Simple Assessment Tax Changes

Lucy Orrow Tax Accountant Essex Lambert ChapmanFrom Monday 11 September 2017, HMRC have gone live with Simple Assessments.  These were announced in 2015 when there was a step towards abolishing Self-Assessment Tax Returns.  This has in part been dealt with by the Making Tax Digital process, which obviously has now been deferred until 2019 at the earliest and backed up by this new form of tax collection, known as Simple Assessments.

Where individuals are employed and have tax collected through the PAYE system, the new dynamic coding system introduced in July and dealt with in my recent article Recent Changes to Tax Codes, will ensure their tax collection is dealt with promptly.

For more complex taxpayers such as the self-employed or those with rental income, Making Tax Digital will look after their affairs.

In the middle we have those individuals for whom the PAYE system and Making Tax Digital do not fit but still have a tax liability, so for example, individuals with dividend income or interest which may not be covered by reliefs or allowances.  These individuals could be targeted by the Simple Assessment regime.

HM Revenue & Customs will be issuing Simple Assessments to individuals from 11 September 2017, and throughout the rest of the Tax Return season. 

As yet, we do not know quite what these will look like but the expectation is that they will be somewhere between the P800 tax calculations issued in previous years to non-Self-Assessment individuals and a Self-Assessment Tax Return. 

If you have already submitted a Tax Return for 2016/2017, HMRC are not able to issue a Simple Assessment as you have complied with the filing requirements for the year.  If however, you have not yet submitted your Self-Assessment Tax Return, HM Revenue & Customs can withdraw the Notice to File which will have been issued in April 2017, and instead raise a Simple Assessment.  It is possible that there will be an overlap between you starting your Self-Assessment Tax Return and the issue of the Simple Assessment being raised.

On receipt of the Simple Assessment there is a 60 day window in which queries can be raised about the figures declared but after that time, the Assessment becomes binding and the tax payable.  As with Self-Assessment, the tax liability is due by 31 January following the end of the tax year ie 31 January 2018 for 16/17.

HM Revenue & Customs have advised that interest and penalties charges will be levied if the tax is not paid on time and the expectation is that these will be in line with the existing penalty regime.

As is currently the case, individuals have an obligation to advise HM Revenue & Customs of any new sources of un-taxed income or capital gains tax which are declarable and this deadline is 5 October 2017 so it is possible that a Simple Assessment may be raised prior to this deadline and so the expectation is that your Self-Assessment Tax Return submission would supersede this.

State Pensioners

Normally, even if the state pension is an individual's only taxable income, they must complete a self assessment tax return if the total amount of pension received in a tax year is more than their tax-free personal allowance. However for 2016/17, HMRC will now send their own calculation of the tax owed for the 2016/17 tax year through a simple assessment.

HMRC had originally intended that all taxpayers who completed a tax return would receive a simple assessment calculation. However, HMRC’s testing of this process overran and so now it will only be those who began to receive their state pension after 6 April 2016 who will be sent the simple assessment.

We ask that any taxpayers in receipt of a Simple Assessment ensure that they liaise with their accountant or tax adviser so that any queries can be raised or HM Revenue & Customs advise that a Self-Assessment Return will be submitted.

Please do not just ignore the brown envelope when it is posted through your door.

If you have any queries, please contact our Tax Team or myself Lucy Orrow, for more information.

October 2017

Disclaimer

The views expressed in this article are the personal views of the Author and other professionals may express different views. They may not be the views of Lambert Chapman LLP. The material in the article cannot and should not be considered as exhaustive. Professional advice should be sought in connection with any of the issues contained in the article and the implementation of any actions.

What Next?