HMRC’s new civil powers

• On 21 July 2020, HMRC issued a policy paper and draft legislation on “Amendments to HMRC’s civil information powers” as part of the Finance Bill 2020-21.
  • This proposes to introduce a new Financial Institution Notice (FIN) requiring financial institutions to provide information to HMRC about a specific taxpayer, without the need for approval from the First Tier Tribunal (FTT).
  • The information must be ‘reasonably required’ to check the taxpayer’s tax position.
  • An authorised officer of HMRC will need to approve the decision to issue a FIN.
  • If a Financial Institution fails to comply with a FIN, HMRC have the right to charges penalties. The Financial Institution will be able to appeal to the tribunal against such a penalty.
• Any documents that are subject to legal professional privilege cannot be requested in a Schedule 36 notice.
• HMRC are required to tell the taxpayer why the information is needed, unless a tribunal rules this condition should not apply.
• The measure corrects a drafting error in the Schedule 36 legislation that governs increased daily penalties for failure to comply with an information notice.
• The measure will have effect on and after the date of Royal Assent to Finance Bill 2020-21.

Read the full policy paper here.

Read the draft legislation here.

Aspire Comment

The amendment to civil powers relates to Schedule 36 of the Finance Act 2008, which gives HMRC the power to make a formal, written request to be provided with statutory information/documentation  in the taxpayer’s possession for the purpose of checking a taxpayer’s tax position.

This measure will speed up the process for HMRC to obtain information from financial institutions as they will no longer need to seek approval from the tax tribunal. The UK is the only country in the G20 jurisdiction that requires the approval of a tribunal, or the consent of the taxpayer, before a notice requiring information from a third party can be used.

A Schedule 36 notice must only request information that is “reasonably required”, however, as with all HMRC guidance, we are yet to see a definition of what is to be classed as reasonable. This leaves the legislation open to interpretation and provides a sound defence in the event that a HMRC officer issues a Schedule 36 notice that requests an abundance of documentation, some of which may not be statutory records.

It is important that, should you receive a Schedule 36 notice, you consult with an advisor to ensure that the request is reasonable, only asks for statutory documentation in your possession and that the deadline to provide the documentation to HMRC is reasonable.

If you have been subject to a Schedule 36 notice that you would like to discuss or have any other employment tax related matters you wish to discuss, call us on 0121 445 6178 or email enquire@aspirepartnership.co.uk.