HM Revenue and Customs (HMRC) is facing growing scrutiny from critics and industry experts over proposed expansions to its information-gathering powers. The proposals seek to extend the reach of Financial Institution Notices (FINs) to cover cryptocurrency service providers, allowing the tax authority to request detailed user data without first obtaining tribunal approval.
What Are the Proposed HMRC Powers?
The core of the dispute lies in the planned expansion of Financial Institution Notices. Under current UK rules, HMRC can issue these notices to financial institutions to retrieve information without a taxpayer’s consent or a tribunal’s sign-off. The draft measure seeks to bring cryptoasset firms under this umbrella. Under these proposed powers, HMRC would be able to demand computer records, software access, and customer transactional data directly from businesses.
According to reports on TradingView News, the public consultation on these draft measures closed on September 7, and a decision on whether to implement the changes remains pending. Industry commentators have raised alarm bells regarding the lack of taxpayer consent or direct appeal processes against the notices themselves.
An Overreaching Definition?
One of the primary concerns highlighted by the UK crypto tax software provider Recap is the potentially broad definition of entities that could be affected. Critics warn that the current phrasing might sweep up non-custodial businesses. This could mean that tax software developers, wallet software creators, block explorers, data vendors, and hardware wallet manufacturers—firms that do not actually hold or manage customer funds—could find themselves subject to these invasive notices.
Furthermore, the draft legislation includes a measure that would remove the statutory requirement for HMRC to submit an annual report to Parliament detailing its use of Financial Institution Notices. Opponents argue this drastically reduces parliamentary oversight on how often these unilateral notices are issued.
The Privacy and Security Backlash
The prospect of linking real-world identities—including full names, home addresses, and national tax identifiers—permanently to public Bitcoin blockchain addresses has sparked intense debate. Security experts point out that unlike traditional banking records, blockchain ledgers are entirely public. Permanently tying identifying data to specific wallets could expose retail investors and everyday traders to physical security risks if that data is ever leaked or compromised.
This proposal comes at a time when UK authorities are steadily increasing pressure on crypto holders. Just recently, HMRC launched a separate campaign targeting undeclared gains, urging taxpayers to voluntarily disclose outstanding liabilities before the upcoming Crypto-Asset Reporting Framework (CARF) rules go live.
At the same time, the Financial Conduct Authority (FCA) continues to finalise its wider regulatory structure. As reported in our review of FCA perimeter guidance, the regulatory gateway for digital assets continues to tighten ahead of the full regime taking force in 2027.
As retail investors navigate these shifting regulatory tides, UK Bitcoinblog.com will continue to provide objective, hype-free coverage of UK crypto tax and regulation developments. This article is for educational and news purposes only and does not constitute financial or legal advice.
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