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HMRC to gain further information gathering powers

25 September 2020. Published by Adam Craggs, Partner and Alexis Armitage, Associate

Draft legislation, published as part of Finance Bill 2020/21, will, if enacted, grant HMRC the power to issue 'Financial Institution Notices', requiring certain financial institutions to disclose information they hold about certain taxpayer(s) and their assets, without the safeguards which are currently in place.

At the moment, HMRC has the power to issue a third party notice, pursuant to paragraph 3, Schedule 36, Finance Act 2008, to third parties, such as banks and other financial institutions, requiring them to provide information (or produce a document) relating to a taxpayer if that information is 'reasonably required for checking the tax position' of the taxpayer. Importantly, HMRC can only issue such a third party notice if it has the agreement of either the taxpayer in question or approval from the First-tier Tribunal (the FTT). 

However, the new power will enable HMRC to issue third party notices to certain financial institutions without having to first obtain the agreement of the taxpayer or approval from the FTT.  

Given that HMRC will be able to issue Financial Institution Notices without the taxpayer's consent or any judicial approval and as the draft legislation provides no statutory right of appeal against such notices, any financial institution who receives such a notice and wishes to challenge it or its terms, may wish to consider pursuing a suitable remedy through judicial review proceedings.