HMRC Financial Institution Notices

For many taxpayers, the first sign of an HMRC compliance check is a letter, a phone call, or a request for information. But HMRC’s information-gathering powers have evolved, and in some cases, HMRC can now obtain relevant financial data quickly and directly from banks and other financial institutions.

One of the most significant tools in that shift is the Financial Institution Notice (FIN). Introduced in 2021, a FIN allows HMRC to require specified information or documents from a financial institution without tribunal approval or the taxpayer’s prior agreement (although HMRC must usually provide the taxpayer with a copy of the notice and a summary of the reasons).

This matters most to people with complex or “multi-stream” finances – business owners, property investors, families using wealth-planning structures, and individuals with significant investments.

We have put together a practical guide to FINs, why they matter in today’s enforcement environment, where they can create issues for wealth structures (property, FICs and pensions), and what you can do now to reduce risk.

What is a Financial Institution Notice?

A Financial Institution Notice is a type of information notice within HMRC’s civil information powers (Schedule 36 Finance Act 2008, as amended). It enables HMRC to require a financial institution to provide information or produce documents about a named taxpayer, provided HMRC meets the statutory conditions.

A “financial institution” can include banks and building societies, investment managers/platforms, insurers and other entities holding relevant financial account information (as defined for these purposes). HMRC’s internal guidance notes that identifying whether an entity is a financial institution is not always straightforward, which is why the definition matters in practice.

A FIN can require, for example:

• account holder details and identifiers
• balances and statements
• transaction histories
• interest and investment income details
• documentation evidencing ownership and beneficial interest (where held)

It’s important to understand what a FIN isn’t: it is not a penalty notice, and it is not (by itself) a finding of wrongdoing. It is a mechanism to obtain information that HMRC says it reasonably requires to check a tax position or collect a tax debt.

The “quiet shift” in enforcement

FINs sit in a broader direction of travel: more data, faster checks, and less friction for HMRC when gathering third-party information.

Historically, if HMRC wanted information from a third party, it often needed tribunal approval and had to navigate additional procedural steps. FINs remove that tribunal step for requests to financial institutions, so HMRC can obtain relevant bank and investment data more quickly. HMRC can then compare that data with what’s reported on tax returns and in accounts, which is why record consistency is so important.

That matters because modern compliance checks increasingly rely on:

• data matching and inconsistencies (rather than “smoking gun” evidence)
• the ability to verify income streams quickly
• cross-checking reported figures against third-party sources

And in a world where more taxpayers have multiple income streams (salary + dividends + rental income + investment income), small inconsistencies can attract attention, even where the underlying tax position is correct.

In practice, HMRC guidance says the taxpayer should be sent a copy of the notice and a summary of the reasons when it is issued to the financial institution.

Where FINs bite: property, FICs, and pensions

FINs are most relevant where the financial picture is more complex. Not because complexity implies wrongdoing, but because it increases the likelihood of mismatches, timing differences, and misunderstandings.

1) Property investors: receipts, refinancing and “messy” cash flows

Property income is a common source of compliance friction, with triggers such as:

• rental receipts paid into one account, but expenses paid from another
• refinancing or capital injections that look like “income” in bank statements
• large one-off receipts (insurance, deposits, settlement payments)
• timing differences between receipt and reporting periods

A FIN can provide HMRC with a clear record of inflows and outflows, which may then be compared against rental declarations, capital gains reporting, or loan interest claims. Where bookkeeping is light-touch, or where personal and property finances overlap, the risk isn’t just “tax error”; it’s also the administrative burden of demonstrating the correct position.

2) Family Investment Companies: dividends, loan accounts and beneficial ownership

Family Investment Companies (FICs) can be effective wealth planning vehicles, but they create layered financial activity:

• dividends flowing to different family members
• director loan account movements
• shareholder loans and capital injections
• inter-family transfers that are legitimate but poorly documented

FIN information can highlight patterns that prompt HMRC questions, such as funds moving between connected parties without clear documentation. Or investment income appearing in places that don’t match the narrative in tax returns and company accounts.

It’s not that FICs are “problematic”; they’re just document-heavy. If paperwork (shareholder agreements, loan documentation, minutes, dividend vouchers, beneficial ownership records) doesn’t keep pace with real-world transactions, HMRC can be left filling in the gaps, and that’s rarely comfortable for any taxpayer.

3) Pensions and legacy planning: not the target, but part of the picture

This type of notice is not a pension-specific power, but pension and investment activity often sits alongside broader wealth planning. Large contributions, investment drawdowns, legacy planning and intergenerational transfers can all create transaction patterns that HMRC may want to understand in more depth, particularly where the overall picture includes:

• investment accounts and platforms
• significant interest/dividend flows
• large transfers between accounts
• multiple parties benefiting from the same structures

For families planning succession, the direction of travel is clear: where assets are material, and planning is sophisticated, the supporting records need to be equally strong.

Safeguards and limits: what HMRC can’t do 

FINs are not intended to enable speculative “fishing expeditions”. The legislation and associated guidance emphasise that information must be reasonably required, and the notice must operate within defined conditions.

From a practical standpoint, the limits and safeguards to keep in mind include:

• Scope matters: the notice should specify what is required and (typically) the time period.
• Reasonableness and proportionality: requests should be no wider than needed to check the tax position.
• Taxpayer visibility: HMRC’s internal guidance currently states that a copy of the FIN should be sent to the taxpayer, along with a summary of the reasons for the FIN.
• Tribunal involvement (limited): in some cases, a tribunal may be involved, for example, in relation to whether the taxpayer must be named and whether the institution must avoid disclosing the notice.
• Legal professional privilege: privileged material cannot be required under information powers.

If the notice appears disproportionate, unclear, or asks for material beyond what is reasonably required, that’s usually the moment to take advice, and quickly. How and when you respond can shape the direction of the compliance check.

Practical steps to reduce risk

The best defence against information-driven enquiries is simple: ensure your records tell the same story as your bank and investment data.

Here are the steps that make the biggest difference for business owners, property investors and families with wealth structures.

1) Make your “income map” match your accounts

List your income streams (salary, dividends, rental income, interest, distributions) and confirm:

• where each stream is received
• how it is recorded in bookkeeping/accounts
• how it appears on returns (personal and corporate)

This is particularly important where you have multiple accounts, joint accounts, or accounts used for mixed purposes.

2) Separate personal and investment/property banking where possible

Clean separation doesn’t just improve bookkeeping; it reduces the risk of misunderstandings. If you already have mixed accounts, consider moving to a structure where:

• property receipts and expenses flow through a dedicated account
• investment platform transactions are clearly identifiable
• family transfers are documented (see below)

3) Document inter-family transfers and loan activity properly

A large proportion of “difficult” enquiries aren’t about hidden income; they’re about undocumented transactions.

For FICs and family wealth planning, keep up to date:

• dividend paperwork (vouchers, minutes/resolutions)
• loan agreements and repayment schedules
• director loan account support
• beneficial ownership and control records

If the paperwork exists, an enquiry is usually manageable. If it doesn’t, it becomes a reconstruction exercise.

4) Reconcile early, not when HMRC asks

Quarterly or monthly reconciliations (even for smaller structures) can reveal issues while they’re still easy to fix:

• miscategorised receipts
• missing expense evidence
• timing issues between accounting and tax periods
• unrecognised investment income entries

5) If something is wrong/unclear, deal with it before HMRC does

This development is part of a wider shift towards faster, more data-led compliance. If you suspect historic omissions, reporting mistakes, or gaps in documentation, early advice can help you:

• establish the true position
• quantify exposure
• decide the best route to correction (where needed)
• reduce stress and cost if HMRC later opens a check

How Wilkins Southworth can help

FINs reinforce a wider message: modern compliance is increasingly data-led. For clients with property income, investment structures and wealth planning arrangements, the priority is not just “being correct”; it’s being able to demonstrate correctness quickly and coherently.

Wilkins Southworth can support with:

• structuring and documentation for family wealth planning (including FICs)
• personal and property tax advisory
• corporate tax and owner-managed business planning
• HMRC enquiry support and fee protection for cost certainty if a check escalates

If you’re unsure how exposed you are, a structured review of income streams, record-keeping and ownership documentation can significantly reduce the risk of an enquiry turning into a long, expensive distraction.

If HMRC is already asking questions (or you’re concerned they may), get in touch with us today.