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The Treasury has stopped controversial plans to collect information about the exact hours worked by every employee in PAYE returns but dividend reporting goes ahead
The data collection on employee hours was meant to start from April 2026, but the idea has gone in the bin as part of the government’s attempts to reduce red tape and regulatory burden for business.
This means employers will not have to provide HMRC with detailed employee hours data as part of PAYE real time information (RTI) reports. This additional reporting was expected to cost businesses £58m in initial implementation costs due to software upgrades and complex internal reporting requirements, then £10m a year for businesses to operate.
The PAYE hours reporting was originally meant to start from April 2025 but was delayed last August after the Labour government came to power.
The original proposals put forward by the Conservatives in July 2022 would have seen a mandatory reporting requirement to disclose exact working hours of staff.
At the time, Conservative ministers at the Treasury tried to justify the information grab by asserting that this level of data would improve workforce planning across the country. It also said the additional information would reduce non-compliance.
When it was first announced, even HMRC admitted that collecting data on this scale would be challenging as not every employee is based at a single company site so even if companies provided this data it might not give HMRC the granular level of information it wanted about working hours.
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It also acknowledged that the scope of the proposals could infringe ‘the rights and freedoms of individuals’.
In the responses to the initial consultation, businesses were highly critical of the measure, citing concerns about the complexity, cost and administrative burden of the reporting requirements, including software upgrades, stressing that ‘these updates and any other technical upgrades would be costly and administratively burdensome for business’.
In an increasingly complex tax world, the government said it was ‘committed to simplifying tax for businesses so the Income Tax PAYE Amendment Regulations 2025 will no longer be introduced’.
The decision has not been widely publicised on the Treasury or HMRC websites.
In a statement given to Business & Accountancy Daily, the government said it wanted business owners to be able to ‘spend their valuable time doing what works to build their businesses. Adding administrative tasks to their “to do” list would take owners away from dedicating their time and resources on what matters most to them’.
However, the requirement to report dividends will go ahead from 6 April 2025 under the Income Tax (Additional Information to be included in Returns) Regulations 2025.
The Regulations require the inclusion the inclusion of information about directorships, close companies and dividend income in personal returns. In addition, dates of commencement and cessation of business activities will have to be included in personal, trustee and partnership returns.
James Murray, Treasury minister responsible for HMRC, and chair of HMRC’s board, said: ‘As part of the prime minister’s Plan for Change, this government is committed to freeing up time and resources spent managing tax admin to support the growth of businesses and the economy.
‘We have listened to their concerns about the previous government’s plans and will no longer introduce PAYE regulations relating to data collection of employee hours.’
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