HMRC Data Collection Powers: A Closer Look at the Latest Developments

In recent news, it has been announced that HMRC will be granted additional powers when it comes to collecting crucial information. Specifically, the focus will be on the amount of dividend payments earned by owner-managed business directors, as well as the number of hours worked by individual employees. These new regulations are set to come into effect from April 2025, and it’s important for businesses and employees alike to understand the implications.

Dividend Disclosure and Self-Assessment

Starting from the 2025-26 tax year, individuals involved with owner-managed businesses will be required to provide a clearer breakdown of their dividend income. This means using their self-assessment tax return to differentiate the dividend income received from their own companies from other sources. Additionally, individuals must disclose the percentage share they hold in their own companies. It’s worth noting that HMRC will request specific information related to dividend value and percentage shareholding on the SA102 form, particularly in close companies where the individual holds a directorship.

Enhancing Reporting on Employee Working Hours

The new legislation also puts a spotlight on reporting employee working hours. Employers will be obligated to provide detailed information about the number of contracted hours worked by their employees. This will be done through real-time reporting using PAYE (Pay As You Earn) systems. While these requirements may seem extensive to some, HMRC justifies these changes as a means to improve government support for the labour market. However, there are concerns about the necessity of such detailed information, considering that companies already report their national minimum wage liability, and employees can be paid above the minimum wage as per company policies.

Cracking Down on Tax Evasion and Keeping Compliance in Check

HMRC’s decision to strengthen its data collection powers is not only aimed at enhancing tax compliance but also curbing tax evasion. The draft legislation emphasises the importance of “compliance” as a crucial objective. It is part of the wider effort to drive better compliance and crack down on tax evasion, especially after the disruptions caused by the pandemic. However, following the original consultation in 2022, HMRC had to make adjustments to their initial plans based on feedback from stakeholders. As a result, certain data collection elements were dropped, including information about employee job titles, precise working locations, and specific details about the type of work done by individual self-employed workers.

A Measured Approach to Data Collection

The UK government has taken into account the feedback received during the consultation process. In response to stakeholders’ concerns, HMRC has aimed to maintain a measured and proportionate approach to collecting new data. Wherever possible, they plan to utilise existing data held by customers rather than imposing additional burdens. However, it’s important to note that failure to comply with the new regulations may result in penalties of up to £60.

Looking Ahead

As HMRC’s data collection powers continue to expand, it is crucial for businesses and individuals to stay informed and ensure compliance. These developments signify a shift towards a more comprehensive understanding of dividend income and employee working hours. While concerns about data collection and its potential administrative burden have been raised, HMRC maintains that these changes will ultimately lead to a more robust tax system.
At Studholme-Bell, we recognise the importance of staying up to date with legislation and ensuring compliance. Our team of experts is ready to assist you in navigating the evolving landscape of HMRC data collection powers and other regulatory matters. Contact us today to learn more about how we can support your business.

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Note: Please consult with a qualified accountant or tax advisor for personalised guidance on your specific circumstances.