Time for Full Disclosure: HMRC to be given new powers

October 4, 2020

2 min read

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What's going on here?

HM Revenue & Customs (HMRC) will be given powers allowing it to force financial institutions to pass on information about people’s assets without an individual’s approval or a court order.

What does this mean?

The government plans to give HMRC the power to hand out “financial institution notices” which will force all financial institutions to hand over information on their customers. These form a part of measures to make it easier for HMRC to share information with foreign authorities in a global crackdown on tax avoidance and evasion. HMRC would be able to request a wide range of data and there is a fear that HMRC could fish for information regarding those who have done nothing wrong or simply made a mistake. However, HMRC said, “it was important for it to be able to obtain the information needed to tackle tax evasion and avoidance in an appropriate and effective way.”

What's the big picture effect?

For the finance industry, the granting of such power to HMRC is alarming. Many believe that these plans will lead to an increase in requests by the tax authorities. This is because it would bypass the tax tribunal which ensures proper scrutiny and prevents free access to personal financial matters.  This has been echoed by the House of Lords Economics Affairs Committee which argued the Treasury has granted HMRC too many powers, thus eroding taxpayer protections. 

But could these powers perhaps be justified? Over the weekend it was revealed that HSBC allowed fraudsters to transfer $80m of fraudulent money. This was following an investigation by BuzzFeed News and then BBC Panorama into the so-called FinCEN Files.  The investigation discovered that criminals laundered money through major banks and used anonymous British companies to hide their assets. By granting HMRC the power to request information from banks could prevent such issues arising. 

There is also an argument that the government is granting such measures as a way to rebuild the Treasury’s finances following the coronavirus pandemic. A claim which HMRC strongly denies. But with an investigation into 23 companies for tax evasion, the targeting of furlough fraud and these new powers HMRC will certainly be busy.  Not to forget the tax and white collar crime practice groups at law firms who will now be primed and ready to intervene in any litigation. If these powers are used sparingly, they can be a great asset in preventing financial fraud. Overused and HMRC may find itself caught up in litigation over their use.

Report written by Michael Johnson

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