HMRC has continued its pressure to obtain information from financial institutions and we now have a new series of cases before the First Tier Tribunal. They are all nearly identical, being ex parte applications seeking documents relating to customers of one particular institution with UK addresses and non-UK bank accounts. The reasoning of HMRC is clear and understandable, but I cannot help feeling it is utterly wrong.

HMRC have obtained information from other institutions from which HMRC have calculated (sic) that if they find out about people with offshore bank accounts, 25 percent of these customer accountholders will owe some tax. Therefore, HMRC are seeking financial details of the lives of accountholders of a completely different financial institution, even though 75 percent of them will likely have dealt with their affairs entirely properly.  

It was acknowledged that the Revenue have no information suggesting noncompliance by customers of the financial institution in question, but because 25 percent of those of some other institutions had underpaid tax, this is somehow a reason for seeking all this confidential information from them.

In fact, HMRC acknowledge that quite a lot of the details will relate to foreign-domiciled people who have not remitted income from their foreign accounts and are therefore not taxable (but bad luck, HMRC are not prepared to exclude these people from their enquiries), and that actually it will not be 25 percent, but probably only 5 percent, who will have underpaid some tax. So, 95 percent of the relevant population will have all their financial details gratuitously disclosed for no good reason other than that maybe 5 percent of them (and where on earth does the 5 percent figure come from? – it is surely only a guess) might have not paid their taxes properly. I promise, I am not making this up.

The Special Commissioner noted that although not all the information obtained by HMRC was obtained from customers of this particular financial institution, it is statistically likely that there is a significant degree of noncompliance among this institution’s customers. Well, yes – but it must be right to say that, having regard to the fact that nearly everybody in the country has a bank account, it must be statistically likely that there is a significant degree of criminal activity among all banks’ customers, which, on this reasoning, would give the authorities grounds to turn everybody over.

In determining whether the Revenue request was justified, the Special Commissioner said he had to weigh the burden imposed on the financial institution against the benefit to the Revenue. That must surely be the wrong equation. The burden to the financial institution would be negligible – it may take some time for the computer databases to be searched for this information, but it is hardly a burdensome exercise. The important issue surely is to balance the rights of the 95 percent of blameless taxpayers against the benefit to the Revenue of identifying the 5 percent who might have underpaid their taxes. In weighing these issues, it might have been useful to use the scales of justice.

And what about the larger issue of the destruction of trust in the financial institutions relating to the security of people’s financial affairs? I know it is not popular at the moment to be sympathetic to bank confidentiality, and it is of course absolutely right for those who fail to disclose their income to be brought to account vigorously, but rounding up a hundred people in the hope (even in a confident hope) that you might be able to find five wrongdoers is not the mark of a civilised society – or tax system.

However, there was a deafening silence after the previous four Special Commissioners’ decisions on this subject, and I daresay there will be a similar reaction to these four cases.

I cannot resist the observation that “good men doing nothing” or, worse, treading a road paved with good intentions is generally regarded as a flawed approach.