Written by Aubrey Hodder
Payroll Team Leader
Ward Goodman
February 5, 2025
In a significant policy reversal, HM Revenue and Customs (HMRC) has announced the cancellation of its proposed requirement for employers to report detailed employee working hours through the Pay As You Earn (PAYE) Real Time Information (RTI) system. This decision comes following a backlash from businesses who expressed their concerns over the increased administrative burden such reporting would entail.
Background of the Proposed Changes
Initially, HMRC introduced the draft Income Tax (Pay As You Earn) (Amendment) Regulations 2024, which mandated employers to provide detailed data on the actual hours worked by employees. The objective was to enhance the accuracy of income reporting and ensure compliance with tax regulations. The implementation was slated for April 2026, giving employers a two-year window to update their payroll systems to accommodate the new reporting requirements.
Feedback from Businesses and Concerns Raised
Upon the proposal’s release, numerous businesses, particularly small and medium-sized enterprises, voiced their apprehensions about the potential administrative challenges involved. The Chartered Institute of Payroll Professionals (CIPP) highlighted that its members were particularly concerned about the increased workload and the complexities involved in tracking and reporting precise working hours for each employee. Many employers feared that the additional reporting requirements would necessitate significant changes to their existing payroll processes, leading to increased costs and potential compliance issues.
HMRC’s Decision to Withdraw the Proposal
In response to the widespread feedback, HMRC’s Software Developer Support Team communicated the decision to withdraw the planned implementation. An email from the team confirmed that the draft regulations would not be progressed, acknowledging the concerns raised by businesses regarding the administrative burden. This move underscores HMRC’s willingness to engage with stakeholders and adapt its policies in light of practical challenges faced by employers.
Implications for Employers
With the withdrawal of the proposed regulations, employers will continue with the current practice of reporting employees’ normal working hours in broad categories, rather than providing specific data on actual hours worked. This decision alleviates the immediate pressure on businesses to overhaul their payroll systems and processes. Employers can maintain their existing reporting methods without the need for additional data collection or system modifications.
Future Directions and HMRC’s Commitment to Data Transformation
Despite this policy reversal, HMRC remains committed to its broader data transformation initiatives. Projects such as Making Tax Digital for Income Tax Self Assessment (ITSA) and the digitalisation of business rates are still underway, aiming to modernise the UK’s tax system. The collaboration between HMRC, industry bodies like the CIPP, and businesses will be crucial in ensuring that future changes are both effective and manageable for employers.
Final Thoughts
HMRC’s decision to abandon the detailed employee hours reporting requirement reflects its responsiveness to business concerns. Employers should continue to monitor payroll regulations to avoid any unexpected changes.
This development serves as a reminder of the importance of open dialogue between regulatory authorities and the business community to ensure that tax policies are both effective and practicable.
If you need expert payroll advice or assistance with compliance, the experienced team at Ward Goodman in Dorset, can provide tailored support. Get in touch to find out how we can help your business stay compliant with confidence.
