The Office of Tax Simplification (OTS) is seeking input for its review of ways to make tax easier for people through smarter use of third party data, by reducing the amount of information they or their agents need to supply directly
The review, announced at the end of last year, was prompted by HMRC’s 10-year tax administration strategy, which included proposals for the pre-population of tax returns, including with data from third-parties, to reduce the need for taxpayers and agents to submit additional information that HMRC either already holds or could verify itself.
The OTS is considering whether and in what ways this option could be helpful to individuals and improve their experience of the tax system. It will explore any concerns they may have and whether and in what ways these could be overcome.
The review is considering alternative ways for HMRC to receive and use information that is already provided in some form either by individuals or third parties, rather than considering the provision of new types of information.
As example, instead of individuals having to provide to HMRC details of potentially taxable income and gains on their investments, the review will consider whether it could instead be uploaded by their investment or wealth management company and reflected in their online tax account or self-assessment return.
In addition, many people who are eligible to claim relief from higher rates of tax for charitable donations or pension contributions, do not currently do so.
The OTS review will consider whether this information could instead be reported to HMRC on the individual’s behalf by a third party and be prepopulated into their return or claimed through the online tax account, and the potential benefits and drawbacks of such an approach.
The kinds of third party data under consideration include bank and building society interest (building on the information already available); dividends from UK companies and distributions from authorised unit trusts; distributions from UK and overseas open-ended investment companies; pension contributions; gift aid payments to charities; data from investment and wealth managers including information about chargeable gains, excess reportable income, interest, dividends and equalisation payments; insurance bond chargeable events; and royalties.
The consultation has questions in two sections, the first aimed at individuals and their agents and the second at the third parties that could potentially provide data to HMRC on their customers’ behalf.
Questions for individuals include the type of information they would like to see submitted automatically to HMRC, the method by which this would be done and verified, and how to check the accuracy of the information submitted.
Third party data suppliers, such as financial institutions, charities, pension providers, are asked for details on how they currently identify individuals and whether they use their National Insurance number, how they check for inaccuracies, how long it would take for them to adapt their systems to pass data on to HMRC, and whether there are any regulatory issues raised by doing so.
The call for evidence closes on 9 April.
The OTS has said it intends to publish a report outlining its findings in summer 2021.