The UK’s tax authority, HMRC, has unveiled a series of proposed changes aimed at improving the quality and scope of data collected from taxpayers. These modifications seek to streamline tax administration, bolster compliance, and provide better insights into the labour market for policymaking purposes.
One key proposal outlined in draft regulations published in March involves revising the reporting requirements for employee work hours through the Real-Time Information (RTI) system. Currently, employers must provide information on employees’ normal weekly working hours within predefined bands. Under the new plan, employers would be required to report the precise number of hours paid to each employee during the relevant period.
This change would apply to salaried employees, hourly workers, and those with irregular employment patterns. In cases where payment is not directly tied to hours worked, such as for company car allowances, employers would have the option to report zero hours and provide a brief explanation.
Separate Dividend Income Reporting for Business Owners
Another proposed alteration concerns the reporting of dividend income for directors of owner-managed businesses. The draft regulations suggest that directors should separately identify the amount of dividend income received from their companies on the SA102 Employment page, alongside their salary and benefits information.
Mandatory Self-Employment Start and End Dates
Additionally, HMRC plans to make the completion of self-employment start and end dates mandatory within the Income Tax Self-Assessment (ITSA) system and the upcoming Making Tax Digital (MTD) for ITSA platform. This move is expected to improve the accuracy and completeness of self-employment data.
Minimizing Burden and Leveraging Existing Systems
According to HMRC, the primary focus of these changes is to enhance the quality of data already collected through existing systems like RTI and ITSA, or information that taxpayers currently provide voluntarily. By leveraging existing processes, the tax authority aims to minimize additional burdens on businesses and limit the need for extensive system and software modifications.
Initially, HMRC’s proposals included a requirement for employers to report specific reasons for zero hours worked when employee payments were not directly linked to hours. However, after acknowledging industry feedback regarding the complexity of this requirement, the tax authority has decided to simplify the process by reducing the number of reportable descriptions in such cases.
Following the publication of the draft regulations on March 14, 2024, HMRC has been actively engaging with software providers, stakeholder groups, and businesses to gather feedback and advice on the proposed changes. The consultation period will run until May 9, 2024, with further co-creation of guidance and technical specifications expected in the coming months.
Implementation Timeline
If the proposals are implemented as planned, the first batch of paid hours data would be supplied via RTI in April 2025, marking a significant milestone in HMRC’s efforts to enhance the quality and utility of customer data for improved tax compliance and informed policymaking decisions related to the labour market.
‘By Faye Lusted’
