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ICAEW urges government to retain safeguards for taxpayer data


Published: 27 Apr 2021 Update History

International obligations are no excuse for sweeping away established self assessment safeguards and enabling HMRC to obtain information on taxpayers from financial institutions without prior approval, argues ICAEW’s Tax Faculty.

In a briefing to MPs, ICAEW has outlined its concerns on clause 122 of the Finance (No. 2) Bill 2019-21 which expands HMRC’s civil information powers.

Under Schedule 36, Finance Act 2008 HMRC can issue a notice to a financial institution to obtain third-party information or documents about taxpayers provided prior approval has been gained from a tribunal or the taxpayer.

The new measure, however, will remove the requirement for HMRC to obtain prior approval before it issues a financial institution notice (FIN).

The change will enable HMRC to obtain bank statements and credit card statements without time restriction and challenge taxpayers to justify transactions years after the event.

Under current legislation HMRC cannot request information that is not reasonably required, for example an individual taxpayer's personal expenditure. However, ICAEW’s Tax Faculty warns: “Recent case law demonstrates that HMRC officers routinely request such information, and it is only the intervention of the tribunal that ensures that the statutory limits are observed. By by-passing the tribunal's oversight, the risk of excessive information being provided to HMRC is inevitable.”

While the stated aim of the change is to facilitate speedier exchanges of information with overseas tax authorities and bring the UK into line with other G20 countries, clause 122 extends the measure to UK requests. ICAEW argues that this, in effect, removes a major safeguard for taxpayers.

“We are concerned that, if the existing Schedule 36 safeguard for a third-party information notice to have tax tribunal approval is removed, this power would be used routinely as a way of obtaining information, so that the number of domestic information requests will far exceed the number of times they are used for international information exchanges,” states the briefing.

ICAEW recommends that the provision should, therefore, be restricted to FINs issued as a result of a request from overseas tax authorities.

It also suggests that an annual report from HMRC to parliament should name the jurisdictions (including in the UK) whose tax authorities have made information requests for which FINs (clause 122) and third-party information notices (under existing legislation) and cite the number of requests for each. This would enable the FIN regime to be assessed alongside the existing third-party notices regime.

Alongside this briefing ICAEW's Tax Faculty has issued a further five in response to the measures in the Finance Bill 2019-21, calling for an extension of the super-deduction and other temporary first-year allowances to machinery intended to be leased, as well as the simplification of the proposed late payment penalty regime and a deferment to changes to the Construction Industry Scheme.

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ICAEW expresses its concerns over the provisions to expand HMRC’s civil information powers, contained in the Finance Bill 2019-21.

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