In this report the independent Office of Tax Simplification (OTS) explores some possible ways of making it simpler for people who are self-employed, or who receive private residential property income, to meet their tax obligations in a practical and streamlined way.
This has been a fast-paced initial exploration of these issues, following the publication of the scoping document in July. As envisaged in that document, the report’s three recommendations focus on potentially fruitful areas for further, more detailed, work concerning
- the potential for HMRC to offer a fully integrated individual tax account, providing an end-to-end tax reporting and payment service
- the role of those third parties who play a significant role in relation to a group of taxpayers, and who would have sufficient information to enable effective third-party reporting
- which types of self-employment business or rental business would most benefit from being able to report data periodically and pay tax through an integrated individual tax account
Bill Dodwell, OTS Tax Director, said:
The key recommendation in this report is for HMRC to continue its work on the personal tax account further, to enhance its capabilities and integrate it with the business tax account. This could thus provide an end-to-end reporting and payment service. This would help everyone and provide the necessary foundation to support the further ideas we explore in this report.
The report considers two other areas: how third-party reporting might support taxpayers and whether new means of paying income tax should be introduced - again, to make this easier for those taxpayers who wish to pay their Income Tax and National Insurance more regularly.
Bill Dodwell added:
Previous work from the OTS has established that many self-employed taxpayers want additional help in reporting and paying tax. In some sectors, third-party reporting could help. Further in-depth work is needed to test this and potentially develop a workable plan.
Current law provides that self-employed people and landlords pay their tax twice a year. Many are happy with this - but there’s also evidence that others, especially those on middle or lower incomes would like help to stay on top of their tax payments. More work could define how this help could be best provided.
Kathryn Cearns, OBE, OTS Chairman, said:
This report focuses on ways to simplify the practical administration of tax for self-employed people and residential landlords, including harnessing technology in ways which make it easier for them to keep on top of their tax affairs and up to date with their payments. The OTS looks forward to being able to continue to support further work and thinking in these areas.
Notes for editors
The Office of Tax Simplification (OTS) is the independent adviser to government on simplifying the UK tax system, to make it easier for the taxpayer. The OTS makes recommendations for the government to consider. It does not implement changes - these are a matter for government and for parliament.
This report builds on a range of the OTS’s previous work in this area including:
- a report published in July 2018 on the impacts of the platform economy
- a Technology discussion paper, published in January 2019, which explored a range of wider questions about the impacts of technology, including the role of HMRC’s personal tax account
Making Tax Digital is a wide-ranging programme from HMRC which may in time require that self-employed individuals and landlords keep business records digitally and upload information or make returns to HMRC, at least quarterly. At present Making Tax Digital for VAT has been implemented and the government has said that the programme will not be expanded at least before 2021. The OTS envisages that Making Tax Digital for Income Tax could support the solutions discussed in this report.
Press enquiries only please contact Julie Gillespie, OTS Press Officer 03000 585028