Understanding HMRC’s Simple Assessment
From September 2017, HMRC introduced what they refer to as a “new way of collecting tax” which will apparently “make life easier for millions of customers who have had to do self assessment tax returns in the past”.
Welcome to “Simple Assessment”.
This concept was originally announced in the March Budget 2015 at the same time as the “Making Tax Easier: The end of the tax return” vision (subsequently renamed Making Tax Digital) and has been somewhat overshadowed by this ever since. The paper detailing this simpler system was entitled “Making Tax Easier: Simpler Payment” and has since been renamed Simple Assessment.
The idea behind Simple Assessment is that now that HMRC have increasing direct access to data, they can calculate some taxpayers tax liabilities from information they already holdwithout the individual concerned having to submit a formal self assessment tax return.
The first people to whom Simple Assessment will be rolled out are pensioners with income in excess of their personal allowance and those taxed under PAYE who cannot have their underpaid tax collected through their tax code.
However, if an individual falling within either of these categories has already received a tax return for 2016/17, they must still file this and they will then be brought within Simple Assessment from the 2017/18 tax year.
Individuals being dealt with under Simple Assessment will either be sent a tax calculation (form P800) or a Simple Assessment letter, setting out their income from sources such as pensions, state benefits, earnings, benefits in kind and savings interest.
The individuals should check the information is correct and, if it is agreed, pay over their tax to HMRC. A due date for the tax payment will be given on the assessment or the letter and, if the individual misses the payment deadline, they will be charged interest and may be liable for penalties.
If the individual disagrees with the calculation, they will have 60 days in which to contact HMRC to get the position corrected. If they do not agree with HMRC’s response, they then have 30 days to appeal.
So do we think this will work in practice?
Certainly, our experience has shown that where assessments were issued by HMRC in the past from data they had received directly from employers and pension providers, for example, the information has not always tied up with the details provided to the taxpayer.
It remains to be seen whether Simple Assessment will indeed live up to its name or whether in fact it will lead to more work for advisers having to review the assessments against the client’s income sources to make sure what has been declared is right and liaising with HMRC and the taxpayer to ensure the correct position is agreed.
And what about taxpayers who do not have a tax adviser to check these assessments? Will they merely accept them as correct and pay over the tax?
Watch this space!
Disclaimer
The information provided by Charter Tax Consulting Limited is general in nature and does not constitute specific tax advice. Professional advice should be sought before deciding on a course of action, or refraining from a certain action, arising from the above information. Tax legislation changes regularly and information contained herein is provided based on legislation as at 10 October 2017.
Taxation planning concerns the application of complex statute and case law to future events. Accordingly, however expert the opinion given, it is always possible that the Courts will take a different view of the application of the law. We undertake to apply reasonable care and skill in the provision of advice. We do not guarantee that tax planning steps will in all circumstances achieve a certain legal effect.
