The taxman’s new tax collecting powers

July 2016 will see the introduction of a new set of tax collecting powers that HM Revenue & Customs (HMRC) will be able to use when it believes tax is due that is not covered by a  self-assessment tax return.

The Finance Bill 2016 heralds the introduction of a new tax assessment system similar to the one operated prior to self-assessment. From July 2016, HMRC will have the power to issue simplified income and capital gains tax assessments to individuals and trustees.

The new system is similar to the department’s current non-enforceable tax collecting powers for those who don’t use self-assessment (Form P800), but allows HMRC to pursue the tax shown as payable by the new style assessment.

When a person receives a simplified assessment they will have until 31 January following the end of the tax year to which it relates to pay or it will be due three months later if the assessment is issued later than 31 October after the end of the tax year.

HMRC will base its simplified assessment on information it receives from individual taxpayers and various other organisations, such as banks, employers and other financial institutions signed up to disclose information to the Revenue.

As a safeguard, the assessment must state where the information was collected and it is believed that HMRC will not be allowed to inflate tax demands by using estimates of incomes or gains.

Anyone who receives an estimate that they believe is incorrect will be able to lodge an appeal against it and they will have 30 days to ask HMRC to suspend all or part of the tax assessment.

In an interesting twist, HMRC will be able to reject some self-assessment requests and issue a simplified return in its place, in cases where it has reason to suspect that an individual may avoid paying tax by simply not filling in their self-assessment tax return.

Link: Finance Bill 2016