HMRC is working on plans to access more information about individual taxpayers
The main focus will be on accessing more data about the self employed, partnerships and those earning dividends, as well as the number of hours worked by employees, their job titles and the locations of businesses.
This would inevitably raise administrative costs for businesses and individuals who have to comply with the rules, and there would be a penalty system for non-compliance.
The proposal is to add a compulsory field to real time information (RTI), the reporting mechanism for PAYE, requesting the occupation of each employee. This would have to be completed by employers, but it is hard to understand why the tax authority would need such information.
It also wants to know which office or business location the employee is based at, and says that this information would be useful to know in terms of where senior management and back office support is based, for example.
HMRC admits that collecting data on this would be challenging as not every employee is based at a single company site so even providing this data may not give HMRC the granular level of information it wants.
The demand for such detailed data would require a change in legislation to give HMRC far more powers.
It is clear from the consultation that HMRC does acknowledge that the data plans are far reaching. ‘HMRC carries out data protection impact assessments for new processing activities likely to have a higher risk to the rights and freedoms of individuals, particularly if there are proposals to change our statutory powers, and where new legal gateways are created to share personal data with other public sector bodies and tax jurisdictions,’ HMRC’s consultation stated.
One of the main thrusts of the data plan is to access more detailed information about the profile of the self employed and the type of business they are involved in, and HMRC justifies this by stating that support could have been more tailored to specific self employed sectors when providing covid-19 support during the pandemic.
One of the options is to require the self employed to provide a description of their business type when they complete their annual self assessment tax return.
It is considering using standard industrial classification (SIC) codes which are already required by Companies House, but this information is not shared with HMRC.
In the consultation HMRC stated: ‘It would also increase HMRC’s ability to target compliance interventions at higher risk sectors. This would help the vast majority of businesses who try to get their tax right, by nudging those who are accidentally non-compliant and helping to avoid unnecessary investigations.
‘Finally, it would provide an evidence base to support future sector-specific policy interventions, both in HMRC and across government, for example economic support in relation to a future crisis.’
Businesses are required to tell HMRC the ‘nature of business’ when they register. However, because businesses only have to register once, HMRC said it ‘does not have a lever to effectively ensure that this is updated. Furthermore, because HMRC use free text, it is difficult to analyse the data or combine it consistently with other datasets, so it is not easily comparable with SIC codes for example’.
HMRC said: ‘The changes in this document will potentially affect all self-employed taxpayers, all employers, employees about whom additional data may be stored and shared, as well as tax agents and tax or payroll software providers for these groups.
‘Better data about the whole customer population can help us target operational activity more effectively – for example compliance and debt collection activity.’
There is also hints that the level of data HMRC wants to collect would be really extensive, with details about employees from the type of job they perform to the hours worked.
HMRC claimed that ‘collecting occupation data alongside tax records would support the government in delivering the skills needed by employers, the economy and society’.
Better location data would help HMRC and the Treasury to design tax policy in a way that supports levelling up and enable greater policy flexibility, the consultation stated.
HMRC seems to be indicating that the data would be available to employers in some format although it is not clear how this data would be shared. The consultation stated: ‘Improved occupation data can also help businesses and employers. It would help employers understand more about what skills and training they need employees to have. It could also help businesses with investment decisions, by using information on which areas of the country have concentrations of people with particular skills and experience they are looking for.’
Finally, it is also looking at expanding the amount of information it collects about dividend payments and proposes changing the reporting requirements for owner managed businesses.
‘To avoid confusion and to achieve consistency for our customers and between our own internal datasets, we are therefore proposing to build on the existing definition of a close company, in three ways,’ HMRC said.
First, the company director and close company fields that already exist on the SA102 form would be made mandatory.
Second, a new mandatory field would be added to the SA102 form that would ask for the value of dividends received from the close company of which the individual is a director.
Finally, there would be a further new mandatory field on SA102 asking for the percentage shareholding in the company.
Subject to the response to this consultation, the government plans to legislate for any changes in Finance Bill 2023/24 at the earliest.