The additional requirements are being introduced over the next few years. HMRC argues that this will help it to:
- provide better outcomes for taxpayers and businesses;
- improve compliance; and
- build a more resilient tax system.
It is yet to be seen how HMRC will make use of the additional data collected. In recent years, there has been an increase in what HMRC terms “upstream compliance” activity, which essentially prompts taxpayers to correct their tax affairs without raising a formal enquiry. These communications are typically targeted based on information that HMRC has obtained from third parties (eg, overseas tax authorities, employers, Land Registry, and Companies House).
The proposed changes will allow more information to be obtained directly from taxpayers, giving HMRC further ability to risk-assess returns and better target its upstream compliance activity.
The following is a summary of the additional information and data requirements contained in the draft legislation published on 18 July 2023.
It is proposed that from 2025/26, employers will be required to provide more detailed information on employee hours worked via real time information (RTI) PAYE reporting. The information to be reported will be set out in separate regulations, a draft of which has not yet been made available.
The draft primary legislation that provides the regulation-making powers is very broad. It says the information does not have to be relevant to the assessment, charge, collection and recovery of income tax in respect of PAYE income. However, it goes on to state that the information must be relevant for the purpose of the collection and management of income tax, corporation tax, or capital gains tax.
In the consultation outcome Improving the data HMRC collects from its customers, HMRC indicated that the information required will be contractual hours worked where those contractual hours are reasonably stable (ie, not a zero hours contract) and actual hours worked for hourly rate employees.
In ICAEW REP 085/22, ICAEW’s Tax Faculty was strongly opposed to using RTI to collect additional data. It should be noted that the government is keeping the requirement for employers to provide occupation and location data under review.
Shareholders in owner-managed businesses
It is proposed that from the 2025/26 tax year, shareholders will be required to provide additional information via their self assessment return. The amount of dividend income received from their own companies will have to be reported separately to other dividend income, and the percentage share they hold in their own companies must be stated.
Failure to report this information will give rise to a fixed penalty of £60.
Self-employed individuals will be required to provide information on the start and end dates of their businesses via their self assessment return. It is not clear whether partners will be required to advise of the dates they entered or exited a partnership, although the draft legislation provides for additional information to be included in both partnership and trustee returns.
The boxes to collect this information are already contained in the self-employment and partnership pages of the self assessment return, but completion of the information is not mandatory.
This change is expected to apply from tax year 2025/26 onwards and failure to report will also trigger a fixed penalty of £60.
Creative industry and cultural tax relief claimants
Along similar lines to the additional information form which will need to be completed for all R&D tax relief claims from 8 August 2023, companies claiming creative industry or cultural tax reliefs will be required to complete and submit an online information form.
For the audio-visual expenditure credit and the video games expenditure credit, this will apply from 1 January 2024. The operative date relating to all other creative sector and cultural tax reliefs (film tax relief, high-end TV relief, animation tax relief, children’s TV tax relief, video games tax relief, theatre tax relief, orchestra tax relief and museums and galleries exhibition tax relief) is 1 April 2024.
The Tax Faculty
ICAEW's Tax Faculty is recognised internationally as a leading authority and source of expertise on taxation. The faculty is the voice of tax for ICAEW, responsible for all submissions to the tax authorities. Join the Faculty for expert guidance and support enabling you to provide the best advice on tax to your clients or business.
More from the Tax Faculty
Stay up to date with the latest developments in tax by signing up to the Tax Faculty's weekly e-newsletter
Comprehensive support for Tax practitioners each month from the Tax Faculty and expert contributors.
Expert advice from the Tax Faculty's technical managers on all the developments in tax policy and practice.