Beware financial institution notices by Jack Prytherch, tax lawyer at CMS

Is HMRC’s new power broader than it has accepted, asks Jack Prytherch.

From June 2021, HMRC have the power to issue ‘financial institution notices’ (FINs) without the normal key safeguards for recipients and taxpayers.

Although the relevant legislation makes clear that FINs can be issued to a broad range of financial institutions, HMRC previously stated that the new power would have only a negligible impact on a very small number of entities such as banks and building societies.

However, a recent response to a freedom of information request submitted by the CMS Tax Disputes & Investigations team indicates that the practical scope of FINs as applied by HMRC may be broader than suggested. HMRC’s information powers HMRC have a wide range of statutory powers at their disposal to investigate the tax affairs of both businesses and individuals. This includes the ability to issue ‘information notices’ under schedule 36 to the Finance Act 2008 (Schedule 36) to compel the sharing of information or documents in order for HMRC to check the tax position of UK taxpayers.

Under Schedule 36, information notices can be issued directly to taxpayers (taxpayer notices) or, alternatively, to third parties in order to obtain information about identified taxpayers (third party notices) or even unknown taxpayers (identity unknown notices).

Taxpayer notices, third party notices and identity unknown notices are subject to different rules but, in each case, there are strict controls and safeguards that must be followed before they can be issued.

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