Building societies (and other third parties such as banks) are already legally required to comply with an information notice served under schedule 36 of the Finance Act 2008.   We recognise that the process for serving this notice can be long and arduous since HMRC must first obtain permission to serve it from the independent first-tier tribunal.   HMRC is also required to inform third parties of its intention to serve and ask if they have any objections, before applying to the tribunal.   On average, the process lasts 12 months.  So we do understand why HMRC wishes to remove these steps from the legislation to leave it with the power to simply serve a notice requiring information.   They would certainly help it in long-running tax disputes. 

But the proposals do have serious flaws.   One is the lack of independent oversight or appeal for taxpayers.  Another is the potential for an increased volume of information notices which could impact the resources of third parties, such as building societies.  While the paper does say there is unlikely to be a material increase in notices, clarity on anticipated volumes would be welcome.  The proposals are indicative of a growing trend by HMRC to effectively use third parties to help it collect information on taxpayers.

We also have reservations about the process of this consultation.  While there may be arguments in favour of speeding up the information notice process, the consultation is hardly a fair or transparent way of eliciting them.   The proposals look more like a stage two consultation paper since they include detailed policy design.  They leave HMRC open to the accusation that the decisions have already been made.  In fact, the timing of the consultation is most unfortunate.   The House of Lords Economic Affairs Finance Bill sub-committee is to examine developments in the balance of powers and safeguards between HMRC and the taxpayer.  The closing date for written submissions is 1 October 2018 ie the day before this consultation closes.  In view of the relevance of the sub-committee’s deliberations, we urge HMRC to delay any further decisions until at least the House of Lords’ work has concluded. 

Given that the policy design is at such an advanced stage, there should at least be an assessment of the number of taxpayers and institutions affected and the likely impact on them of the changes.

Click here for the full response.