HMRC’s civil information powers to be extended as a result of the Finance Bill 20/21 to include removing the need for taxpayer’s permission when requesting information from third party financial institutions.

What is an information notice?

Schedule 36 of the Finance Act 2008 allows HMRC to issue a formal notice containing a request for information from the taxpayer during the course of an investigation. This may be a request for bank statements, copies of loan agreements, sale and purchase agreements or any other information required by HMRC to investigate and assess a taxpayer’s position.

What is a third party information notice?

Pursuant to paragraph 3 of Schedule 36 of the Finance Act 2008, HMRC has the power to issue an information notice to a third party such as a bank or other financial institution, requiring them to disclose certain documents or information relating to a taxpayer. The information should be ‘reasonably required for checking the tax position’ of the taxpayer.

HMRC may need to issue a third party information where they cannot obtain the information from the taxpayer or they need to independently obtain this.

It is important to note that HMRC must seek consent of either the taxpayer or approval from the First Tier Tax Tribunal prior to issuing a third party notice.

HMRC has published guidance on third party notices here.

HMRC’s increased powers to issue information notices

The draft legislation, Finance Bill 2020/21 intends to amend HMRC’s civil information powers, allowing the revenue to issue ‘Financial Institution Notices’, without having to obtain consent from the taxpayer or approval from the Tax Tribunal.

It is anticipated that removing the requirement for approval will help to speed up HMRC’s processes in gathering information.

Failure to comply with information notice

A third party can appeal an information notice if it is unduly onerous to comply with the notice unless the notice requires the third party to produce its statutory records.

If a taxpayer or third party fails to comply with the notice, HMRC can issue a penalty assessment.

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