Be prepared to give HMRC more information

Businesses and individual taxpayers will have to provide more information to HMRC in the coming years.

The Institute of Chartered Accountants in England and Wales (ICAEW) says draft legislation released earlier this month indicates that additional requirements for information will be introduced over the next few years.

HMRC argues that this will help it to provide better outcomes for taxpayers and businesses, improve compliance and build a more resilient tax system.

The proposed changes will allow more information to be obtained directly from taxpayers, giving HMRC further ability to risk-assess returns and better target its ‘upstream’ compliance activity.

It is proposed that from 2025/26, employers will be required to provide more detailed information on employee hours worked via real time information (RTI) PAYE reporting.

The information to be reported will be set out in separate regulations, a draft of which has not yet been made available.

ICAEW says the draft primary legislation is “very broad”. The information does not have to be relevant to the assessment, charge, collection and recovery of income tax in respect of PAYE income.

However, it goes on to state that the information must be relevant for the purpose of the collection and management of income tax, corporation tax, or capital gains tax.

Shareholders in owner-managed businesses will also be affected. It is proposed that from the 2025/26 tax year, shareholders will be required to provide additional information via their self-assessment return.

The amount of dividend income received from their own companies will have to be reported separately to other dividend income, and the percentage share they hold in their own companies must be stated. Failure to report this information will give rise to a fixed penalty of £60.

Meanwhile, self-employed individuals will be required to provide information on the start and end dates of their businesses via their self-assessment return.

ICAEW says it is not clear whether partners will be required to advise of the dates they entered or exited a partnership, although the draft legislation provides for additional information to be included in both partnership and trustee returns.

This change is expected to apply from tax year 2025/26 onwards and failure to report will also trigger a fixed penalty of £60.

Also, ICAEW says that from August 8, 2023, companies claiming creative industry or cultural tax reliefs will be required to complete and submit an online information form.

For the audio-visual expenditure credit and the video games expenditure credit, this will apply from January 1, 2024.

The operative date relating to all other creative sector and cultural tax reliefs (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) is April 1, 2024.

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