Given the current furore surrounding certain political events of the past few week let’s try to take our minds off such things with a look back to a little corner of FA 2016 which may have passed you by.
For 2015/16 and subsequent tax years HMRC will have a new power to make a 'simple assessment' of an individual's or trustee's income tax or capital gains tax liability without that person first being required to complete a self-assessment tax return.
HMRC will instead assess their tax liability on the basis of information already held. HMRC can issue more than one simple assessment in a tax year.
The assessment is subject to appeal within 60 days, or suspension by HMRC without a formal appeal. If the assessment is suspended, the person will be required to pay the amount not in dispute, and HMRC must then either confirm or withdraw the assessment, or issue a further assessment either in addition to, or in place of, the original. There is still a right of appeal if the person disagrees with the assessment after the suspension is lifted.
The amount due, less any payments on account and income tax paid at source, is payable on or before the 31 January after the end of the year of assessment, or, where the notice was after 31 October following the year of assessment, three months after the day on which the notice was given.
The new measure will apply to both Individuals and trusts with straightforward Income Tax or Capital Gains Tax affairs and is part of the government’s stated objective to abolish the tax return.It should reduce the number of individuals with straightforward affairs having to send a tax return to HMRC.
In March Budget 2015 the government published ‘Making Tax Easier: The end of the tax return’ - replacing tax returns with digital tax accounts for individuals and businesses. This is now changed to ‘Making Tax Digital’.
At the same time ‘Making Tax Easier: Simpler Payment’ was announced. This set out plans to introduce legislation to remove the need for taxpayers to complete a tax return with information that HMRC already holds, simply to pay their tax bills. This is now changed to ‘Simple Assessment’.
The current law is contained in the Taxes Management Act 1970 (TMA). The legislation will amend section 7 of TMA to remove the requirement on an individual or trustee to notify HMRC that they are chargeable to Income Tax or CGT if the total income and gains consist of sources included in a Simple Assessment for the year of assessment unless the Simple Assessment does not cover all sources of income or gains.
A new section 8C of TMA will be introduced that will allow HMRC to withdraw a notice to file a Self-Assessment tax return prior to the issue of a Simple Assessment.
New section 28H will define what a Simple Assessment is and the circumstances when it will be issued. It will set out what should be included in the Simple Assessment notice; specifically the amount due, how it has been calculated and the information held by HMRC used in that calculation. It also requires HMRC to tell the individual how the amount due may be paid and the date it is due.
New section 28I provides similar information as 28H but for trustees.
New 28J will allow HMRC to withdraw a Simple Assessment.
A new section 31AA and AB will allow HMRC to suspend Simple Assessments aside from the formal appeals process.
New section 59BA of TMA will set out who is chargeable and when payment is due following the issue of a Simple Assessment.
Here’s a link to the copy of the draft: