As a pensioner with modest income to complete on my tax return, I have just received a Simple Assessment from HMRC. I believe this replaces the need to do a tax return. Is this right?
Back in 2015, the Treasury announced a desire to abolish the tax return and last year it took a step toward that aim, introducing legislation for a new form of tax collection – Simple Assessments. The plan is to eventually remove two million taxpayers from the Self Assessment system and the first tranche of taxpayers being targeted are those where the PAYE system alone cannot deal with the tax liability, but where HMRC has sufficient information to determine the tax position and issue a demand for payment.
One group of taxpayers this will cover are pensioners who receive the state pension without tax deducted at source, and whose other pension income sources are not sufficiently large to enable tax on the state pension to be collected from them.
2016/17 will be the first tax year to which assessments relate and it is expected that the issuing of the notices will take place over the late summer and autumn of 2017. The legislation sets out a framework surrounding the new assessments; here are some of the key points:
- Where a tax return has already been filed for a tax year, HMRC cannot issue a Simple Assessment
- HMRC may, however, withdraw a notice to file a tax return which has already been issued to a taxpayer and issue a Simple Assessment instead. The taxpayer may well, in the interim period, have begun working on their tax return either personally or using a tax adviser
- Following the issue of a Simple Assessment, the taxpayer has only 60 days to ‘raise queries’ (ie, challenge the figures). After that 60-day period the assessment becomes binding
- The due date for payment of a Simple Assessment is either 31 January following the end of the tax year to which it relates, or three months following the date of issue of the assessment – whichever is later
- There is a system of interest and penalty charges for failure to pay at the appropriate time
- Taxpayer obligations to notify HMRC of new sources of untaxed income or capital gains remains in place, as at present
Anyone who receives a Simple Assessment should not ignore it or confuse it with other paperwork routinely sent out by HMRC and do not assume that it will be accurate. The end of the 60-day period for queries should be noted and a process to check the accuracy of the assessment should be undertaken, either by the taxpayer or a professional. This check should extend beyond just considering what is already included in the assessment, to thinking about whether all of your taxable income and gains, as well as all tax relevant factors (like pension contributions, gift aid, losses and so on) have been taken into account.
The advice above is specific to the facts surrounding the questions posed. Neither FPM nor the contributors accept any liability for any direct or indirect loss arising from any reliance placed on replies.