The UK Government has made changes to its proposals on how third-party data is reported to HM Revenue & Customs (HMRC) after feedback from the Institute of Chartered Accountants of Scotland (ICAS) and other stakeholders. 

In June, ICAS responded to a consultation on how data provided by third parties could be improved and used to help taxpayers get their tax right, particularly through more accurate PAYE coding and the pre-population of returns.  

The consultation covered financial account information – such as bank and building society interest (BBSI) – and card sales data from merchant acquirers. 

ICAS’ submission focused on BBSI, dividends and other investment income, representing the perspective of agents and individual taxpayers.  

While supporting the aim of improving coding and pre-population, the institute cautioned that changes to data provision alone would not guarantee accurate tax outcomes without corresponding upgrades to HMRC’s digital systems and processes. 

The body recommended quarterly, rather than monthly, BBSI reporting and raised concerns over a proposal requiring financial institutions to collect National Insurance Numbers (NINOs) from all customers, warning it could result in “debanking” for those without NINOs. 

In its official response, published alongside draft legislation on ‘Legislation Day’ (L-Day), the government confirmed it will adopt quarterly reporting for financial account information.  

The shift reflects industry feedback, including from ICAS, that monthly reporting would create significant cost and administrative burdens for providers.  

HMRC has urged data suppliers to modernise and automate processes to prepare for future real-time requirements. 

The government also acknowledged ICAS’ concerns on NINO collection.  

Financial institutions will not be penalised if they cannot obtain NINOs from existing customers, provided they make “reasonable efforts” – a definition HMRC will develop in consultation with the sector.  

For new accounts, processes will align with requirements for Individual Savings Accounts. 

While ICAS welcomed safeguards to reduce the risk of debanking, it warned that added administration could still deter institutions from serving customers without NINOs. 

ICAS backed plans for investment platforms, managers and financial institutions to report dividend and investment income to HMRC but stressed the need for itemised data in coding notices and pre-populated returns.  

A single total could mislead taxpayers into believing all dividends are included. The institute also called for a simple online reporting route for individuals and agents. 

The government has pledged further engagement with industry before finalising any changes. ICAS continues to invite member feedback to inform its ongoing policy work and discussions with HMRC.