Schedule 36 Disclosure notices on banks: Latest ruling - Mazars - United Kingdom
Schedule 36 Disclosure notices on banks: Latest ruling
HM Revenue & Customs (HMRC) has obtained permission from the Tax Chamber of the First-tier Tribunal to issue Schedule 36 Finance Act 2008 notices to 308 banks to obtain information about their customers who hold offshore accounts.
This is not the first such ruling, although it is the first such ruling by the First-tier Tribunal. The Offshore Fraud Project Group, established by HMRC, already obtained permission from the special commissioners between 2005 and 2007 to require financial institutions to provide details of overseas bank accounts of their UK customers and credit cards belonging to those customers funded from those accounts. This led to the first Tax Amnesty, the Offshore Disclosure Facility program, which allowed those who with unpaid taxes linked to offshore accounts or assets to regularise the position and settle their tax liabilities with a favourable penalty rate.
The information powers will be exercised in combination with the second Tax Amnesty recently announced, the New Disclosure Opportunity NDO. For Mazars Tax Investigations guidance on what this involves click here. HMRC will ensure the information obtained from the banks will be used to ensure that NDO disclosures are complete and trace any undeclared interest.
In the light of the last few years, the Amnesties and the deal with Liechtenstein, it is expected that HMRC will continue to target financial institutions for information on offshore accounts apart from the 308 banks to which the notices have now been issued.
This targeting does not necessarily begin with a Schedule 36 notice, as the process may begin with initial correspondence and discussions between HMRC and the bank.
The entire information process must be managed very carefully:-
- Banks are facing a fine balancing act between complying with those notices and data protection and confidentiality rules in various jurisdictions. Some banks may face conflicts in their obligations and consider that the right course of action is to appeal to the First-Tier Tribunal within 30 days beginning with the day on which the information notice is given. Appeal may be against the entire notice or any requirement in the notice in isolation on the grounds that it would be too onerous to comply with.
- Even in jurisdictions where, as with the UK Data Protection Act 1998, information may be provided for the purposes of the assessment or collection of tax, it is important to ensure that no more is disclosed than is specifically required by the notice, hence the importance of not making disclosures without a notice, even if the intention is not to appeal against the notice. Even then, banks should make sure that disclosure remains within the specific parameters of the information notice as disclosure not supported by the evidence provided by the notice that there is a tax assessment or collection purpose could fall into a gap, causing the bank to be in breach.
- Significant work will be necessary to retrieve and put together the information in the format required and permitted, which may stretch resources.
- Clear information will have to be provided to clients about the information required by the notices and guidance issued for client facing staff to respond to queries.
If you are interested in discussing how we and our Tax Investigations team can help you, please call your usual Mazars contact.
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- Copyright 2012 - Mazars - United Kingdom
