Draft legislation: Better use of new and improved third-party data – LITRG response

LITRG supports the principle of HMRC making smarter use of third-party data with the aim of improving the taxpayer experience with HMRC and making it easier for taxpayers to get their tax right. In previous submissions to consultations on this topic, we have repeatedly highlighted the need for appropriate safeguards, transparency around data and robust processes for taxpayers to challenge any defects or errors in data.

This consultation covers secondary legislation being made under the regulation-making powers contained in Schedule 23 Finance Act 2026.

LITRG notes one significant and concerning omission: the draft legislation does not include provisions under the regulation-making powers contained in paragraph 4 of Schedule 23 Finance Act 2026 – provision of data to persons other than HMRC. We think that providing taxpayers with this data would play a key role in supporting them to get their tax right and understand their tax. It would also provide a key safeguard by allowing the taxpayer to see the information provided about them to HMRC, check its accuracy and provide a starting point if they need to challenge it.

We strongly recommend that the regulation-making powers set out in paragraph 4 Schedule 23 Finance Act 2026 are used.

We also take the opportunity to highlight again that, because of the inevitability of errors in third-party data and possibility of errors in HMRC data-matching, there need to be clear and accessible HMRC-supported mechanisms to enable taxpayers to challenge and correct third-party data.