Question proposed, That the clause stand part of the Bill.

Clause 122 makes changes to enable HMRC to issue a new financial institution notice that in certain circumstances will require banks and others to provide information about a specific taxpayer to HMRC that is required to check a tax position or collect a tax debt without the need for approval from the independent tax tribunal. In around 500 cases a year, HMRC uses its formal powers to obtain information with tribunal approval. That includes domestic cases where HMRC wants to check information, and also cases where the information is needed by other tax authorities.

Co-operation with other tax authorities is crucial if international tax evasion and avoidance is to be tackled. The UK relies on other countries helping it, and they rely on the UK. In international cases, obtaining information takes, on average, 12 months, despite the fact that HMRC works with the Ministry of Justice to speed up the process and has more than doubled the number of HMRC staff dealing with such requests. That means that the UK does not meet its commitments to the OECD standards that we ourselves helped to develop, which require such international requests to be completed within six months. All other G20 countries can meet that standard, and the UK is under an obligation to demonstrate compliance with the standard when it is peer reviewed, in order to maintain co-operation with other countries. Following consultation, therefore, the Government decided to make the changes while ensuring that there are appropriate safeguards for taxpayers.

Timely access to information is central to international efforts to tackle tax avoidance and evasion. The changes allow the UK to meet its obligations under the OECD standards and bring it in line with all other G20 countries, while ensuring the appropriate safeguards.

The key change introduced by Clause 122 are the new powers for HMRC to issue financial institutions with a statutory demand for information—a financial institution notice—about a known taxpayer. Such notices differ from existing HMRC powers as they may be issued without the prior approval of taxpayer or tribunal, the financial institution has no right of appeal against a notice, and a notice may be issued for the purposes of collecting a tax debt from the taxpayer.

The Low Incomes Tax Reform Group has expressed its concern that that represents the removal of important taxpayer safeguards. I understand that HMRC has justified the introduction of financial institution notices on the basis that the existing statutory safeguards on third-party information notices mean that they cannot meet the international obligation to tackle offshore tax avoidance and evasion in obtaining information on behalf of overseas jurisdictions on a timely basis.

As the Minister knows, we welcome any efforts to tackle tax avoidance and evasion, but we would like to ask him why that approach is justified. HMRC is introducing powers that will be used in a domestic context, even though there is no domestic justification for them. HMRC’s apparent reason is that it is not possible to introduce a new process for domestic cases because of restrictions in UK law and international treaties.

However, the House of Lords Economic Affairs Finance Bill Sub-Committee recently heard evidence, including from HMRC, that the vast Majority of the delay in obtaining information for international cases was down not to the UK’s Court Service, which HMRC acknowledged took four to six weeks to process an application, but rather to delays in obtaining information required from overseas jurisdictions, which HMRC told peers takes eight months on average. The Lords recommended that, rather than removing important taxpayer safeguards, HMRC should review the whole process for dealing with international information requests requiring tribunal approval and should work with the financial institutions, the tax tribunal and others to find other means to streamline the process.

We would welcome the Minister addressing those points directly in his response, as there are clearly concerns that new financial institution notices might not in fact speed up the process of obtaining information in international cases. We would also welcome him addressing the concern as set out by the Institute of Chartered Accountants in England and Wales that new financial institution notices will be used routinely as a way of obtaining information, with the number of domestic information requests far exceeding the number of times the notices are used for international information exchanges. Is the Minister confident—and if so, why— that financial institution notices will be used only in accordance with the original policy intent, which is to speed up HMRC’s dealings with international exchange of information requests from overseas jurisdictions, rather than as an additional compliance tool for inquiring into the affairs of UK taxpayers?

I am grateful to the hon. Gentleman for his questions, and I am happy to respond to them. Let me take them in order.

The first question relates to the balance of powers and safeguards. It is important to have a balance here, because HMRC must have the tools to bear down on avoidance and evasion and to support and assist other tax authorities that may seek to do so through international means of collaboration. We as a country, and HMRC, benefit from such collaboration, as do those other tax authorities. I think the hon. Gentleman will recognise that there is a balance and that we should meet international standards, let alone those we promulgated, especially when the failure to do so might cause us to lose either status or connectivity with other nations across the G20. All other G20 nations are compliant with this standard.

The hon. Gentleman asked about safeguards. Let me clarify one little thing. The concern is that there should be a rapid capability of response. If there was an appeal process in relation to a financial institution notice, the effect would be to slow down the process as a whole, so the UK would still be unable to meet these international standards. It is important therefore that we do not build back in a delay that has been removed by the policy, provided that there are appropriate safeguards.

The measure does have important safeguards built into it. First, the notice may be issued only when the information is reasonably required to check a known person’s tax position or in connection with the recovery of a tax debt. An authorised HMRC officer who is experienced and has been specifically trained in the application of civil information powers must approve each and every notice, and those authorised officers must themselves pass a test to ensure that they retain their status. There is an appeal right for the financial institution against any penalties that may be charged for failure to comply with a notice, and there is a requirement for HMRC to make an annual report to Parliament on the use of the financial institution notice.

On the suggestions made by the House of Lords Economic Affairs Committee, it is important to be aware that HMRC consulted on this measure for 12 weeks in 2018. The consultation asked for new ideas about how the UK could meet international standards, and there was a further technical consultation in 2020. No new options were put forward that would allow the UK to meet its international obligations. This was the option that had most support, and it was therefore adopted by the Government, although they recognised that it was not widely welcomed in every quarter. As a result of the consultation, safeguards were built into the position in a way that gives additional comfort.

It is also important to ask whether this policy might become the basis for new fishing expeditions. I have indicated that something like 500 cases a year fall under the current policy. We do not expect, and HMRC has made it perfectly plain that it does not expect, that there will be a substantial increase in that number. In any case, the policy includes an annual report on which financial institutions will be consulted, as HMRC has made plain. Oversight in relation to how HMRC administers the tax system will also be subject to the new professional standards committee. It will therefore be possible to chart the use of the powers and for HMRC—and, in due course, Parliament—to make an assessment about whether they are in danger of being abused or used for purposes for which they were not intended.

Question put and agreed to.

Clause 122 accordingly ordered to stand part of the Bill.