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Concerns over ‘unduly onerous’ financial institution notice proposal

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The CIOT has responded to HMRC’s consultation on draft Finance Bill legislation to introduce a new financial institution notice (FIN), which would require financial institutions to provide information to HMRC about a specific taxpayer on request, without the need for tribunal approval.

The CIOT notes that HMRC is not taking forward a number of the proposals originally put forward in its 2018 consultation Amending HMRC’s civil information powers. This includes ‘option 1’ which would have involved removing the requirement to obtain tribunal approval in all cases.

The CIOT expresses concern that, rather than consulting fully on the detailed policy design, the process has moved straight on to consultation on the draft legislation which will give effect to the proposal, and thus limits scope for substantive changes to policy design.

One key point to note is that the draft Finance Bill legislation suggests there will be no right of appeal against the issue of a FIN, even if it would be unduly onerous for the institution to comply with the notice. This would contrast with the position for existing third-party information notices, where the right of appeal on grounds of unduly onerous compliance is built into FA 2008 Sch 36 para 30.

If there is to be no ‘unduly onerous’ appeal option, the CIOT urges HMRC to provide guidance on how complaints from financial institutions will be dealt with where obtaining the information is unduly onerous. Commenting on the proposals, Sarah Saunders, manager at RSM, notes in a firm’s client briefing that: ‘The tax system requires checks and balances to stop either side exercising excessive power. It is not unreasonable to require HMRC to justify complex information requests and institutions should be protected from excessive demands.’

The CIOT also questions how HMRC would use the new FIN in practice, for example where HMRC issues a notice to request information about UK taxpayers during the course of a domestic enquiry but existing third-party information powers under Sch 36 require tribunal approval and also provide a right of appeal.

Issue: 1501
Categories: News