HMRC To Gather More Information From Taxpayers

Recently, HMRC announced that new reporting requirements will be implemented for owner-managed companies and self-employed traders, starting from the tax year 2025/26 or later ...

About a year ago, I had cautioned that His Majesty's Revenue and Customs was seeking to gather more data from employers, businesses, and individual taxpayers to identify various aspects such as trade sectors of unincorporated businesses, business locations, individual occupations, exact employee working hours, dividends received from personal companies, and start/finish dates of self-employed traders.

"HMRC has confirmed that employers and business owners will need to provide this extra data!"

While the new regulations are scheduled to be effective for accounting periods commencing in 2025/26, there is a possibility of a later commencement date if HMRC needs more time to adapt its systems accordingly.

Employee working hours data will be reported by employers for each pay period on RTI returns. The reporting will include details of contractual hours for relatively stable employment (such as salaried employees), and actual hours worked for hourly or irregularly paid employees. The government believes that this additional reporting will not be overly burdensome for employers, as they already record working hours to ensure compliance with the national minimum wage.

Regarding self-employed individuals, the tax return will now mandate the provision of start and end dates of their businesses. Failure to provide this data could lead to a flat £60 penalty. HMRC will collaborate with businesses and other stakeholders, including tax agents, to create clear definitions for when a trade or letting business starts and ceases for tax purposes.

The breakdown of dividend income between income generated from the taxpayer's own company and dividends from other sources, along with the percentage of shares owned by the individual. The motivation behind this data requirement remains unclear, but it might be aimed at scrutinising personal service companies that may not be adhering to the IR35 rules correctly.

Notably, the government has decided against seeking data on industry sectors and worker occupations due to the difficulty of fitting real businesses and job descriptions into pre-defined categories.

"Location data may be explored as part of the new digitized business rates system!"

These new reporting requirements will come into effect in the near future, and further details will be provided in due course. The focus appears to be on ensuring accurate tax compliance and identifying potential areas of non-compliance for closer scrutiny.

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