INTM604020 - Transfer of assets abroad: Information powers: Restrictions on particulars to be provided by banks

The legislation provides that a bank does not have to provide particulars of any ordinary banking transactions between the bank and a customer carried out in the ordinary course of banking business, unless one of the situations below applies:

• where the bank has acted or is acting on behalf of the customer in creating a settlement as a result of which income becomes payable to a person abroad, or in the execution of the trusts of any such settlement;
• where the bank is acting or has acted on behalf of the customer in connection with the formation or management of a body corporate. This requirement is limited to companies which if they had been incorporated in the UK would be close companies, and which are not companies whose business consists wholly or mainly of the carrying on of a trade.

‘Settlement’ is defined in ITTOIA05/S620. ‘Bank’ is defined in ITA07/S991.

The meaning of ‘ordinary banking transactions’ was considered by Megarry J. in the case of Royal Bank of Canada v CIR (47 TC 565). Although his judgement did not purport to define the scope of the privilege afforded to banks, he found that:

It seems to me to be a strictly limited provision. The limitations may be ranged under four heads. First the protection is given not to particulars at large but only to particulars of certain transactions: if the particulars sought are particulars, not of any transaction, but of the name and address of some person, unrelated to anything that could fairly be called a transaction, then they are outside the protection. Second, there is a limit to the type of transaction: no transaction will suffice unless it falls within the expression “ordinary banking transactions”. Third, there is a limit by reference to the parties: only transactions “between the bank and a customer” qualify. Fourth, there is a limitation as to the circumstances in which the transaction is carried out, namely, that it was “carried out in the ordinary course of banking business. This language seems to me to be carefully guarded” etc.’.

Also, the protection of this section would not apply, for example, to a bank’s nominee company.

Although there may be a contractual duty of confidence between a bank and its customers this is subject to - and over-ridden by - the duty of any party to a contract to comply with the law of the land. If it is the duty of such a party to that contract, whether at common law or under statute, to disclose in defined circumstances confidential information, then that person must do so and any express contract to the contrary would be illegal and void.

For example, in the case of banker and customer, the duty of confidence is subject to the overriding duty of the banker at common law to answer questions about a customer’s affairs when asked to give evidence on them in the witness box in a Court of Law. But the legislation on Human Rights needs to be considered in this context also – see INTM604040.