HMRC is planning to collect more data about UK taxpayers, like job titles and working hours, to tackle tax evasion.
Is this data grab justified? How will it affect businesses and individuals? Learn more about it below!
To improve the data collected from the taxpayers, HMRC presented a consultation document that covers six main areas:
- The business sector of the self-employed;
- The occupations of employees and the self-employed;
- The location of an employment or a business;
- The hour's employees work;
- Dividends paid to shareholders in owner-managed businesses;
- The start and end dates of self-employment.
1. Business sectors
Currently, HMRC doesn't know what unincorporated businesses do.
The proposal is that when a company is registered with Companies House, it must provide information on its business sector using SIC codes, allowing them to select up to four.
Self-employed traders may complete the business description box on their tax return, but that box is not compulsory and the free text description can’t be easily matched to SIC codes.
HMRC states that more accurate business sector data would help target compliance interventions at higher-risk sectors (tax inspections to make taxpayers pay the right amount of tax).
2. Worker occupations
In the same way, HMRC doesn't collect any data on employee occupations.
To identify occupation-specific skills shortages in different areas of the country and to help employees get the training they need from their employers, HMRC says they need to collect this information.
Specifically, the proposal is to add a compulsory field to the Real Time Information (RTI) return to enter the relevant standard occupational classification (SOC) code when a worker joins, leaves or changes occupation in a company.
Besides this, it will possibly be added as a field to Self Assessment tax returns, asking for the occupation, using a SOC code.
This additional data required for the self-employed can confuse taxpayers, as it duplicates the proposal under the business sectors above and doesn't provide benefits for people.
3. Business locations
When it comes to business locations, HMRC included a plan to keep the postal address for every business. This will be beneficial to identify compliance risks, such as operating overseas.
With this being said, the proposals are the following:
- Add two compulsory address lines for each employee on RTI forms to report the normal base/office for each employee;
- Add a new field for employees where there is no standard work address for the employee for agency workers, contractors or other itinerant workers.
4. Employee hours worked
HMRC states that currently it's not possible to identify employees who are on zero-hours contracts, so it needs more data to spot when the national minimum wage rate hasn't been complied with.
HMRC's proposal when it comes to this topic is the following:
- Replace the worked hours bands on the RTI return with contractual hours for each employee;
- Split out the “other” band on the RTI return to give reasons for why the pay is irregular.
5. Dividends paid by close companies
information provided on tax returns is not enough to identify who operates through their own company and what dividends people are receiving from that company, so HMRC suggests to:
- Make the optional close company box on the SA102 a mandatory field;
- Require the taxpayer to separately declare dividends received from a close company that he or she is a director of and state the percentage of the company’s shares that they own.
6. Self-employment start and end dates
To inform its small business compliance activities and allow help to be provided early in the business lifecycle, HMRC says it needs to know accurate start dates for each self-employed business.
The idea is to make completion of the start and end date fields on the Self Assessment tax return mandatory.
As we know, Self Assessment tax returns are not submitted within the first year of business life, so providing the start date will probably not give additional useful information to HMRC.
Is it worth it?
Mainly, the data required by HMRC will be used for policy-making.
Jon Stride, the vice-chair of ATT’s technical steering group, said: "This consultation deserves serious consideration and it is far too important to be left to just tax boffins".
Stride also mentioned that "It has been introduced as a Stage 2 consultation, meaning that it has skipped the critical first stage of setting out objectives for public debate. Its focus, therefore, is on identifying the best options rather than on exploring the merits of creating what looks in effect like a rolling business census."
At the same time, the vice-chair admits that the data in question could be really useful in supporting the government’s levelling up agenda and targeting resources and policies.
Simultaneously, any additional administrative load for businesses needs to be justified, to have a clear understanding of the intended use of the information by other government departments.
These changes benefit mostly the government rather than the individual workers and businesses, who will be compelled to add more information on their tax returns.
Claiming your tax refund doesn’t need to be stressful.