb-editorspic.jpg?sfvrsn=df04ab27_1)
