Simple assessments are coming

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From mid-August, some taxpayers will be sent a simple assessment (form PA302) which will demand payment for tax which can’t be coded out under PAYE. 

Back in time

Do you remember how personal tax worked before self-assessment? The Inland Revenue would raise an estimated tax assessment, the taxpayer would appeal, a tax return would be submitted and eventually the figures would be agreed and the tax would be paid. HMRC appears to have turned the clock back to pre-SA days with a new power to raise simple assessments for 2016/17.

In April 2016 the McNeils outlined HMRC’s proposed powers in this area, which are now contained in FA 2016, Sch 23 and came into effect on 15 September 2016. As yet there is still no detailed guidance available on gov.uk concerning simple assessments, but we expect some guidance to appear in the next two weeks.

The policy paper for simple assessments suggests that this new procedure will be used where the taxpayer’s main source of income is taxed under PAYE, but he or she also has up to £10,000 of other taxable income or gains. This income threshold has not been included in the legislation.

Not a tax return

A simple assessment is a tax assessment made by HMRC, not by the taxpayer, so it is the opposite of a self assessment made alongside an SA tax return. If the taxpayer has received notice to file an SA tax return, HMRC must withdraw that notice before issuing a simple assessment to the taxpayer. HMRC has up to four years from the end of the tax year to issue a simple assessment.

Who receives a simple assessment 

The aim of the simple assessment procedure is to take the taxpayer out of the SA system, where they have only a small amount of income or gains which is not taxed under PAYE.

We understand that for 2016/17 the simple assessment procedure will mainly be used for taxpayers whose tax underpayment cannot be coded out. These taxpayers will be the first to receive a simple assessment from mid-August 2017.

Taxpayers who reached pension age in 2016/17 will be notified in August or September whether they will be within the new regime for 2016/17, then, if required, the simple assessment form PA302 will be issued in October 2017.

Pensioners with income which just exceeds their personal allowance will remain in SA for 2016/17 but will be taken out of SA and put into the simple assessment regime for 2017/18.

Appeal period

The taxpayer has 60 days to query the simple assessment or such longer period as HMRC allows. It is very important that the taxpayer reacts to the simple assessment within this period, as once the assessment becomes binding, the tax liability becomes payable and there is little the taxpayer can do to challenge it. The simple assessment is not a “determination” which can be replaced by submitting a tax return.

Paying the tax

The normal tax payment date applies, so for 2016/17 the tax due is payable by 31 January 2018. Although if the simple assessment is issued after 31 October following the tax year, the tax will be payable three months after the date of the assessment. The taxpayer doesn’t have to make payments on account after receiving a simple assessment.  

Not digital

The simple assessment powers are entirely separate to the requirements for individuals to report income through their digital tax account under MTD. It is expected that the simple assessment will be an entirely paper procedure.

 

If you come across a simple assessment please comment below, and let us know how it is working out for your clients

About Rebecca Cave

Consulting tax editor for Accountingweb.co.uk. I also co-author several annual tax books for Bloomsbury Professional and write newsletters for other publishers.

Replies

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By Sparkly
04th Aug 2017 12:16

Surely they must wait until after 5th October before they issue these? We have until 5th October to notify HMRC that a 2016/17 Tax Return is required. So issuing a "simple assessment" before a "customer" has perhaps notified them of a new self-employment for example seems to be jumping the gun.

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By Chris Mann
04th Aug 2017 12:21

"HMRC appears to have turned the clock back to pre-SA days"

Oh, if only, Rebecca, when it was, certainly in my view, a highly respected Government Agency. The description of "customers" is totally lost within HMRC. Taxpayers does what it says on the can.

With the various online, digital, issues which are reported regularly on Aweb, I think my cynical nature is to be extremely cautious about this new "project".

Time will of course tell and, as with all these things, the devil will be in the detail.

Thank you for the update though, Rebecca.

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By mabzden
04th Aug 2017 13:01

It sounds like a good idea to me.

Determinations are very much in favour of the recipient taxpayer and should be scrapped IMHO. I've seen determinations that understate the taxpayer's true tax liability by many thousands of pounds. The taxpayer can accept HMRC's bill, scrap any plan to submit a tax return and say thanks very much for the early Christmas present.

So it makes more sense to use a system that is simple but doesn't give a few lucky taxpayers a one way bet.

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to mabzden
07th Aug 2017 11:42

So, you have not learned to fear the juxtaposition of the name "HMRC" with the word "simple".
Perhaps you are too young to remember that before its actual implementation, SA was supposed to stand for Simplified Assessment.
Be afraid, be very afraid.

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07th Aug 2017 09:24

Call me an old cynic if you will, but I look forward to HMRC issuing a torrent of "simple assessments" for SA customers who have already filed their 2016-17 tax returns, containing entirely fictional numbers to the factual ones already notified.

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07th Aug 2017 10:10

Oh dear, oh dear, oh dear!

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By Mallock
07th Aug 2017 11:27

I see nothing "simple" in introducing a different set of rules for certain taxpayers who may not understand the importance of appealing the assessment in time.

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07th Aug 2017 11:27

Are these going to include all the individuals whose state pension is over the personal allowance and don't have another source of income to collect them from?
I've had a few of these come in to see me recently. So far every one has a repayment from an earlier year due ( tax deducted at source on interest not reclaimed ) but HMRC should be deducting tax at source through PAYE not creating a whole new process to land elderly people with lump sum demands!

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07th Aug 2017 11:36

Will these be copied to agents?
Will they be visible on SA system?
Why am I feeling uneasy?

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07th Aug 2017 11:49

Forget "simple". Given the current state of SA, "competent" would be a great advance.

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By jam2
07th Aug 2017 12:14

I have received a copy of a letter sent to a client today informing them that they no longer need to submit a self assessment. Their 2016-17 one has already been submitted and this is the first time they have been due a repayment. Wonder if that's why - showing the cynic in me!!
Maybe this is the start of the 'simple assessment' entourage.

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07th Aug 2017 12:31

A line in Rebecca's article sticks out and probably sums up the Government's short term policy thinking.

........If the taxpayer has received notice to file an SA Return , HMRC must withdraw that notice before issuing a simple assessment to the taxpayer...............

Swelling the legislation with Clause 155 , Schedule 23 Finance Bill March 2016 , this simply sounds like an additional administrative burden , simplistically devised by simpletons.

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By Eric T
07th Aug 2017 14:42

It certainly d9oes seem to indicate that HMRC is more and more being managed by people who don't really understand their own rules.

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By raju m
07th Aug 2017 17:11

Why don't they call them very very very simple assessments .

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to raju m
07th Aug 2017 17:23

Why don't they just call them off.

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By janefg
08th Aug 2017 11:55

I wonder what date the 60 days will run from! Will it be the date the taxpayer receives it or the date that HMRC purports to have issued it?

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to janefg
08th Aug 2017 12:22

For example:
2015/16 Notice to file SA100 was dated 6 April 2016. I received it in the last week of May 2016.
2016/17 Notice to file SA100 was dated 6 April 2017. It came through my letterbox that afternoon.
In either case, I assume it will be deemed to be received on the third working day after the date of posting. As there is no postmark, this will be the date on the assessment.
I do not trust HMRC to physically post on the date printed on the document.
I also fear that HMRC is incapable of reliably printing the complete and correct postal address.

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to leon0001
09th Aug 2017 21:06

Presumably the printing and delivery has been privatised

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09th Aug 2017 08:59

It appears HMRc want a simple solution to smallish tax problems, lets give it a go.

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to AndrewV12
09th Aug 2017 09:10

Er, let's not. The simplest way is that that has gone on for many years. Tax returns are completed once a year declaring income and expenses. Tax is calculated once a year and paid over to HMRC in the time frame set down by law.
Any attempts by HMRC to muddy the waters by bringing in such measures is far from simple as previous posts have demonstrated.

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09th Aug 2017 21:03

Excellent. Great to see that pensioners who only have state pension will be taken out of SA

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07th Dec 2017 09:54

Appear to be allowing a few days for post - one dated 27 November , due for payment +3 months becomes 3 March.

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