Financial Institution Notice

The recently published Finance Bill 2020/21 introduced the new Financial Institution Notice (FIN). A FIN allows HMRC to legally require banks and other financial institutions to provide relevant details about a specific taxpayer. HMRC will use FINs to check a person’s tax position and also to help with debt collection.

HMRC must provide the taxpayer with reasons why the information is needed, except in cases where a tax tribunal has ruled that this condition does not apply. But they do not need the agreement of the taxpayer before issuing a FIN. It is only necessary that the Financial Institution Notice be approved by an authorised officer of HMRC.

The information must be required to check the tax position of a particular taxpayer.  For international requests the information requested in the Financial Institution Notice must be relevant to the administration or collection of tax and the overseas jurisdiction must have exhausted all reasonable domestic routes for obtaining the information.

A Financial Institution Notice can be issued to credit card companies as well as banks, with the same legal force, compelling them to to provide documents or information about a particular person. If the Financial Institution fails to comply with the FIN, then HMRC can charge penalties for non-compliance, with provision for an appeal process.

HMRC hope the new Financial Institution Notice will shorten the time required to deal with international exchange of information requests and bring the UK into line with the latest international standards on tax transparency and exchange of tax information. At present HMRC needs on average twelve months to obtain information under a notice, compared to the international target of six, largely because of the need to obtain the approval of a tribunal.