According to draft legislation released on 18 July, HMRC (Her Majesty’s Revenue and Customs) is set to implement new requirements for businesses and individual taxpayers, necessitating the provision of additional information in various areas, including creative sector relief regimes and PAYE reporting.
These changes are scheduled to be introduced gradually over the next few years. The primary goals behind these additional requirements, as advocated by HMRC, are to promote better compliance and establish a more robust tax system.
The specific ways in which HMRC intends to utilise the extra data collected remain to be seen, but recent trends suggest an increase in “upstream compliance” activities. These involve communications with taxpayers prompting them to rectify their tax affairs without formal inquiries, often based on information obtained from third parties such as overseas tax authorities, employers, Land Registry, and Companies House.
The proposed amendments will enable HMRC to obtain more data directly from taxpayers, thereby bolstering their ability to assess risks in tax returns and more effectively target their upstream compliance initiatives. The following is a summary of the additional information and data requirements detailed in the draft legislation released on 18 July 2023:
- Employers: Starting from the 2025/26 tax year, employers will be required to furnish more detailed information on employee working hours through real-time information (RTI) PAYE reporting. The specifics of the information to be reported will be detailed in separate regulations, the draft of which is not yet available. The legislation is broad and specifies that the information doesn’t have to be directly relevant to income tax assessment, charge, collection, and recovery for PAYE income. However, it must be relevant for the purposes of collecting and managing income tax, corporation tax, or capital gains tax. HMRC’s consultation outcome indicated that the required information will pertain to contractual hours for reasonably stable employment (excluding zero-hours contracts) and actual hours worked for hourly rate employees. The inclusion of occupation and location data remains under review by the government.
- Shareholders in Owner-Managed Businesses: From the 2025/26 tax year, shareholders will need to provide additional information via their self-assessment returns. This will include separately reporting the amount of dividend income received from their own companies compared to other dividend income, and stating the percentage of shares they hold in their own companies. Failure to report this information will lead to a fixed penalty of £60.
- Self-Employed Individuals: Self-employed individuals will be required to furnish information on the start and end dates of their businesses via their self-assessment returns. It’s unclear whether partners will also need to provide dates they entered or exited partnerships, although the draft legislation allows for additional information to be included in partnership and trustee returns. While the boxes to collect this information already exist in the self-employment and partnership sections of the self-assessment return, their completion is currently not mandatory. This change is expected to take effect from the 2025/26 tax year, and failing to report the required information will result in a fixed penalty of £60.
- Creative Industry and Cultural Tax Relief Claimants: Companies claiming creative industry or cultural tax reliefs will be required to complete and submit an online information form. This is similar to the additional information form for all R&D tax relief claims. The implementation dates differ depending on the specific relief claim: for the audio-visual expenditure credit and video games expenditure credit, this will be required from 1 January 2024, while for all other creative sector and cultural tax reliefs (such as 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), the operative date is set for 1 April 2024.
For information on how these changes affect your own individual circumstances, contact us directly today.
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