Consultation outcome

Summary of responses

Updated 21 July 2025

Ministerial foreword

As Exchequer Secretary to the Treasury and Chair of the HMRC Board, I have set out 3 strategic priorities for HMRC: to improve customer service; to close the tax gap; and to modernise and reform the tax system. Making better use of third-party data offers the potential to unlock benefits for all 3 of these objectives.

Advances in technology and data-sharing offer new opportunities to automate processes and improve accuracy across the tax system. International examples demonstrate the opportunity to use third-party data to deliver a straightforward experience for customers, such as where third-party data is used to pre-populate boxes in tax returns or to remove the requirement to complete a tax return altogether.

Billions of pounds are lost each year due to error and evasion, and closing the tax gap will directly help fund our public services. Additionally, tax evasion can distort markets by giving evaders an unfair competitive advantage. That is why HMRC plans to level the playing field for compliant businesses, for example by using card sales data to identify unregistered taxpayers and automatically register them for the relevant tax regimes.

These changes are part of our wider strategy to modernise tax administration. Alongside measures to tackle promoters of tax avoidance and invest in digital services, the reforms will help create a more coherent, more resilient, and fairer system. Together, these initiatives are designed to close loopholes, reduce the burden of compliance, and ensure the tax system is efficient and supportive of economic growth.

I am grateful to those who have provided essential feedback to the consultation published at Spring Statement 2025. We have carefully considered the feedback, making key changes to planned reforms – including reducing the proposed reporting frequency of interest income from monthly to quarterly - and look forward to continuing to work together with industry to help design the changes and develop improvements for both taxpayers and HMRC. 

James Murray MP, Exchequer Secretary to the Treasury

Executive Summary

Background

At Spring Statement 2025, the government published its consultation on Better use of new and improved third-party data to make it easier to pay tax right first time. The government proposed a phased approach to reforming HMRC’s bulk-data gathering powers, starting with key datasets already provided to HMRC: financial account information (such as bank and building society interest (BBSI)) and card sales data. The phased approach and focus on datasets already provided by industry will minimise disruption and ensure that reforms support, rather than hinder, business growth.

Reforming HMRC’s collection of card sales data will help support small businesses, who accounted for around 60% (£28.0 billion) of the overall tax gap in 2023 to 2024, to get their tax right first time. HMRC plans to use improved card sales data to provide tailored feedback to taxpayers via digital nudges, helping ensure income declared by them is consistent and accurate. HMRC also plans to ensure a level playing field between businesses by using card sales data to identify unregistered taxpayers and automatically register them for the relevant tax regimes. 

Reforming HMRC’s collection of data on financial accounts will enable HMRC to make it easier for customers to pay tax on their savings income. HMRC plans to use the improved financial account information to enhance the Pay-As-You-Earn (PAYE) coding out of interest income and introduce pre-population of interest income in Income Tax Self-Assessment (ITSA) returns.

Overarching feedback

Questions related to how HMRC can receive the right data, of the right quality and at the right time to deliver improvements for taxpayers.

In general, respondents understood the rationale for the change, including the principle of closing the performance gap with other tax authorities who make better use of third-party data, and the benefits that doing so will deliver for taxpayers and HMRC. There was broad recognition that the current system requires modernisation and reform.

However, respondents cautioned that the benefits to HMRC and taxpayers must be balanced against the cost to data suppliers of providing the data, and data privacy considerations. Useful feedback was provided regarding administrative considerations and questions of proportionality, including suggestions for where adapting the proposals may deliver better overall outcomes.

This is why, as detailed below, HMRC has listened to feedback and made a series of alterations to the policy to reflect this. This is part of a genuine commitment to co-design the policy with industry and always consider the balance of burdens on taxpayers with the burden on data suppliers.

Detailed considerations

Chapter 3 sets out the detailed feedback received for each proposal and the government’s response.

Most respondents were supportive of a move towards standing reporting obligations but cautioned where complexities of some types of interest-bearing products would make it difficult to comply with new mandatory reporting requirements. In response, the government will seek to include a carve-out from some, or all, of the new reporting requirements for some isolated products.

Several respondents recognised the benefit of more timely reporting. However, many respondents raised concerns around the cost of monthly reporting of financial account information and queried the additional benefits it will deliver. The government has listened to stakeholder feedback and will instead take forward quarterly reporting of interest income at this stage to align with initiatives such as Making Tax Digital (MTD). Some respondents suggested it would be challenging to submit data less than a month after any reporting period. HMRC will therefore engage with data suppliers to better understand the challenges of reducing this delay to less than a month.

Respondents were broadly supportive of reporting to a tailored Common Reporting Standard (CRS) schema for financial account information but stressed that significant modifications will be needed to ensure compatibility with domestic reporting requirements. The government notes the broad support for an XML schema specification and will work with stakeholders to establish the data fields that will be reportable.

Respondents also recognised the importance of collecting tax references to maximise HMRC’s ability to match third-party data to customers. However, several respondents raised concerns on the proportionality, cost and operational complexities of this proposal, particularly on performing outreach to existing account holders. Tax references are a key source of designatory data ensuring the government can make key service improvements for customers. As such, the government maintains that tax references need to be collected for new and existing accounts. However, we have listened to concerns raised by stakeholders and have identified some exemptions (see government response to question 12).

The majority of stakeholders recognised the importance of due diligence and an effective penalties regime for ensuring high quality reporting. However, some stakeholders raised concerns with the verification of taxpayer references, primarily National Insurance Numbers (NINOs), as there is no existing platform to verify a NINO. On penalties, respondents expressed that they should be proportionate and paired with a suitable transitional period. The government will proceed with the proposed due diligence requirements and penalties, whilst providing clear guidance on expectations and aligning with other tested bulk-data reporting regimes where appropriate.

Stakeholders were broadly supportive of the exploratory questions asked regarding closing the reporting gap between domestic reporting and international obligations under CRS. HMRC will do further work with industry and other stakeholders to understand the challenges and nuances highlighted relating to the potential collection of dividend and investment data from third parties to inform any future phase of reform.

Next steps

As explained in the next steps section, the government has published draft legislation alongside this response document for an 8-week technical consultation and welcomes comments to ensure the legislation works as intended.

The government is committed to implementing these changes in a way that is proportionate and sensitive to the needs of businesses including the timing of the first requirements. HMRC will continue to work closely with stakeholders to ensure that new requirements are clear, targeted, and minimise unnecessary administrative burdens, allowing businesses to focus on growth and innovation.

Introduction

The consultation, Better use of new and improved third-party data to make it easier to pay tax right first time, was published on 26 March 2025 and closed on 21 May 2025. It builds on a previous call for evidence which explored opportunities to reform HMRC’s information and bulk third-party data gathering powers and earlier recommendations provided by the Office of Tax Simplification (OTS) in their report on Making better use of third-party data: a vision for the future published in 2021.

The government also ran related consultations into the UK’s implementation of internationally agreed Organisation for Economic Co-operation and Development (OECD) reporting rules which this consultation draws on. These included Reporting rules for digital platforms (2021) and the Crypto-asset Reporting Framework, Common Reporting Standard amendments, and seeking views on extension to domestic reporting (2024)

In total we received 22 written responses across the financial industry, taxpayer and business representative groups, trade bodies, academia, charities and accounting firms.

This document provides a thematic summary of the responses to each proposal and sets out the government response. The government is grateful to those who provided written feedback and participated in focused roundtable meetings with HMRC.

Summary of responses and government response

Timely reporting – standing reporting obligations and frequency

This section relates to questions 1 to 6 in the consultation document which outlined how the government will:

• progress from a notice-based regime to standard reporting obligations
• improve the timeliness and frequency of the data provided to HMRC to deliver key service improvements

Question 1: Do you support maintaining the scope of Schedule 23 of Finance Act 2011 paragraph 12 ‘interest’ as HMRC moves towards standing reporting obligations for financial account information? Are you aware of any unforeseen consequences or missed opportunities?

There were 12 responses to this question. Most responses supported the principle of maintaining the existing scope of Schedule 23 of Finance Act 2011 paragraph 12 ‘interest’.

However, many respondents queried whether carve-outs should apply for specific types of interest, such as compensatory interest payments and multi-fixed year deposits. It was suggested that HMRC should consider operational and regulatory implications for these interest types. For example, compensatory interest payments are often made manually, involve tax withholding and must be paid promptly to customers in line with requirements imposed by financial regulations.  

Many respondents understood the rationale, and supported the principle of, introducing standing reporting obligations. It was recognised that this approach could modernise and simplify the current approach of issuing notices under schedule 23 (Finance Act 2011).

Some respondents highlighted the benefits of having a more complete view of taxpayer circumstances (by not limiting reporting obligations to data suppliers sent a notice) to enable service improvements such as pre-population.

However, several respondents expressed concerns relating to the significant costs and operational challenges for new data suppliers in scope of standing reporting obligations. It was recommended that HMRC should provide a suitable lead-in period and clear guidance to support financial institutions who are unfamiliar with reporting requirements.

Government response

The government notes the complexities of some types of interest, such as compensatory interest, and the challenges financial institutions will face with complying with the reporting obligations if they remain in scope. The government will carefully consider any potential financial and administrative impacts the inclusion of these products will have on data suppliers and will explore a carve-out for some, or all, of the new reporting obligations from phase one of the reforms. Where interest types are outside the scope of new standing reporting obligations, the government (or HMRC) will continue to have the option to require the information under schedule 23 (Finance Act 2011).

Whilst the government notes concerns regarding costs and unfamiliarity for financial institutions who are not currently reporting financial account information to HMRC, the government is committed to making things easy for all customers, regardless of which financial institution they use. Reporting from all in-scope ‘data-holders’ is essential for introducing initiatives such as pre-population, where the department requires a complete view of the customer’s circumstances to correctly pre-fill a field within a tax return. In line with stakeholder feedback, HMRC will provide a suitable lead-in period and clear guidance to support financial institutions who are unfamiliar with reporting requirements.

Question 2: Do you support maintaining the scope of Schedule 23 of Finance Act 2011 paragraph 13A for card sales data as HMRC moves towards standing reporting obligations? Are you aware of any unforeseen consequences or missed opportunities?

There were 9 responses to this question. Several respondents highlighted the rapidly evolving payments landscape, owing to various changes to merchant acquirer business models such as previous acquisitions and mergers, payment facilitator service models, and the multiplicity of payment methods. It was recommended that HMRC should undertake a comprehensive review of the full spectrum of alternative retail payment methods to ensure the reporting framework remains fit for purpose and that the definition of a ‘relevant data-holder’ is sufficiently clear.

Government response

The government notes the continuous evolution of the payments industry, including the range of actors involved and increasing use of non-card sale payment methods (such as direct account-to-account transfers). The government will consider points raised around the completeness of card sales data and its coverage of business transactions for future phases of reform.

For simplicity, phase one of the reforms will maintain the scope of Schedule 23 of Finance Act 2011 paragraph 13A for standing reporting obligations. This definition includes both traditional merchant acquirers and payment facilitators who have a ‘contractual obligation to make payments to retailers in settlement of payment card transactions’, and therefore excludes other businesses active in alternative parts of the card acceptance value chain (such as independent sales organisations (ISOs) and gateway providers). The government is committed to work closely with data suppliers and to produce detailed, clear guidance on who is within scope of the standing reporting obligations.

Question 3: Should specific types of financial accounts or providers receive special consideration in the reporting of financial account information and card sales data, and why? What is the volume or incidence of these exceptions?

Several respondents recognised the importance of not allowing a de minimis exception for reporting interest and card sales data to ensure the data can be used effectively to drive the proposed service improvements. They expressed that a de minimis threshold could lead to incomplete data and taxpayer confusion.

As with responses to question one, respondents broadly suggested that certain financial accounts should receive special consideration when warranted by their complexity or the compliance burden placed on third parties, again this included one-off interest payments. Data suppliers recommended a decision should be made on the continued inclusion of interest paying current accounts in scope of existing Schedule 23 FA 2011 reporting, due to the risk of financial exclusion from the requirement to collect a tax reference.

For investments portfolios that generate interest distributions, one respondent recommended the onus to report interest income should fall on members of the Certificateless Registry for Electronic Share Transfer (CREST) where securities are held electronically as opposed to collective investment vehicles. It was noted that these entities will only know the legal owner (CREST member) and not the beneficial owner. They expressed that imposing obligations on collective investment vehicles such as investment companies would be a significant compliance burden, especially for certificated shares, which are low in value and expected to be phased out.

Government response

In line with stakeholder feedback, the government will not include a de minimis reporting threshold.

The government notes and understands that specific types of financial accounts or providers will create complexities with the reporting framework. Whilst some types of financial account information may make sense to ‘carve out’ entirely from the standing reporting obligations (with reporting through Schedule 23 (Finance Act 2011)) for completeness, others are more appropriate to be excluded from specific requirements only, such as mandating collection of tax identifiers.

HMRC will carefully consider any potential financial and administrative impacts the inclusion of these products will have on data suppliers and will explore the exclusion of these cases from phase one of the reforms. The government notes the role of intermediaries in investment chains and will work with stakeholders to design a reporting process that is compatible with industry.

Question 4: Do you have any comparable examples of an effective process which ensures that a) those in scope are aware of their reporting obligations, and b) the relevant department is aware of those who should be reporting?

Some respondents referenced several existing reporting regimes, such as Individual Savings Account (ISA) reporting, Foreign Account Tax Compliance Act (FATCA), CRS and the earlier European Savings Directive that predated the CRS as examples where no notice is required, and standard reporting obligations apply.

One stakeholder suggested, where possible, HMRC should explore the use of a notification trigger linked to an existing registration process. For example, when a financial institution registers with a relevant regulator, this event could prompt a notification in the onboarding process that raises awareness of reporting obligations.

Many respondents emphasised the importance of clear, timely and, in some cases, direct communication from HMRC to ensure that data providers fully understand their reporting obligations. A collaborative approach was encouraged where HMRC works closely with stakeholders to ensure effective implementation.

Government response

The government notes respondents’ feedback on approaches taken in other jurisdictions and reporting regimes, and the need for any lessons to be tailored to the specifics of the UK tax system.

The government remains committed to engage and work with data holders to ensure they are aware of their responsibilities from the outset and plans to provide a digital reporting service in line with other bulk-data regimes.

Question 5: The government’s emerging position is that the frequency of reporting financial account information should be monthly, and that data should be required as close as practicably possible to the end of each month.

1. What would be the cost of introducing monthly reporting?
2. Would a frequency more regular than monthly be preferable; ie because it integrates better with business processes? If yes, what would be preferable between a week, a few days, 24 hours, or ‘on or before payment’, and why? What are the relative costs and benefits?
3. How soon after the end of each reporting period can data be provided?
4. Are there specific cases that need to be treated differently, if so, why, and what is the volume or incidence of these exceptions?

There were 32 responses to this question including the sub-questions.

Many respondents were not in favour of monthly reporting, citing the administrative challenges of rebuilding existing processes and the costs of implementing new systems. They also expressed concerns that monthly reporting would reduce the time available to validate and assure the data before it is submitted to HMRC.

Several respondents questioned whether the benefits of monthly reporting justified the additional burden. Whilst data suppliers would prefer to maintain annual reporting, quarterly reporting was seen as significantly more favourable than monthly. Some respondents outlined how quarterly reporting would still enable much of the intended use of the data whilst aligning with other reporting requirements such as Making Tax Digital (MTD) and CT61 returns (through which tax withheld at source for some sources of interest income are reported to HMRC).

Respondents were broadly supportive of reducing the time after the reporting period to deliver the intended service improvements but emphasised the importance of striking a balance between the timeliness of reporting and the administrative burdens placed on data suppliers. It was suggested that one month would be a reasonable time frame, with one respondent specifically proposing a minimum period of 3 weeks from the end of the reporting period.

As raised in response to previous questions, it was noted that specific cases such as compensatory interest and other types of interest require special consideration with regards to the frequency and timeliness of reporting due to their complexity and variability.

Government response

The government is committed to helping customers get their tax right. To do so, HMRC must improve the timeliness with which it acquires data to deliver key service improvements such as pre-population and timely PAYE tax coding updates.

The government has carefully considered stakeholder feedback regarding costs and proportionality. The first phase of reform will require financial account information to be reported quarterly (as opposed to monthly as initially proposed). The government urges data suppliers to take advantage of the opportunity to modernise and automate its processes where possible when moving to quarterly reporting. It is recommended that reporting solutions are scalable, and future-proof as expectations of timely tax administration continue to move closer to real-time.

The government will continue to work closely with data suppliers to agree a proportionate time after the reporting period to submit the financial account information, which delivers for taxpayers and is compatible with the business processes of financial institutions.

Question 6: The government’s emerging position is that the frequency of reporting card sales (merchant acquirer) data should remain as monthly and be extended to all in-scope data-holders, and that data should be required as close as practicably possible to the end of each month.

1. Would a frequency more regular than monthly be preferable, for example because it integrates better with business processes? If yes, what would be preferable between a week, a few days, 24 hours, or ‘on or before payment’ (from the merchant acquirer to the vendor), and why? What are the relative costs and benefits?
2. How soon after the end of each reporting period can data be provided?
3. Are there specific cases that need to be treated differently, if so, why, and what is the volume or incidence of these exceptions?

Most respondents suggested that monthly reporting will come at a significant cost for both providers of card acquiring service not already sent a notice under Schedule 23 (Finance Act 2011), and for those who are already sent a notice but are currently reporting annually.

Several respondents raised concerns that more real-time reporting would reduce the amount of time to check and validate the data before it is submitted. Data suppliers expressed that achieving a turnaround of less than 15 days will be impossible without a rebuild of systems, and that 30 days is preferred to allow time to review the accuracy of the data.

Data suppliers raised concerns about the timing of HMRC’s use of card sales data, suggesting that monthly reporting may offer less value than initially expected. They pointed out that certain cases such as gift cards, charge backs and intermediated accounts require special treatment due to the risk of the overestimation of sales:

• gift card purchases represent liabilities and not sales until they are redeemed and therefore, merchant acquirers will not be aware of when the redemption of a gift card occurs
• several respondents indicated that chargebacks are common occurrence within the banking industry and can be initiated up to 120 days after a transaction. They expressed concerns that timely reporting of data will pose of a risk of inadvertently inflating a merchant’s turnover figures if information is reported prior to chargebacks being redeemed
• intermediated accounts such as those used by solicitors to manage client funds require different treatment to avoid misreporting turnover for the intermediary rather than the underlying client. It was suggested these cases could be addressed through schema modifications

Data suppliers also wanted clarification on how corrective filings will be accounted for in the context of an automated process for supplying the data.

Government response

The government notes respondents’ concerns on monthly reporting. However, two-thirds of data suppliers currently provide card sales data monthly, indicating that monthly reporting is feasible and achievable. The government will maintain monthly reporting for card sales data to reflect current practices.

The government notes respondents’ preference to supply data one month after the reporting period. However, as set out in the consultation document, it is crucial for HMRC to receive timelier data to deliver service improvements for customers. As demonstrated by other reporting frameworks such as Real Time Information (RTI), implementing a reporting period shorter than one month is achievable and, once systems are operational, can lead to reduced administrative costs for data suppliers due to automation. HMRC will continue to work with stakeholders to agree a period that is both practical and compatible with business processes.

The government notes the risk of the overestimation of the sales that may arise from the specific cases noted by respondents. The challenges are known to HMRC (as they exist in card sales data provided to date) and the department will ensure to keep them in mind when using the data during interventions with individual taxpayers, for example by not fully pre-populating a tax return box.

Collecting the right data – schemas and collection of tax references

This section relates to questions 7 to 13 of the consultation which outlined options to:

• introduce and implement set schemas for third-party data reported to HMRC
• modernise how the data is shared to meet schema requirements; and
• require data suppliers to request tax references to support improved data matching

Question 7: Regarding the schema for card sales (merchant acquirer) data, do you agree with our conclusion that exploring a different schema at this point is not preferable? If not, are there other schema options (such as internationally recognised schema) that the government should consider?

We received 7 responses to this question. There was a consensus amongst respondents that given card sales (merchant acquirer) data providers have recently transitioned to XML schema specification, introducing a different schema is not appropriate at this time.

Most respondents agreed that modifying the existing schema to capture the additional information HMRC requires (covered in question 12) is sensible. Some respondents detailed the need for a change roadmap to understand HMRC future ambitions and to support business readiness.  

Government response

The government notes the consensus in response to this question and will work with suppliers on the necessary adaptions to the existing XML schema for card sales providers to acquire additional data elements (covered in question 12).

Question 8: Our preferred option is to tailor the CRS schema. We would be grateful for your views on:

1. Which key specifications need to be included? How would you tailor the CRS schema to meet domestic reporting requirements?
2. What the benefits and drawbacks are of combining BBSI and other interest under one schema?
3. What are the associated costs with adopting a tailored version of the CRS schema? Would an alternative approach be more cost-efficient?

We received 15 responses to this question. Most respondents expressed support for the introduction of a schema for BBSI data based on a tailored version of the CRS schema. However, respondents also noted that elements of CRS schema are not required for domestic reporting and some elements in domestic reporting are not covered in the CRS schema. It was also noted that inclusion of data elements for domestic reporting may increase file sizes rendering monthly reporting more difficult.

Respondents also highlighted that BBSI and Other Interest (OI) data include references making it easier to identify and remediate any errors in submission. In contrast the CRS schema does not contain these references and is less tolerant, particularly where data is missing, which can cause submission failure. Stakeholders requested clarification on whether a move to a tailored version of CRS schema would adopt the same void and resubmission process under the automatic exchange of information (AEOI).

In response to the question regarding the benefits and drawbacks of combining BBSI and OI data, respondents noted the benefits of standardising reporting frameworks. However, some highlighted the differences, most notably that BBSI data relates to both individuals and non-persons, whereas OI data relates to individuals only. Any alignment would need to consider these details to ensure data is reported accurately.

Some respondents questioned whether the NINO could be reported as opposed to sharing all Know Your Customer and Anti-Money Laundering data to reduce file size.

Many respondents shared views on more practical elements around reporting including, whether a third-party, such as a financial institution, could share with their customers the data they share with HMRC, for example, via an annual tax statement for transparency. Additionally, one respondent highlighted financial institutions report new accounts to HMRC but do not report when an account is closed which can impact the accuracy of the data if used for estimating interest for accounts that no longer exist.

In response to costs, respondents did not provide a figure, stating that until a detailed specification is set out it will be difficult to quantity changes. However, any change of this kind will include upfront development costs and may involve working with contractors to update the format and systems.

Government response

The government notes the support for introducing a set schema for BBSI including tailoring existing formats where appropriate. Following representations from key stakeholders during the consultation, the government is considering descoping some types of interest from the new reporting obligations for phase one of the reforms.  Therefore, any new schema will take that decision into account.

The government also notes, despite the broad support for tailoring the CRS schema, the challenges that exist with alignment and ensuring that any new schema for reporting BBSI data is fit for domestic purposes. Further discussions are needed around the key requirements needed within the schema including points made regarding the financial institution references, the submission process and how accounts are reported.

Question 9: What are your views on how the data, in line with the schema options, should be shared/transmitted from third-party suppliers to HMRC?

Question 10: To help alleviate burdens on data suppliers and to support greater efficiency, what are your views on:

1. HMRC providing a manual resource like a user interface (compliant with the XML standard schema like the CRS model) for providers supplying small volumes of data?
2. What easements should be provided if any?
3. Would you use an Application Programming Interface (API) if they were made available to share information and data with HMRC in this context? Are there other forms of transmitting data that are effective and secure for the transfer of bulk data between systems?

The government received 4 responses to Question 9. Respondents stated that any new method for transmitting or sharing bulk data will need to be secure and efficient.

The majority of respondents said that a secure file transfer process would be preferable, however, caveated that the existing Secure Data Exchange System (SDES) has file size restrictions which are problematic for larger institutions supplying significant volumes of data.

The government received 5 responses to question 10. Respondents noted that a manual interface for financial institutions with low volumes of reportable data would be a welcome improvement for smaller organisations, particularly for those who may not have received notices under Schedule 23 before.

Respondents had mixed views regarding the use of an API and wanted further clarity. Some respondents stated that a bulk push API which sends the data automatically would be preferable, as opposed to a pull API which requires the data to be requested by the recipient. Given the sensitivity of the data being transferred, HMRC was encouraged to support multiple mechanisms for submission. APIs tend to best support small and frequent exchanges of data and are better suited where real-time feedback is needed.

Government response

The government shares the view that any future change to how data is transmitted between a third-party and HMRC is secure and efficient. HMRC is investing to improve its ability to ingest data, this includes upfront investment in a front door portal with the capability to validate files at the point of submission to ensure data quality.

The government also notes the point made for having multiple ways in which data can be transmitted such as XML schema, excel spreadsheet and manual input to support data exchange for different customers and data types such as compensatory interest.

The government notes the support for a push API or file upload as a secure method for transmitting bulk data. Further discussions are required to identify the most suitable method for both data providers and HMRC.

Question 11: Which identifiers are appropriate for these types of categories (Partnerships, Trusts and Charities) and do you have views on how they may be collected and supplied by third parties?

We received seven responses to this question. Responses varied between respondents providing their view of which identifiers would be best for these categories and others who wanted to further understand HMRC’s intended use for the data.

The majority of those who did provide a response to this question stated the following:

• Partnerships and Trusts – Unique Taxpayer Reference (UTR)
• Limited Liability Partnership (LLP) – Company Registration Number (CRN)
• Charities – Charity Number

Some respondents highlighted that financial institutions do not collect this data already and placing any obligations to do so could result in significant development costs to process, validate and store the information.

Some respondents stated that NINOs could be challenging for third parties to acquire from larger partnerships, especially for those with overseas partners not entitled to a UK NINO or where there are frequent changes to the partnership. Furthermore, other respondents challenged whether HMRC would have the ability to be able to appropriately match interest from partnership accounts to individual partners, given that partners may not be entitled to equal shares of any interest arising.

Government response

The government has a keen interest in ensuring data it acquires is brought in for a specific purpose and can be adequately used for discharging our functions. This includes improving capability around matching data we acquire from third parties to our systems.

Question 12: What are your views on the proposed requirement to place obligations on suppliers to request NINOs from individual customers, CRNs from incorporated businesses and VRNs from businesses and traders making sales via card machines (merchant acquirer data)?

Question 13: What are the associated costs on suppliers for collecting the relevant tax references from your customers?

We received 17 responses to question 12 and nine responses to question 13. Some respondents recognised the importance for HMRC to be able to accurately match data from third parties to our systems and understood the rationale for placing obligations on data providers to collect tax references. However, many respondents raised concerns:

Scope

Respondents requested clarity around which types of interest-bearing products and payments they will need to collect the NINO for, for example, compensatory interest. Respondents felt any outreach to some types of accounts, for example, dormant, is likely to result in no response and cautioned against over-burdensome and costly proposals in this regard. Additionally, stakeholders were not sure how HMRC used interest data relating to non-persons (for example charities, clubs and incorporated businesses) and requested clarity over the benefit of acquiring the tax references for these entities.

Costs

The proposal to collect tax references, for example, NINO for new and existing accounts could cost a large bank around £10 million. A letter to existing customers costs around £1 - £3 per letter and operational resource will be required to arrange, send and review the responses from customers. Other costs include changing onboarding processes, training staff and updating internal guidance.

Proportionality

Key stakeholders raised concerns regarding proportionality including financial institutions bearing costs writing to customers many of whom may not respond. Previous outreach programmes such as CRS, typically show a 20% response rate. Some respondents stated without an incentive for the customer to provide the NINO then it is hard to drive the right behaviour meaning the third-party must request but the customer does not have to provide. A point was also raised around how often the third-party must attempt to obtain the NINO and the costs associated with the attempts noting customers may not respond.

Safeguards

Some respondents raised several issues on safeguards around this obligation. These included, but not limited to:

• what happens if a third-party (for example, financial institution) fails to obtain the tax reference? Are there penalties under such circumstances?
• what happens if the customer chooses not to provide the NINO to the third-party? Are there are any consequences for the customer?
• what happens if a customer is ineligible for a NINO? What does a third-party report in this scenario?

There were additional concerns raised about the exclusion of vulnerable groups if they could not provide a NINO and potential risks for financial institution’s existing customer base.

Security

Some respondents raised security concerns of requiring third parties to collect, store and transmit this information to HMRC and the consequences of any potential data breaches.

Communication

Some respondents suggested that without the support of the government through a communications plan setting out the new requirements, the likelihood of successfully implementing this obligation will reduce.

Noting the challenges requiring a third-party to acquire tax references for both new and existing accounts, particularly the difficulties in incentivising responses from existing customers, some respondents suggested alternative ways of improving matching capability. For example, getting taxpayers to report all their financial account information and investments via Self Assessment return process or digital tax account.

In relation to VRNs and CRNs for card sales providers, some respondents stated that card machines are now very affordable, and even businesses with a turnover in the low thousands are likely to use one. A significant proportion of merchants will therefore not be VAT registered and asking for a NINO could be more appropriate, say for example a sole trader and partnership UTR for a non-VAT registered business.

Government response

To deliver the government’s ambition to support taxpayers getting their tax right first time through upstream interventions, it is vital that HMRC has the confidence in the data to be able to adequately use it. Tax references are a key source of designatory data and the reporting of these references along with other identifying information (for example, name, date of birth, address) can significantly improve matching third-party data to taxpayer systems. Therefore, this is a key driver to be able to unlock the benefits of upstream interventions, ensuring the right tax is collected first time.

Moreover, data security is a fundamental element of how government stores, uses and shares information. Third parties already share sensitive information including NINOs with the government and we are keen to ensure the expansion of data sharing between third parties and government is done in an efficient and secure manner.

The government notes the concerns regarding safeguards for both customers and third parties because of this proposal. Therefore, we set out the following position:

• to reduce the risk of debanking, financial institutions will not be penalised for being unable to obtain the relevant tax reference from customers where they’ve made ‘reasonable efforts’
• we will work with financial institutions to develop clear guidance around the obligations

To make this requirement work effectively, the government recognises the need to raise awareness about this obligation as part of the proposal. After financial institutions develop their communication plans, HMRC will consider how it can support and amplify these activities where possible, to encourage people to share their information with a trusted third-party when requested. This approach should improve response rates and help achieve the intended benefits.

Considering the various views provided, to reduce burdens and costs on third parties and to safeguard customers and data providers, the emerging position relating to the concerns are as follows:

Financial account information data

• the government maintains the position for third parties to collect the NINO for both new and existing accounts. We understand that there will be significant costs relating to client outreach and remediation of the existing customer base. However, to deliver the benefits for customers (expanding PAYE coding out and introducing pre-population) is it vital we improve our ability to match third-party data to taxpayer records
• NINOs will only need to be requested and collected for interest-bearing depository (savings) accounts. This means for compensatory interest and interest-bearing current accounts financial institutions are not required to obtain a NINO in the first phase of reform
• dormant accounts will be exempted from the requirements to collect a NINO in the first phase of reform. We intend to work with industry to define what constitutes as a ‘dormant account’, using Dormant Bank and Building Society Accounts Act 2008 as a reference point
• for new accounts, we intend to align with ISAs around how the NINO should be acquired
• for existing accounts, we will work with third parties to explore and agree a definition of ‘reasonable efforts’ which will include understanding how digital communications can be used to reduce costs on industry
• given our use cases for this data are improving PAYE coding out and introducing pre-population, financial institutions will not be obligated to collect and provide the CRN for incorporated businesses with savings accounts

Merchant acquirer data

We maintain our position in consultation, aligning to the Reporting Rules for Digital Platforms, that:

• NINOs should be collected from individuals with a merchant account
• VRNs from businesses (where applicable)
• CRNs from incorporated businesses

The process for how merchant acquirers and payment facilitators should obtain a NINO from a customer (such as sole trader) will be aligned with ISA regulations including the relevant safeguards.

We will work with merchant acquirers and payment facilitators to understand the best way to obtain the VRN from customers.

Ensuring data quality – due diligence requirements and penalties

This section relates to questions 14 to 16 which outlined how the government will build on existing regulations to ensure the third-party data provided by data suppliers is fit for purpose by:

• introducing specific due diligence requirements for data suppliers
• adopting a modern penalties regime

Question 14: What are your views on introducing due diligence requirements that align, where appropriate, to those for Reporting Rules for Digital Platforms (RRDP) and the Crypto Asset Reporting Framework (CARF)?

We received 14 responses to Question 14.  Respondents noted that aligning due diligence with similar processes for the CARF and RRDP, could lead to better data and made sense in terms of consistency across different regimes.  Similarly, one respondent drew a parallel between the due diligence requirements in the consultation and current plans for ISA digitisation and stressed the importance that both regimes are aligned to similar standards.  Key concerns from respondents often focused around NINO collection and verification, including:

• without HMRC providing a validation mechanism for NINOs, data suppliers would not be able to ensure a customer had provided a correct NINO (meaning it may be in the correct format but may not belong to the customer)
• complexities around updating records when a NINO is issued after account setup
• data security concerns relating to the sharing of NINOs for existing accounts, for example customer reluctance to share sensitive information and risk of fraud if that information is shared as part of a phishing scam

Some respondents said that it is easier to check and confirm CRNs, which are available in the public domain (Companies House) and VRNs using the government’s existing digital service.  This data is also not sensitive, so has fewer risks with being shared.

Most respondents to this question agreed that it was desirable to have a secure verification system provided by HMRC for checking NINOs.

Government response

As stated in the government response to Question 12, HMRC needs accurate tax references to fulfil its ambition to increase its ability to match data to its customers’ records to deliver tailored services.  Therefore, the government maintains the position set out in the consultation regarding due diligence requirements and intends to align them with recent OECD initiatives, ie RRDP and CARF.  This represents international best practice.  The government continues to explore options for a NINO verification service. 

Having considered stakeholder views, we maintain the position that financial services providers will be required to use all records available, as well as any publicly available electronic interface, to ascertain the validity of the tax identification numbers, including:

• NINOs: we expect financial services providers to ensure the NINO they are collecting from their customers is in the correct alpha-numeric format and the final character is either A, B, C or D – we are exploring ideas to support data suppliers to make the process of validating data easier
• CRNs: financial services providers are expected to verify the CRN (assuming the entity is an incorporated business) using Companies House
• VRNs: merchant acquirers and payment facilitators will be expected to use the government’s existing digital service to verify whether a business is VAT registered

Financial services providers must keep a record (for a period of 5 years) of the steps taken to meet the due diligence requirements and the information collected while applying the due diligence procedures.

The consultation responses have shown that there will be legitimate instances where customers cannot provide a NINO. As is common practice we plan to work with suppliers to understand, in instances where suppliers provide inaccurate or incomplete data, the reasons why this is the case before taking any action, for example a NINO not supplied or in the wrong format.  Regarding concerns around data protection, businesses will be required to comply with data protection laws when submitting data to HMRC, ensuring that personal data is handled lawfully and fairly.

Question 15: Do you agree that, in principle, penalties relating to bulk third-party data obligations should be consistent with those set out above?

Question 16: If not, is there an alternative penalty structure that would be more appropriate to ensure accurate data, including on tax identification numbers, are collected for customers?

We received 12 responses to Question 15, and 7 to Question 16.  Most respondents agreed that penalties should be proportionate and accompanied by a soft launch or grace period to facilitate a smooth transition where new requirements are being brought in for third-party data suppliers.  Respondents were also positive about aligning the penalty regime with one that already exists and that suppliers are familiar with, and as such, did not suggest alternative penalty structures.

One respondent positively noted the inclusion of a penalty for ‘failure to notify individual reportable persons that the financial services provider has submitted information about them to HMRC’, which mirrors the rule in the RRDP. This should help the taxpayer query the data with the bank if it looks wrong and also remind them to declare it to HMRC on their return, if they file one, thus potentially reducing errors. Some respondents noted the risk that a few errors in the reporting process which impacted a significant number of accounts could lead to large penalties.  One respondent suggested a statutory maximum penalty for a single breach or year to mitigate this risk.

There was a positive response to the proposal to work with financial services providers to understand the reasons why returns may be incomplete or incorrect before considering the application of penalties.  However, there were related concerns about large data providers having potentially onerous administration in dealing with HMRC follow-up queries.

Government response

The government will proceed with aligning the new regime to the penalty approach adopted for international bulk third-party data, including associated safeguards, in Part 3 of the RRDP implementation of the MRDP and draft International Tax Compliance (Amendment) Regulations 2025.

We maintain the position that penalties will be issued for the following categories:

• failure to register: to ensure mandatory registration for financial services providers, including those that do not have reportable accounts
• late returns
• failure to notify individual reportable persons that the financial services provider has submitted information about them to HMRC
• failure to apply due diligence procedures
• inaccurate or incomplete reports
• failure to comply with record-keeping requirements
• failure to provide information

and that penalties will fall into 2 broad types:

• one-off single penalties for reporting incorrect or incomplete information
• initial and continuing daily penalties for failing to comply with the collection, verification, reporting and other requirements in the framework

As with RRDP, the government intends to ensure data providers within scope are treated fairly, by including such provisions as:

• a grace period (agreed between HMRC and supplier to help suppliers get things right) for data providers when the new regime comes into effect
• the right to appeal a penalty notice
• putting in place safeguards to ensure data suppliers are not penalised more than once for the same error
• not unfairly penalising businesses for failures to submit data in a timely or accurate manner, provided they can demonstrate a reasonable excuse as defined in Part 4 of Schedule 23 of Finance Act 2011

As is currently standard practice within HMRC for bulk data acquisition, we will work with financial services providers to understand the reasons why returns may be incomplete or incorrect before considering the application of penalties.

Extending reporting to new third-party data sets: dividends and other income from investments

The government set out plans in the consultation to include other data sets in further phases of reform such as dividends and other investment income. For the majority of cases, HMRC does not receive regular data about dividends payments from third parties unless it is for overseas financial accounts. In addition, for 2024 to 2025 the personal dividend allowance was reduced to £500, bringing in an estimated 1.2 million additional customers into the tax system. We invited views on how HMRC might close the reporting gap between the information HMRC receives from financial accounts held by UK taxpayers overseas and domestic reporting, particularly relating to accounts where dividends and other investment income are received. This was intended to be the start of a discussion with the financial services industry and other stakeholders. The questions were:

Question 17: What are your views on how the gap between domestic reporting and international obligations under Common Reporting Standard could be closed? Are there any specific types of financial account, or financial account information, that you believe should be included or excluded in future phases of reform? If so, why?

Question 18: What data do you (individuals and their agents) currently use to calculate tax liability on dividends and other investment income? Would it be easier if this data were pre-populated in self-assessment or shown in a PAYE tax coding notice?

Question 19: How straightforward would it be for you (third-party data suppliers) to provide dividend and other investment income data to HMRC that mirrors what is provided in customer annual tax packs and aligns with the tax year end 5 April? What are the main challenges with this approach?

Summary of responses to questions 17 to 19: dividends and other income from investments  

The majority of respondents were cautiously in favour of extending third-party data reporting to dividends and other investment types providing that any reforms were proportionate, and any pre-populated data is broken down for agents and taxpayers and are correctable. Many respondents wanted assurance that any pre-populated data would be supplied with an override functionality and split-out to show the source data.

While many respondents were positive about the possibilities, several noted that it would be unlikely to assist low-income individuals with direct holdings and suggested that HMRC introduce a simple online reporting mechanism for dividend reporting for these individuals and their agents. Others also saw limited benefit for taxpayers with more complex affairs and warned that pre-populated data could cause confusion in these cases.

Another key concern highlighted in closing the reporting gap was a recommendation that any reporting obligation should only fall on the platform or nominee not on the underlying investment entity due to the cost and complexity of tracking frequently traded shares.

Many respondents also said that the discrepancy between the tax year end and calendar year end would need to be addressed and requested that HMRC provide a more in-depth consultation on the proposals.

Additionally, one respondent noted that focusing solely on savings income creates a missed opportunity to detect underreporting of other income types. They recommended that the government should consider requiring financial institutions to report the total credits and debits over a relevant period to support broader compliance efforts.

Government response

The government thanks respondents for engaging with the exploratory questions and welcomes clear feedback provided on the proposed future phase of reform relating to the collection of dividend and investment data from third parties using reformed bulk-data gathering powers.

HMRC will do further work with industry and other stakeholders to better understand the challenges and nuances highlighted and will use this to inform next steps and any potential changes in the future.

General responses

Respondents broadly emphasised that data suppliers should share with taxpayers and their agents the data that is supplied to HMRC to improve transparency and compliance. They expressed that taxpayers should have access to a clear and simple process to challenge and correct perceived errors relating to the accuracy of data provided by third parties, for example, the ability for a taxpayer or agent to override a pre-populated figure without having to engage with HMRC.

Respondents widely recommended a phased and manageable lead in period to allow data suppliers sufficient time to implement the changes and comply with the reporting obligations. 

Government response

The government recognises the benefit to customers of aligning to other reporting regimes, such as RRDP, which require data suppliers to share the data supplied to HMRC with the first party. We will look to replicate this approach as part of alignment to other bulk-data sharing regimes.

HMRC will work with data suppliers to explore ways to enable transparency, and to agree clear processes for challenging potentially incorrect data, between the data supplier, HMRC and the taxpayer.

The government notes respondents’ concerns with deliverability timelines and will work with industry to agree a timeline that is both practical and considers the burden placed on data suppliers. 

Next steps

The government is very grateful for the detailed responses to the consultation as well as the constructive engagement during the consultation period. Whilst there is substantial value to HMRC and taxpayers to receive the right data, of the right quality and at the right time, the government recognises the challenges and concerns raised by respondents regarding the proposals in the consultation, including the potential for additional administrative burdens for data providers.

Consequently, for phase one of the reforms, the government does not intend to take forward the requirement to provide data monthly and will explore carve outs from the reporting obligations for some types of interest-bearing products, and to also consider exemptions for the collection of tax references.

The government will keep these considerations under review whilst continuing to look for ways to improve the third-party data HMRC receives.

HMRC will continue to work with data suppliers and representative bodies, including many of the respondents, to understand the concerns raised during consultation and responses more fully.

The continual engagement with industry will inform legislative changes to reporting obligations, ensuring that as many stakeholder views and concerns as possible are considered in the design of the reporting framework. This will also help HMRC draft secondary legislation with the necessary detail and associated guidance to provide clarity on the implementation of the changes and interpretation of the legislation.

The government has published the draft legislation that will give effect to the changes alongside this summary document for an 8-week technical consultation. The government welcomes comments on the legislation to ensure it functions as intended.

Annex A: List of stakeholders consulted

The government is grateful to the 2 individuals and 20 organisations who responded to the consultation and to those who attended the stakeholder roundtables. The government received written responses from:

Stripe Technology Europe Limited

UK Finance

Centax

Association of British Insurers

TaxAid

Chartered Institute of Taxation (CIOT)

Building Societies Association (BSA)

Deloitte

Freelancer and Contractor Services Association (FCSA)

Institute of Chartered Accountants in England and Wales (ICAEW)

Legal & General (L&G)

Institute of Chartered Accountants of Scotland (ICAS)

Association of Chartered Certified Accountants (ACCA)

KPMG

British Private Equity & Venture Capital Association (BVCA)

Association of Taxation Technicians (ATT)

Federation of Small Businesses (FSB)

Low Income Tax Reform Group (LITRG)

Moore Kingston LLP

Association of Investment Companies (AIC)

Two individuals