SIMPLE ASSESSMENT – HMRC’s new system of advising taxpayers of their tax liabilities

It is a long held desire for the UK to have the most digitally advanced tax system, and whilst Making Tax Digital has had a difficult gestation parts of the system are coming online without too much of a fanfare.

Everybody already has a digital tax account which they can access online now, and this is to become the foundation of our tax system going forward. The idea is that each person’s digital tax account will show all their tax liabilities in one place together with tax payments and  any other information HMRC think we might need.

Those old enough will remember the schedular system where different assessments were raised on different parts of your income with the underlying idea that those different parts were deliberately kept separate so no one looking had an overview of a taxpayer’s total income, after all that was our private affair and wasn’t the business of anyone else. How things have changed, nowadays we’re almost at the polar opposite!

An interesting, although perhaps sensationalist, tv program a month or two ago seemed to lift the curtain on HMRC and give us a glimpse of the systems at HMRC’s disposal.

One scene showed a computer screen displaying a spider diagram, with the Revenue officer explaining that it showed all the different information already available to HMRC should they care to look at a particular taxpayer, especially if they have cause to doubt the accuracy of a tax return.

Given all this information at their fingertips it is perhaps a logical, and dare I say it, sensible development that rather than have certain taxpayers prepare and file their tax returns that HMRC then check, that instead HMRC could actually prepare those tax returns themselves. Let’s think about that for a moment, a number of tax returns we prepare for our clients are simple form-filling exercises using information taken from bank statements and P60s and this is a service that is much valued by our clients and one we’re happy to supply for a comparatively low fee. All the information we use to prepare those tax returns is already held by HMRC, so instead HMRC of waiting to receive the tax returns they will use the information they already have to issue “Simple Assessments”.

I haven’t yet seen a Simple Assessment but I hear they are starting to be issued this month and I have two trains of thought. Firstly, what a good initiative, it will take a lot of people out of self assessment and make their tax affairs so much simpler. Secondly though, is it not frightening and maybe a little worrying about the amount of information HMRC might have access to? No doubt we all gave permission for our personal information to be given automatically to HMRC, but I expect in some cases it was hidden way down in the small print within standard terms and conditions.

This is a seismic shift from the old schedular system, and yes that was an antiquated system which probably couldn’t work in today’s modern world, but I wonder whether this new system is a step too far. The system is being marketed as a wonderful tool designed to help us taxpayers get to grips with our taxes but am I being too cynical to suggest that actually it is taking control away from us and actually we’re moving nearer to a state where HMRC can run roughshod through our personal information even though the very vast majority of us always pay the right amount of tax and are happy to do so!

*Simple Assessment has been introduced from 11 September 2017 and is HMRC’s new system of advising taxpayers of their tax liabilities without the need for annual tax returns. HMRC intend to issue simple assessments in cases where the tax affairs are straightforward but where the tax liability cannot be collected through a PAYE code. It is thought that simple assessment will remove up to 2 million tax payers from the tax return burden.

If you have any questions regarding your tax affairs please contact our Tax Partner Robin using the contact info below:

Tel: 01825 745945

Email: robins@swindellsaccounting.co.uk