Income Tax: simple assessment
Published 9 December 2015
© Crown copyright 2015
This publication is licensed under the terms of the Open Government Licence v3.0 except where otherwise stated. To view this licence, visit nationalarchives.gov.uk/doc/open-government-licence/version/3 or write to the Information Policy Team, The National Archives, Kew, London TW9 4DU, or email: psi@nationalarchives.gov.uk.
Where we have identified any third party copyright information you will need to obtain permission from the copyright holders concerned.
This publication is available at https://www.gov.uk/government/publications/income-tax-simple-assessment/income-tax-simple-assessment
Who is likely to be affected
Individuals and trusts with straightforward Income Tax or Capital Gains Tax (CGT) affairs.
General description of the measure
The measure provides a new power to allow HM Revenue and Customs (HMRC) to make an assessment of Income Tax or CGT liability without the individual first being required to complete a Self Assessment tax return. It will allow HMRC to assess a person’s tax liability on the basis of information held by it, for example it will be used where it is not possible to collect the whole of a person’s annual Income Tax liability through PAYE and HMRC has sufficient information about the individual to make the assessment.
Policy objective
The measure is part of the government’s commitment to abolish the tax return.
It will reduce the number of individuals with straightforward affairs having to send a tax return to HMRC.
Background to the measure
At March Budget 2015 the government published ‘Making Tax Easier: The end of the tax return’ setting out a vision to modernise the tax system by replacing tax returns with digital tax accounts for millions of individuals and businesses. This is now changed to Making Tax Digital.
At the same time the introduction of ‘Making Tax Easier: Simpler Payment’ was announced. This set out plans to introduce legislation to remove the need for customers to complete a tax return with information that HMRC already holds, simply to pay their tax bills. This is now changed to Simple Assessment.
Detailed proposal
Operative date
This measure will have effect on and after the date of Royal Assent to Finance Bill 2016.
Current law
Current law is contained in the Taxes Management Act 1970 (TMA).
Proposed revisions
Legislation will be introduced in Finance Bill 2016 to enable HMRC to send a Simple Assessment notice to customers with straightforward tax affairs which will set out their tax liability without the need for the person to submit a self-assessment return.
The legislation will amend section 7 of TMA to remove the requirement on an individual or trustee to notify HMRC that they are chargeable to Income Tax or CGT if the total income and gains consist of sources included in a Simple Assessment for the year of assessment unless the Simple Assessment does not cover all sources of income or gains.
A new section 8C of TMA will be introduced that will allow HMRC to withdraw a notice to file a Self Assessment tax return prior to the issue of a Simple Assessment.
New section 28H will define what a Simple Assessment is and the circumstances when it will be issued. It will set out what should be included in the Simple Assessment notice; specifically the amount due, how it has been calculated and the information held by HMRC used in that calculation. It also requires HMRC to tell the individual how the amount due may be paid and the date it is due.
New section 28I provides similar information as 28H but for trustees.
New 28J will allow HMRC to withdraw a Simple Assessment.
A new section 31AA and AB will allow HMRC to suspend Simple Assessments aside from the formal appeals process.
New section 59BA of TMA will set out who is chargeable and when payment is due following the issue of a Simple Assessment.
Summary of impacts
Exchequer impact (£m)
| 2015 to 2016 | 2016 to 2017 | 2017 to 2018 | 2018 to 2019 | 2019 to 2020 | 2020 to 2021 |
|---|---|---|---|---|---|
| - | Nil | Nil | Nil | Nil | Nil |
This measure is not expected to have an Exchequer impact.
Economic impact
This measure is not expected to have any significant macroeconomic impacts.
Impact on individuals, households and families
The main benefit for individuals will be an improvement in the customer experience. In particular these customers no longer need to complete a Self Assessment tax return. Customers will also benefit from improved payment options.
The Simple Assessment will reduce the need for customers to contact HMRC because they are experiencing difficulties completing their tax return.
In addition this measure will reduce the number of customers who incur a penalty or have to pay interest because they have not sent a return in on time.
The number of individuals who will benefit will vary from one year to another however it is estimated that eventually up to 2 million individuals will benefit from the introduction of Simple Assessment.
The measure is not expected to impact on family formation, stability or breakdown.
Equalities impacts
HMRC does not hold a protective characteristics profile for Self Assessment and PAYE customers.
People benefiting from this measure are likely to be unrepresented individual customers.
This measure is most likely to impact lower income groups.
Impact on business including civil society organisations
This measure is expected to have no impact on businesses or civil society organisations.
The changes are concerned with interactions between individuals and HMRC, and therefore employers will not be affected.
Operational impact (£m) (HMRC or other)
Initially there will be additional costs for HMRC, as it is likely that Simple Assessment will initially have to be introduced as a paper process and we will have to introduce new guidance and provide support for customers on the new process, but when taken in conjunction with wider changes on modernising the tax system this measure will lead to significant operational cost savings for HMRC.
Other impacts
Justice Impact test: this measure impacts customers with straightforward affairs, for whom HMRC already hold the information necessary to make an assessment. HMRC expects to resolve the majority of disputes informally. However as this measure introduces a new assessment with a right of appeal there may be a small increase in the number of appeals going to tribunal.
Other impacts have been considered and none have been identified.
Monitoring and evaluation
The measure will be monitored and assessed alongside other measures in the government’s package for Transforming tax.
Further advice
If you have any questions about this change, please contact Paul Harris on email: simple.assessment@hmrc.gsi.gov.uk