In a move to enhance tax compliance and tackle tax evasion, HM Revenue and Customs (HMRC) is set to implement new regulations on data collection. These changes, effective from April 2025, will have a significant impact on owner managed businesses and individual employees. In this blog post, we will delve into the details of the HMRC data collection requirements and explore the implications for businesses and employees.
Understanding the New Rules
Under the new regulations, owner managed business directors will be subject to increased scrutiny regarding dividend payments. Employers will also be obligated to report individual employees’ working hours. These requirements aim to provide HMRC with comprehensive information for a more accurate assessment of tax liabilities.
Dividend Disclosure
From 2025 onwards, individuals connected to owner managed businesses must detail dividend income received from their own companies separately from other dividend income on their self assessment tax returns. Moreover, they need to specify their percentage shareholding in their respective companies. This data will be requested by HMRC through the SA102 form, ensuring transparency and compliance.
Employee Working Hours
Another significant change involves employers reporting the number of contracted hours worked by their employees. Real-time information PAYE reporting will be used to provide detailed information on employee working hours. This data will aid HMRC in monitoring compliance with national minimum wage regulations and improve government support for the labour market.
Implications and Feedback
The decision to implement these data collection requirements has been met with mixed responses. While some stakeholders believe it will enhance tax compliance, others have raised concerns about potential administrative burdens. As a result, certain elements were dropped from the initial plans, including the collection of employee job titles, precise working locations, and specific types of work undertaken by self-employed individuals.
Penalties for Non-Compliance
To ensure adherence to the legislation, failure to comply with the new data collection requirements may result in a penalty of £60.
The introduction of HMRC’s new data collection regulations signifies a significant step towards improving tax compliance and tackling tax evasion. These changes place additional responsibilities on owner-managed businesses and employers to provide accurate and detailed information on dividend payments and employee working hours. By embracing these requirements, businesses can demonstrate their commitment to transparency and contribute to a fairer tax system.
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Disclaimer: This blog post is for informational purposes only and should not be considered as professional tax advice.