HMRC Simple Assessments to give only 60 days to raise any queries

By and large, the system of Self-Assessment works pretty well. Taxpayers and their agents generally understand the rules: you declare the income, capital gains or losses and pay or reclaim the tax due accordingly. If you make a mistake or need to change things there is a known timetable in which to do so and penalties if you are late or make other indiscretions.  This is all encompassed in a reasonably generous timetable to collate the information, submit the paperwork and prepare for the tax payments.

Although the system has now been in place for 20 years without, by and large, too much interference by the powers that be, in an attempt to simplify and streamline the system, HMRC have introduced the concept of “Simple Assessments” (also known as form PA302).  These are being rolled out now with the first tranche affecting some pensioners and those under PAYE with “simple” tax affairs for 2016/17.

The idea is where HMRC have the information already (for example they already know your PAYE and State Pension income and should know your bank interest), HMRC can calculate your tax position and send you a demand or repayment automatically without the need for a claim or a Tax Return. It is hoped – by HMRC that is – that the new system will also in time encompass additional income of up to £10,000 outside the PAYE system where that income is regular and consistent). The Inspector of Taxes will then issue his computation and the taxpayer will have only 60 days to challenge it or raise any queries before the computation becomes binding.

I will raise that point again – the taxpayer has only 60 days before that assessment is binding.

Leaving aside the fact that at the time of writing it is not clear from when the 60-day time limit will start (from the date that HMRC claims to issue the assessment, or from the date it is received?), there is no way that HMRC will know how much, for example, charitable Gift Aid you may wish to claim or set back into another year or additional claims for allowances, new sources of income (for example rental) or unexpected capital gains that you have made.  These are items which under Self-Assessment you currently need not notify to HMRC until October following the year of assessment – let alone actually provide figures to the Inspector by 31 January following the tax year.

Unfortunately, this Halloween scare story is happening. You as taxpayer still have the ultimate responsibility to ensure that your affairs are in line so if HMRC issue a Simple Assessment and it is not correct – and you fail to raise queries within the 60-day time limit – you are potentially leaving yourself open to penalties

Those who already file under Self-Assessment are not immune from this new system either.  If HMRC’s computers think that you should be handled under the new system, HMRC will withdraw the annual notice to file a Self-Assessment Tax Return and provide what it thinks is your tax position – this could even potentially be after you have actually filed your Self-assessment Tax Return in the first place. If you do have additional sources of income such as those above, you are then left with the issue of having to file under Self-Assessment anyway and combining what HMRC has already assessed with any additional information declared separately.

With the Revenue’s current standard of record keeping, accurate processing of information and in some cases even having an individual’s name and address correct, the Simple Assessment treatment is something that everyone needs to be aware of. Remember, only 60 days before a Simple Assessment (form PA302) becomes binding… so don’t delay opening your post; don’t put it to one side and ignore it… and don’t take a long holiday…!