Better use of new and improved third-party data

The Government's priorities for HMRC are to improve customer service, close the tax gap and modernise and reform the tax system. It sees making better use of third-party data as having the potential to unlock benefits in relation to all three of these objectives.

The current consultation builds on the Tax Administration Framework Review of 2023. The government must modernise to address its priorities for HMRC. Under existing bulk data-gathering powers, third-party data is often received too slowly and is not of sufficient quality to be used for the key service improvements deployed by other tax authorities internationally, such as pre-population of tax returns.

Information is already received by HMRC from a number of sources:

• Other government departments.
• Withholders of tax (employers and pension providers).
• Financial services providers (banks and merchant acquirers).
• Online sales platforms.
• Overseas tax authorities under relevant international agreements.

Despite this, HMRC lags behind its international counterparts.

The Government is adopting a phased approach to reforms, following the consultation on Making better use of third-party data. This consultation had particular implications for Making Tax Digital.

• Phase 1 concerns financial account information like bank and building society savings interest (BBSI) and card sales data (from merchant acquirers and others)
  • At Autumn Budget 2024, the Government announced digital monthly reporting for Individual Savings Accounts (ISAs) will be mandatory from April 2027
  • More generally for BBSI, it is estimated an additional 893,000 taxpayers will have to pay tax on their savings by 2028-29 (as compared to 2022-23).
  • Improved merchant acquirer data will enable HMRC to identify unregistered taxpayers and automatically register them, help small businesses get their tax correct the first time, and support better-targeted compliance activity where taxpayers deliberately misstate their business income.
• Subsequent phases will address possible new data sets such as dividends and other investment income.

Improved data gathering will, in turn, improve the timeliness and frequency of data provided to HMRC to deliver key service improvements. Ultimately it will enable HMRC to progress to modern 'standing reporting obligations' as opposed to the current notice-based approach which is manual and resource-intensive. The government plans to introduce appropriate new legislation to establish this approach in Phase 1.

The consultation closes on 21 May 2025. Responses must be sent by email.

Useful guides on this topic

Tax administration framework: Consultation response
HMRC has published a response to its consultation ‘Simplifying and modernising HMRC's Income Tax services through the tax administration framework’. Several improvements and legislative changes are planned to promote a 'digital by default' approach and improve systems around tax codes.

Making better use of 3rd party information: consultation response
HMRC have published a response to their consultation ‘Making Tax Digital: Transforming the tax system through the better use of information’.

Making Tax Digital: Planner & Timeline
When does Making Tax Digital (MTD) apply? What does MTD really mean? How will it affect you?

ISA guide
What is an ISA? What are the limits? How are ISAs taxed?

External link

HMRC open consultation: Better use of new and improved third-party data

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?
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?
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?
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?
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 i.e. 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?
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?
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?
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?
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?
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 SML 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?
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?
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)?
13. What are the associated costs on suppliers for collecting the relevant tax references from your customers?
14. What are your views on introducing due diligence requirements that align, where appropriate, to those for RRDP and the CARF?
15. Do you agree that, in principle, penalties relating to bulk third-party data obligations should be consistent with those set out above?
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?
17. What are your views on broadening the range of information provided under domestic reporting to close the transparency gap with international obligations under Common Reporting Standard? Are there any specific types of financial account, or financial account information, that you believe should be included in future phases of reform, or any that should not be? If so, why?
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?
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?