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Simple assessments spun out

by
26th Sep 2017
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HMRC has started to issue the first simple assessments, and it has released some very brief guidance which raises more questions than it answers.

History

In August I warned you that simple assessments were coming and set out the background to this new type of tax assessment. HMRC has now announced that the first Simple Assessments will be issued this September, although we had been expecting this process to start months ago as the law came into effect on 15 September 2016.

Spin

The HMRC guidance heralds the simple assessment as “ending the tax return”, which is simply not the case. By saying this, HMRC is promoting the dangerous myth that taxpayers have been released from their obligation to inform the tax authority of their correct taxable income and gains.

The simple assessment briefing says:

Customers with more complex tax affairs who continue doing self-assessment will still benefit from a modernised process in the future. This means they will only be asked for information needed to assess their tax, benefits and credits. HMRC will complete the rest of the information automatically.

This statement doesn’t make it clear that the taxpayer (not customer!) must report their new sources of income or gains, and check the simple assessment for omissions. It also doesn’t define what is meant by “more complex tax affairs”.

Who’s in?

At first, the simple assessments will be issued to the following groups of taxpayers who are not already within self-assessment:

a) those started to draw the state pension in 2016/17, and who have total income in excess of their personal allowance for that year; and

b) individuals taxed under PAYE who have unpaid tax for 2016/17 and who can’t have that tax collected through PAYE.

Other pensioners with a state pension greater than their personal allowance will be taken out of self assessment for 2018/19 and subsequent years. This may well affect a number of your clients. HMRC has confirmed that tax agents will receive copies of the simple assessments issued to their clients where authorisation to act is in place.

Nudge to online  

Although the simple assessment will arrive as a physical form (PA 302), the taxpayer is encouraged to pay the tax due online by the deadline stated on the form. However, the simple assessment briefing and the “Pay your simple assessment tax bill” page don’t state when that payment deadline falls.

HMRC has deliberately mixed together guidance on the P800 and the simple assessment processes. A tax underpayment shown on a P800 is due immediately. However, if the amount is for under £3,000 it should be collected through PAYE.

The underpayment demanded on a simple assessment is due by 31 January following the tax year end, so by 31 January 2018 for the 2016/17 tax year.  

The taxpayer is encouraged to go online to view their personal tax account, but it is not clear whether the simple assessment calculation will be shown as part of that personal tax account.

Appeal

The guidance on how to appeal against a simple assessment is particularly poor. The briefing says the taxpayer should contact HMRC within 60 days if they believe any of the information is incorrect. There does not appear to be a set form to use for an appeal, and it is not clear whether an appeal will be accepted by telephone. The HMRC contact page suggests the taxpayer can use twitter or webchat to challenge their simple assessment!

Conclusion

I hope HMRC improve their guidance for the simple assessment very soon because currently it is not fit for purpose.

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Replies (23)

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abc
By Kim Jong Un's Hair
26th Sep 2017 22:25

Tweet an appeal.. I love it.

How thoughtful to allow customers to do that.

I must protest though as I only use snapchat. Can I appeal that way?

Thanks (2)
Replying to Kim Jong Un's Hair:
By itp3asso
16th Oct 2017 13:02

Try The Onion browser on the dark web.

Thanks (0)
By SteveHa
27th Sep 2017 09:38

Not so sure I'd trust HMRC to process a tweeted appeal. In fact, not sure I trust HMRC to get tax right.

Thanks (4)
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By Eric T
27th Sep 2017 09:43

What happens if your appeal exceeds 140 words?

Thanks (2)
Replying to Eric T:
By SteveHa
27th Sep 2017 10:30

Shouldn't that be characters?

Thanks (2)
Replying to SteveHa:
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By Eric T
27th Sep 2017 10:38

Yes - even more limiting

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By SteveHa
27th Sep 2017 10:30

Just a thought. Does anyone remember that self-assessment was originally Called simplified assessment. Then they figured out that it wasn't simplified and changed the name.

Wonder if we'll see the same here.

Thanks (3)
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By Eric T
27th Sep 2017 10:37

It does make you wonder though,. Are we slowly returning to how it was pre 1994/95 In other words, is HMRC tacitly admitting that the whole 20 Self Assessment experiment was a failure?

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Replying to Eric T:
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By Ken Howard
28th Sep 2017 10:03

Eric T wrote:

It does make you wonder though,. Are we slowly returning to how it was pre 1994/95 In other words, is HMRC tacitly admitting that the whole 20 Self Assessment experiment was a failure?

I've long thought the same!! Pre SA, HMRC would create assessments based on information they held, including pensions, interest, etc., as routine matter of course.

With SA, they seemed to institutionally "forget" all the information they had such as pensions and interest, and insisted on taxpayers telling them via SA returns etc.

It is indeed coming full circle again. I have often thought of the immense waste of time and effort, both within HMRC and millions of taxpayers, that the SA system was, and yes, now that it seems to be coming to an end, it does seem to have been a 20 year failed experiment.

Thanks (2)
Tornado
By Tornado
27th Sep 2017 11:31

Thank you Rebecca.

The mind boggles. Most of the people involved at this stage will be unrepresented, so I wish them the best of luck.

Thanks (2)
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By Akrigg
27th Sep 2017 16:14

Thanks Rebecca

I think that I'll be quoting your conclusion many times over the next few months.

Thanks (1)
Tornado
By Tornado
27th Sep 2017 16:44

"This statement doesn’t make it clear that the taxpayer (not customer!) must report their new sources of income or gains, and check the simple assessment for omissions"

This seems a bit naive.

HMRC will no doubt include on the Simple Assessment all of the information they do have and possibly feel a bit smug about the ability of the Connect software to have found all of this information, but it also exposes the weakness of the system as the implication is that if something is not on the simple assessment, then HMRC do not know about it and may possibly never know about it if the taxpayer decides to say nothing either by error or deliberately.

Will the accompanying note include something like "If you have income or gains that is not shown on the Simple Assessment then that is because we do not know about it. Please let us know if you have such income but do not worry if you don't tell us as it is highly unlikely that we will ever find out"

Unbelievable!

Thanks (1)
Replying to Tornado:
By itp3asso
02nd Oct 2017 13:48

Heigh ho Heigh ho . To work the tax man goes.

Hector the Inspector
Must provide
A decent vector !

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By the_Poacher
27th Sep 2017 21:15

It’s clear that the current self assessment system is overkill for those with very simple tax affairs. This is the first cut of the new system and will probably go through various refinements in the next few months. Let’s not be too cynical too soon

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Replying to the_Poacher:
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By Akrigg
28th Sep 2017 14:41

Fair points - but we've got to be at least wary of a new system that gives wide powers to HMRC, imposes short appeal windows for taxpayers and is being introduced with very little guidance.

If introduced gradually and sympathetically by HMRC then it could benefit many taxpayers.

Thanks (1)
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By Eric T
28th Sep 2017 10:17

I think being cynical should be the default stance to take on any of these proposals. We are now very used to major announcements being made by Chancellors and other Treasury ministers telling us how things will be only for details to be skimpy and major revisions and time delays to ensue. All I see is confusion, poor planning and lack of clarity.

Thanks (4)
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By cmiskin
28th Sep 2017 12:48

A few points:
- authorised agents WILL receive a copy of the assessment (which is a PA302, not an SA302)
- the state pensioner group being taken out of self assessment is those whose ONLY source of income is state pension which happens to be above the personal allowance. Those who joined this group in 2016/17 will not be put into self assessment but will receive a simple assessment. Those who are currently in this group (about 27,000) will not be required to file self assessment returns for 2017/18 or subsequent years (not 2018/19, yes the HMRC guidance is unclear on this point)
- putting taxpayers into self assessment only because they have a P800 underpayment which cannot be coded and has not been paid voluntarily has been a nonsense and simple assessment puts an end to that
- the main sources of information which HMRC is using for these assessments are: data supplied by employers, pensions providers, the DWP. Some data on interest and dividends, mostly supplied by the taxpayer, and these figures do need to be checked carefully as they are often based on out of date historic information. HMRC intends to consult before using any other third party data or further expanding the use of simple assessment
- There has long been a problem with unrepresented taxpayers not understanding their obligation to notify. This is something which HMRC needs to work on but it is an old issue which also applies to P800 cases.

We need to watch what use is made of Simple Assessment in the future but at the moment it is only being used for cases which have no business being in SA.

Thanks (7)
Replying to cmiskin:
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By leon0001
02nd Oct 2017 11:17

You seem very confident in your understanding of the new system. Would you please let us know where you were able to find all this information so that we can refer to it.

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By Eric T
28th Sep 2017 13:47

Ah yes - the intentions are good. The execution may be something else.

We all know what the road to hell is paved with.

Thanks (1)
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By Nigel Hughes
02nd Oct 2017 10:22

Thanks Rebecca - think I can feel another song coming on!

Thanks (1)
Replying to Nigel Hughes:
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By leon0001
04th Oct 2017 10:27

I'm just a soul who's intentions are good
Oh Lord, please don't let me be misunderstood

Thanks (1)
Tornado
By Tornado
04th Oct 2017 10:40

Today I am not sure whether to laugh or cry.

A client has asked me to check over a recently issued 2017 Simple Assessment for his mother. His mother used to be in Self Assessment (up to 2016) but was taken out as the Simple Assessment was promoted as an easier solution.

Looking at the Simple Assessment, pensions and tax deducted were shown but I queried why there were no dividends shown and why there was a round sum shown for interest.

My client has since checked all of the information on the Simple Assessment and has found that interest received during that year was actually under £1,000 and no tax was due on that. The HMRC estimate was for £2,700. In the end, a recalculation based on the facts showed that the underpayment for the year was actually about £2 and not the £350 shown on the Simple Assessment. My client is going to challenge HMRC on behalf of his mother on this.

There are several obvious areas of concern here, for example

a) It is clear that HMRC have included a figure for Interest that is a pure guess. If Simple Assessments are going to replace Self-Assessment then a schedule should be provided to show where such interest figures have come from.

b) If HMRC have access to all of our income details then why was no dividend income shown. In this particular case dividend income was under the £5,000 limit so no additional tax was due but dividend income does contribute to the total income for higher rate purposes and should be included in any assessment.

On the Simple Assessment are these words -

Making Tax Easier - This is a new way of collecting tax called Simple Assessment. It means you don't need to spend time completing a detailed Self-Assessment tax return, which you may have done in the past. You just need to check that the information we hold is correct and pay any tax owed.

It seems clear that whilst HMRC see the future of tax administration, and MTD, as based on the information that they already hold, if practice they know nothing, not even the amount of interest or dividends that a person has received from popular investments.

Also, they seem to have no qualms about trying to extract an additional £350 of unjustified tax by making a finger in the air estimate of interest received.

This once again begs the question as to what is wrong with Self-Assessment as Simple Assessment will still require a lot of work to be done by the taxpayer to arrive at the correct tax liability.

Thanks (1)
Replying to Tornado:
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By Eric T
04th Oct 2017 11:52

Tornado wrote:

Today I am not sure whether to laugh or cry.

A client has asked me to check over a recently issued 2017 Simple Assessment for his mother. His mother used to be in Self Assessment (up to 2016) but was taken out as the Simple Assessment was promoted as an easier solution.

Looking at the Simple Assessment, pensions and tax deducted were shown but I queried why there were no dividends shown and why there was a round sum shown for interest.

My client has since checked all of the information on the Simple Assessment and has found that interest received during that year was actually under £1,000 and no tax was due on that. The HMRC estimate was for £2,700. In the end, a recalculation based on the facts showed that the underpayment for the year was actually about £2 and not the £350 shown on the Simple Assessment. My client is going to challenge HMRC on behalf of his mother on this.

There are several obvious areas of concern here, for example

a) It is clear that HMRC have included a figure for Interest that is a pure guess. If Simple Assessments are going to replace Self-Assessment then a schedule should be provided to show where such interest figures have come from.

b) If HMRC have access to all of our income details then why was no dividend income shown. In this particular case dividend income was under the £5,000 limit so no additional tax was due but dividend income does contribute to the total income for higher rate purposes and should be included in any assessment.

On the Simple Assessment are these words -

Making Tax Easier - This is a new way of collecting tax called Simple Assessment. It means you don't need to spend time completing a detailed Self-Assessment tax return, which you may have done in the past. You just need to check that the information we hold is correct and pay any tax owed.

It seems clear that whilst HMRC see the future of tax administration, and MTD, as based on the information that they already hold, if practice they know nothing, not even the amount of interest or dividends that a person has received from popular investments.

Also, they seem to have no qualms about trying to extract an additional £350 of unjustified tax by making a finger in the air estimate of interest received.

This once again begs the question as to what is wrong with Self-Assessment as Simple Assessment will still require a lot of work to be done by the taxpayer to arrive at the correct tax liability.

Very interesting points. At the moment, the Simple Assessment cannot work if there is dividend income as the only way this is currently reported to HMRC is by the recipient of the dividend through Self Assessment.

I reckon we shall see the return of dividend reporting by limited companies, probably quarterly.

You know you have been in the game too long when you see practices that were abolished years ago by well meaning government ministers and officials being reintroduced by a later generation of well meaning government ministers and officials.

The New Seekers once sang "All My Life's A Circle". How right they were.

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