Corporate report

Report on HM Revenue and Customs Financial Institution Notice powers (2023 to 2024)

Updated 15 January 2025

Presented to the House of Commons pursuant to section 126(6) of the Finance Act 2021.

Summary

This is the third report on the use of Financial Institution Notices (FINs). The period covered is 1 April 2023 to 31 March 2024.

The report shows there has been a significant reduction in the average time taken to respond to international information of exchange requests, with the UK continuing to exceed the international standard. It also sets out that the greatest number of FINs issued were for domestic purposes, with a growth in those numbers from last year. The number of FINs issued for international information of exchange requests also increased in absolute terms but fell in percentage terms compared to last year.

This report outlines the effectiveness and benefits of using the FIN, reasons behind the rise in domestic FINs, and its impact on financial institutions and taxpayers.

Detailed findings

The table below sets out the use of FINs in the period 1 April 2023 to 31 March 2024. Figures from the previous report are provided for information. Note: The total and international figures for 2022 to 2023 have been revised with an updated methodology to ensure all FINs issued in the year are counted.  

	1 April 2022 to 31 March 2023	1 April 2023 to 31 March 2024
Total number of FINs issued	691	1,143
Total number of domestic FINs issued	516 (74.7%)	918 (80.3%)
Total number of FINs issued for international requests (irrespective of year when request received)[footnote 1]	175 (25.3%)	225 (19.7%)
Total number of FINs issued for debt collection purposes (applies to domestic FINs only and included in total above)	7 (1%)	10 (0.9%)
Number of applications for FINs formally rejected by authorised officers[footnote 2]	88 (12.7%)	114 (10.0 %)
The average time taken to respond to international requests received in year[footnote 3]	175 days	127 days

The data demonstrates that there has been a significant improvement in the average time taken to process international exchange of information requests. In the current reporting period, the average time to process international requests was 127 days, compared to 175 days last year. This is well below the 180 days international standard, demonstrating the UK’s continuing alignment with other jurisdictions.  

There are a number of reasons why there has been an increase of domestic FINs:

• in most cases, HMRC have used a FIN because there was no response to a taxpayer notice, or when an open and early informal dialogue approach from HMRC with the taxpayer has failed. Therefore, the most efficient and appropriate next step in many cases is to use FINs by going direct to the financial institutions
• there is a greater awareness and capacity in the efficient use of FINs amongst case workers and authorised officers to tackle any lack of co-operation or engagement from agents and taxpayers. In this scenario, officers would have otherwise resorted to Schedule 36 tribunal-approved notices, which are more costly and time-consuming for HMRC
• FINs are often issued more than once for the same case, as one individual might hold accounts in several institutions, leading HMRC to issue multiple FINs for a single tax case.  Officers are improving their ability to identify taxpayers with accounts with multiple institutions, meaning the number of FINs issued is increasing faster than the number of cases in which they are used

FINs are only issued when it is appropriate to do so and operate within a strict and controlled regime with the safeguards outlined below. FINs are used sparingly and, to put this in context, only 1,143 FINs were issued, compared to the volume of 320,000 cases^{[footnote 4]} conducted by HMRC in 2023 to 2024.

Impacts

Taxpayers

No formal complaints have been made against the use of the FIN from taxpayers. There have been no judicial review applications.

Financial institutions

No issues or concerns have been raised by financial institutions regarding the number of FINs or that the information and documents requested in any FIN has been onerous. No formal complaints have been received from financial institutions against FINs issued.

Conclusion

The FIN is continuing to achieve its policy objectives and the safeguards introduced have operated efficiently. The changes introduced have considerably improved the time taken to respond to international information requests, further aligning with international standards and supporting the UK’s reputation as a leader in tax transparency, as well as making domestic tax administration more efficient.   

Background

Following consultation, the FIN was introduced by the Finance Act 2021 which received Royal Assent on 10 June 2021. HM Revenue and Customs (HMRC) started issuing notices from July 2021 once the relevant preparations, such as training officers to use the FIN, had been completed. The FIN gives HMRC the power to issue third party information notices to financial institutions without the requirement for tribunal or taxpayer approval.

The FIN was introduced to bring the UK in line with all other member countries of the G20, who do not require tribunal approval for information from financial institutions, and to improve the efficiency of domestic tax administration.

The policy work that resulted in the FIN, followed a recommendation under a review by the Organisation for Economic Cooperation and Development’s (OECD) Global Forum on Transparency and Exchange of Information to reform HMRC’s information gathering processes and ensure they are compatible with effective international exchange of information for tax matters. The OECD’s minimum standard requires tax authorities to provide information requested under international treaties within 180 days (6 months). When reviewed in 2018, it was taking the UK, on average, 12 months to provide information where a third party information notice was needed; double the time allowed by the minimum standard.

The FIN is a form of third party information notice within Schedule 36 of Finance Act 2008. FINs allow HMRC to access information and documents from financial institutions, where these are required to check a taxpayer’s tax position, or for the purpose of collecting a tax debt of the taxpayer.  There are several safeguards built into the legislation, including:

• information or documents sought must be reasonably required for the purpose of checking a known taxpayer’s tax position or for collecting a tax debt
• an authorised officer must approve each FIN. HMRC have provided specific training on FIN powers
• a FIN can only be issued if, in the reasonable opinion of the officer giving the notice, it would not be onerous for the financial institution to comply with it
• officers are required to tell taxpayers why the information is needed when the FIN is issued. This requirement can only be overridden with the agreement of the independent tax tribunal, where that tribunal is satisfied that informing the taxpayer might undermine the collection or assessment of tax
• if a financial institution does not comply with a FIN, penalties can be charged. Financial institutions have the right to appeal against any penalties

There is a legislative requirement to present an annual report to the House of Commons on the use of FINs.

Laid before the House of Commons by HM Treasury and containing information provided by HM Revenue and Customs

January 2025

1. These figures refer to all FINs issued in the year irrespective of when the request was received, rather than just those both received and issued in the same year. The figure for 2022 to 2023 has been therefore revised up from 131 taking into account this revised methodology. ↩

2. This figure includes applications that may have been rejected and then resubmitted and approved. HMRC requires compliance officers and authorised officers to ensure that FIN applications are completed to the same standard as tribunal approved notices. The percentage comparison is based on the proportion of applications rejected to the number of FINs issued in the year. ↩

3. The processing figure is calculated by measuring the number of days between the date the request was received from the overseas tax authority in that year and the date HMRC received the information from the UK financial institution to create an average processing time for the year. This is based on in year figures. For 2023 to 2024 there were 129 requests received in year and resulted in a FIN being issued in year with processing time of 127 days.  ↩

4. HMRC’s annual report and accounts 2023 to 2024: performance overview ↩