L-Day: HMRC consultation on collecting data from taxpayers

If taken forward, the amount of data individuals and businesses need to provide to HMRC would increase.

If taken forward, the amount of data individuals and businesses need to provide to HMRC wo

Alongside the Finance Bill draft legislation, on L-Day HMRC published a wide-ranging and significant consultation document titled “Improving the data HMRC collects from its customers”. The document signals an intention to increase the amount of data collected and shared by HMRC to support their own activities and the wider policy and operational work of Government. The consultation will run until 12 October 2022 after which a summary of responses and proposed actions will be published. The document states that any proposed changes to legislation will be published in Finance Bill 2023/24 at the earliest. The document confirms that the proposals would require HMRC to be given additional information and enforcement powers as the data provision by individuals and businesses is likely to be mandatory.

The potential changes set out in the document would likely 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. HMRC are particularly interested in hearing from businesses with multiple branches, owner-managers of limited companies, and businesses who employ a significant number of staff through agencies or on irregular working patterns (as well as employment agencies themselves).

The document identifies areas where HMRC’s data could be improved, along with specific implementation options. The types of data relate to the following six areas (each with an example from the document of HMRC’s case for improvement):

  • The business sector of the self-employed (e.g. to help with better targeting of reliefs and compliance interventions);
  • The occupations of employees and the self-employed (e.g. to help target incentives to employers for training their employees; and to help the self-employed acquire the right skills to meet market demand);
  • The location of an employment or a business (e.g. to help direct the Government’s ‘levelling up’ agenda);
  • The hours employees work (e.g. to potentially assist HMRC monitor National Minimum Wage compliance and to help the Government understand and react to changes in the labour market);
  • Dividends paid to shareholders in owner managed businesses (e.g. to help identify company owner-managers (this was an issue for HMRC when targeting Covid support), target reliefs and monitor tax-motivated incorporation); and
  • The start and end dates of self-employment (e.g. to identify early stage business and target support, including compliance interventions).

Those affected and anyone more generally concerned with how the Government obtains and uses data will be interested in the consultation proposals. Businesses and individuals impacted by the proposals will want to be reassured that the additional compliance burden is proportionate and that additional powers given to HMRC include appropriate safeguards. Overall, the consultation document is further evidence of the increasingly important role that data plays in how citizens interact with the Government and how the Government leverages data to improve its efficiency and effectiveness.