19 August 2024
The CIPP’s policy and research team sheds light on the recent HM Revenue and Customs (HMRC) consultation on collecting hours worked through RTI submissions
Improving the data HMRC collects has been an ongoing discussion since 2022, and the CIPP policy and research team and our members have been eagerly involved in it. Lora Murphy and Samantha O’Sullivan provided an update on the team’s work so far in a previous issue of Professional. You can read it in your printed issue 97 (February 2024) or view it online here: https://ow.ly/HmJs50SpW5U.
Technical consultation 2024
This year’s consultation was a ‘technical’ one, which means it looked at amending legislation to require businesses to change the information they provide to HMRC through both income tax self-assessment and pay as you earn (PAYE) RTI submissions completed by employers / agents. The consultation launched on
14 March and closed on 9 May 2024.
The consultation documents stated that the changes would commence no earlier than the start of the 2025/2026 tax year, with all draft regulations stating a commencement date of 6 April 2025.
The CIPP’s response was solely focused on the RTI element of the consultation, which is all about employers / agents being required to provide more detailed information on employees’ hours paid via RTI submissions. The Institute’s response can be found within the policy hub pages of the website: https://ow.ly/kMIu50SvfRJ.
Gathering your thoughts
HMRC was keen to seek views from the CIPP and its members on this consultation. The policy and research team was delighted to facilitate a think tank with our full, fellow and Chartered members on this very topic on 2 May 2024, focusing solely on the RTI element of the consultation.
Colin Connor, head of new data policy, strategic data policy at HMRC, covered:
What changes are HMRC proposing?
Employee hours paid – Changing current requirement to request through RTI data on number of hours paid to employees (rather than hours in bands).
Why is HMRC collecting this data?
As set out in the original consultation in summer 2022, HMRC wants to:
- improve tax administration and compliance, helping customers to get their tax right first time
- improve the resilience and responsiveness of the tax system to future economic shocks
- improve wider government policy making and outcomes through better understanding of the labour market for policy interventions
The focus is on making improvements to data that HMRC already collects through RTI. This is to ensure that HMRC minimises the additional burdens for businesses where possible and limit the scale and range of changes required to systems and software.
Employee hours draft regulations
Replace current requirement to report normal hours worked per week in bands including ‘other’ band for irregular patterns of employment or where payment is not hours related.
HMRC will now ask for hours paid to employees in a numerical format e.g. 158 hours paid in that period where that information is held. This will be for:
- salaried / contracted employees
- employees paid by the hour.
The current draft regulations say where that information is not held to report nil hours and complete a field inputting a reason why the pay does not relate to hours e.g. payment for a company car.
The reportable reasons were added to the regulations as HMRC was told not all employees’ pay relates to paid hours.
Modifying the approach
Further feedback since HMRC published draft regulations shows that the attempt to accommodate ambiguous circumstances by asking employers / agents to report reasons for nil hours makes the requirements complex and burdensome. HMRC has listened and recognise that the requirement to provide employee hours has gone further than intended.
HMRC plans to modify the approach to simplify the requirement by reducing the number of reportable descriptions where employee hours are not directly linked to the payment made. HMRC is also exploring soft landing / transition options after industry representatives advised the timescales may be challenging.
High-level implementation timeline
Please note this timeline was discussed prior to an incoming and now passed general election, so will more than likely change
- draft regulations and Explanatory Memoranda published for consultation on 14 March 2024, the the consultation closed on 9 May 2024
- focus on RTI changes at present with initial requirements shared with external group of software developers for review and comment March 2024
- requirements finalised in workshops June 2024 and final technical data specifications and test environments shared with developers October 2024
- industry guidance published September / October 2024
- technical guidance produced alongside final technical specifications October 2024
- go-live – first paid hours data supplied via RTI in returns / system in April 2025.
CIPP quick poll
The CIPP’s policy and research team polled visitors to the News pages of the website, by asking “Do you feel prepared for the RTI changes?”. The results showed that:
- 34.7% of respondents already have the hours worked data
- 65.3% of respondents will need to obtain the information to adhere to the new reporting requirements
- of the 65.3%, a resounding 38.8% stated that gathering the data will put additional admin burden on payroll professionals.
Our response
The CIPP responded to the consultation on 3 May 2014, just before the closing date. We did submit our response alongside the Business Application Software Developers Association (BASDA), with a joint covering letter to state both organisations fully support the respective findings set out in each organisation’s response.
The policy team chose this method as the CIPP largely represents payroll professionals, the people responsible for gathering the data and processing it through the payroll. BASDA represents payroll software developers, who will map where the data payroll professionals’ input into the software goes, when it lands with HMRC via RTI submissions.
Based on the feedback gathering via the think tank held in May, and the policy team’s own personal concerns, the main proposals made were:
- urgent clarification should be provided to communicate why this extra data needs reporting and what it will be used for
- consultation with software developers is imperative, as pay elements / components could be mapped with the reportable descriptions as laid out in the draft paragraph 21A (3)(b) of Schedule A
- legislative sandboxes should be implemented to ensure this works in practice
- implementation should not be considered prior to April 2026 to allow appropriate time for testing and employer process changes to capture the data.
What’s next?
The general election has been and gone, and with a new Government now in force, could this mean these measures are postponed, brought forward or even abolished altogether? The policy team is hugely invested in the large change these measures could bring for the profession. We will keep you up to date as soon as we have a response or provide further information on this consultation.
The one thing we can assure you of is, we have heard your feedback, and we are representing you with a passion. The last thing we will do is allow changes to be implemented which will bring about additional admin burden, without having our say to push back where we can.
This article featured in the September 2024 issue of Professional.