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HMRC issues report on financial institution notice powers


Published: 06 Feb 2023 Update History

HMRC’s report covers the impact and effectiveness of HMRC’s latest information power and highlights two potential uses not envisaged during the consultation.
The information power was introduced by Finance Act 2021. It gives HMRC the ability to request information from financial institutions that it reasonably requires for the purpose of either checking the tax position of a known taxpayer or collecting a tax debt of the taxpayer.

When the financial institution notice (FIN) power was introduced, ICAEW expressed concerns that it overrides established self assessment safeguards for taxpayers, as it does not require approval from a tribunal or the taxpayer. However, ICAEW recognises that the change was, in part, for the UK to meet international minimum standards on the exchange of information for tax purposes. This requires tax authorities to provide information requested under international treaties within six months.

The report, covering the period from 1 July 2021 to 31 March 2022, notes the average time for responding to international requests: 197 days against a target of 180 days. Although the target has not been met, the timescale has reduced substantially from 365 days in 2018.

ICAEW had called for FINs to be limited to international requests. However, of the 355 FINs issued in the period, only 141 (39.7%) were issued in respect of international information requests.

When evaluating the impact of the power, the report notes that location and employee data could be included in a FIN, but were not envisaged at the time of the consultation. HMRC has decided not to use a FIN to obtain information concerning a taxpayer’s location when they accessed digital online or mobile banking services. 

Conversely, where all relevant statutory conditions and safeguards are satisfied, HMRC believes the legislation allows a FIN to request information to support the checking of a tax position where the taxpayer is an employee or contractor of a financial institution.

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