HMRC Information Powers: Finance Act 2024 Changes & What They Mean for Practitioners

The Finance Act 2024 introduces a material expansion of the data HMRC will receive from 2025–26. Combined with active reform proposals for Schedule 36 FA 2008 and HMRC’s push toward real-time third-party data feeds, the information landscape for tax investigations is changing faster than at any point since the Taxes Management Act 1970. This guide analyses what has changed, what is proposed and what practitioners should be advising clients now.

HMRC’s Current Information-Gathering Framework

HMRC’s civil information-gathering powers have three main statutory pillars, each with a different trigger and scope.

Section 9A TMA 1970, Enquiries into Self-Assessment Returns

Under s9A Taxes Management Act 1970, HMRC may open an enquiry into any self-assessment tax return by giving written notice to the taxpayer within the enquiry window (broadly, one year from the filing date for a return filed on time). The enquiry notice need not identify which aspect of the return HMRC is examining, nor give any reason for opening. HMRC may enquire into anything in the return or which should have been in the return, including claims and elections. The enquiry closes only when HMRC issues a closure notice. A partial closure notice may conclude one aspect while leaving others open.

For advisers, the key point is that the s9A enquiry window is a gateway: once it closes, HMRC can only challenge the return via a discovery assessment under s29 TMA 1970, which carries additional conditions. Information gathered through Sch 36 notices during an open enquiry does not carry those conditions.

Schedule 36 FA 2008, Information and Inspection Powers

Schedule 36 to the Finance Act 2008 is the primary engine of HMRC’s civil compliance checking powers. It provides for five categories of information notice:

• Taxpayer notices , requiring the taxpayer to provide information or documents to check their own tax position
• Third-party notices , requiring any person to provide information to check the tax position of a named third party; HMRC generally requires First-tier Tax Tribunal (FTT) approval unless the taxpayer consents
• Financial institution notices (FINs) , introduced by Finance Act 2021; permit HMRC to require banks and similar institutions to provide information about a named individual without FTT approval and without the institution having a right of appeal
• Identity unknown notices , require information about an unidentified person or class of persons; FTT approval required
• Identification notices , require name, address or date of birth details

Section 20 TMA 1970, The Predecessor Power

Section 20 TMA 1970 formerly provided HMRC’s primary power to require production of documents. It has been largely superseded by Sch 36 FA 2008 for most practical purposes, though remnants remain relevant in specialist contexts. The Sch 36 regime is more structured, with clearer appeal rights and a more defined penalty structure for non-compliance.

The 2023 Call for Evidence: Three Reform Areas

On 27 April 2023 (Tax Administration and Maintenance Day), HMRC published a call for evidence on reforming its information and data-gathering powers. The consultation ran to 20 July 2023 and covered three principal areas:

1. Third-Party Data Reform

HMRC sought views on how to improve and modernise the collection of data from third parties, employers, financial institutions, platforms and others. The focus was on drawing on international best practice (particularly from Nordic countries with more mature real-time data reporting regimes) and reducing the administrative burden while enhancing HMRC’s compliance capability.

2. Information Notice Procedure Reform

The consultation raised the possibility of streamlining the procedure by which HMRC issues information notices, including whether the FTT pre-approval requirement for third-party notices should be revised or removed in certain categories. This is the most significant proposed reform from a practitioner perspective: the FTT pre-approval requirement currently acts as a meaningful safeguard for third parties and their clients.

3. Digital Transformation

The third strand addressed the opportunities presented by digitisation, including the ability for HMRC to receive data in real time from digital sources, reducing the need for retrospective notice-driven data collection. This is the direction toward which the FA 2024 changes are the first practical step.

A related call for evidence published on 15 February 2024, The Tax Administration Framework Review: enquiry and assessment powers, penalties, safeguards , broadened the scope further, including potential options for a more consolidated suite of powers and the modernisation of how HMRC sends statutory notices.

Finance Act 2024: New Data Requirements from 2025–26

Finance Act 2024 enacts the first tranche of practical reform. With effect from the tax year 2025–26, it introduces:

Additional Employer PAYE Reporting

Employers will be required to include additional information in their PAYE Real Time Information (RTI) returns. Specifically, employers must report the number of hours paid to each employee. This enables HMRC to cross-reference pay against hours to identify potential National Minimum Wage non-compliance and, more broadly, to analyse patterns of employment income that may indicate underdeclared earnings or off-payroll working arrangements.

Additional Self-Assessment Return Data

Personal, trustee and partnership tax returns must from 2025–26 include:

• Dividend income from owner-managed businesses reported separately from other dividend income, together with the taxpayer’s percentage shareholding in the business
• The start and end dates of self-employment for trading businesses

The shareholding percentage data in particular is significant: HMRC will be able to cross-reference dividend distributions with corporate filings at Companies House to identify where directors/shareholders appear to be distributing profits disproportionately to salary, a key risk area for IR35 and employment status investigations, as well as for identifying avoidance involving disguised employment income.

Digital Transformation: Connect and Beyond

HMRC’s Connect system is the current expression of its data analytics capability. Connect cross-references more than 30 billion data points, drawing on: RTI employer returns; Companies House data; Land Registry transactions; Common Reporting Standard data from more than 100 foreign jurisdictions; letting agent and deposit scheme data; and outputs from cryptocurrency exchange data requests. It operates continuously, generating risk scores that determine compliance intervention decisions.

The direction of travel is toward real-time, automated third-party data feeds that bypass the notice-based information-gathering process entirely. The FA 2024 employer hours reporting is one such feed. Digital platform reporting (see below) is another. The logical endpoint of this trend is a system in which HMRC can pre-populate large portions of a taxpayer’s return or identify discrepancies, before the return is even filed.

For tax gap purposes, HMRC estimates that third-party information reporting has been the single most effective intervention in reducing the income tax gap over the past two decades. The expansion of that reporting to new asset classes and new income streams (gig economy, DeFi, rental platforms) is accordingly a central pillar of HMRC’s medium-term compliance strategy.

Digital Platform Reporting: DAC7 and the UK Equivalent

The EU’s DAC7 Directive (Council Directive 2021/514) required digital platform operators, including accommodation sharing platforms, freelance marketplaces and goods-selling platforms, to report seller data to tax authorities from 1 January 2023. While the UK is not bound by DAC7 post-Brexit, it has enacted equivalent domestic legislation: the Platform Operators (Due Diligence and Reporting Requirements) Regulations 2023 (SI 2023/817), in force from 1 January 2024.

Under these regulations, platform operators must conduct due diligence on sellers using their platforms and report to HMRC annually: the seller’s name, address, tax identification number, total consideration received and the number of relevant activities. The first reports covering calendar year 2024 were due by 31 January 2025.

EU DAC8 (Directive 2023/2226), extending reporting to crypto-asset service providers, is in force in EU member states but not directly applicable in the UK. However, the UK’s implementation of CARF (see the cryptoassets article in this series) achieves a comparable result through domestic legislation.

Third-Party Notice Reform: The FTT Approval Risk

The most consequential proposed reform for practitioners is the potential revision of the FTT pre-approval requirement for third-party notices. Currently, under para 2 of Sch 36 FA 2008, HMRC must obtain FTT approval before giving a third-party notice unless the named taxpayer consents. The FTT can impose conditions, and the notice can be appealed by the recipient.

The 2023 call for evidence raised the possibility of removing or limiting this requirement for certain categories of third-party notice, arguing that it creates delay and administrative burden disproportionate to the protection it provides. From a practitioner perspective, this safeguard matters considerably: it is one of the few procedural checks that gives a named taxpayer advance notice that their records at a third party are being sought and an opportunity to assert legal professional privilege or challenge the scope of the notice before compliance is required.

If the FTT approval requirement is removed for some or all categories of third-party notice, the practical effect will be similar to the existing FIN regime, HMRC will be able to obtain data from banks, accountants and other third parties rapidly and without warning. Practitioners should flag this risk to clients in sensitive ongoing matters.

Practitioner Checklist: FA 2024 Information Powers

1. Confirm payroll software providers have updated to capture and report employee hours for RTI purposes from April 2026 (i.e. for the 2025–26 tax year).
2. Review owner-managed business clients’ dividend and salary structures in light of the new shareholding percentage reporting requirement, identify clients whose structures may attract enhanced HMRC risk-scoring.
3. Advise clients with material platform income (Airbnb, Upwork, eBay Business, etc.) that HMRC will have received reports covering 2024 onwards from 31 January 2025, any undeclared platform income for 2024 is already potentially visible to HMRC.
4. Where a client is subject to a Sch 36 enquiry, consider proactively identifying and logging any material subject to legal professional privilege before HMRC issues notices to third parties.
5. Monitor Finance Bill and secondary legislation progress for regulations specifying the precise FA 2024 data requirements; HMRC’s stated intention is to consult further before laying regulations.
6. Ensure clients in the MTD for Income Tax scope (income >£50,000 from April 2026) are working toward compliant digital record-keeping, inadequate records will generate discrepancy signals within HMRC’s data matching systems.
7. Assess whether any existing clients have potential exposure from the 2024 or 2025 digital platform reporting rounds, a voluntary disclosure via HMRC’s Digital Disclosure Service before HMRC opens an enquiry will obtain the best penalty outcome.
8. Track the Tax Administration Framework Review and any consultation on FTT approval requirements for third-party notices, this reform, if enacted, changes the risk profile of HMRC investigations fundamentally.

Frequently Asked Questions