‘Simple assessment’

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.

This is the start of the abolition of the annual self-assessment tax return and replacement by digital accounts. While we can see that this will benefit some individuals we have a concern that at present with the informal method of assessing (form P800) HMRC only get employment details correct and do not make it clear which figures are estimates.

Income from investments etc. and reliefs given such as gift aid are invariably estimated and based on the last tax return submitted. The introduction of the £5,000 nil band for dividends and the £1,000 of bank and building society interest (basic rate taxpayers) and £500 of interest (higher rate taxpayers) as tax free from 6 April 2016 should help here although it is unclear whether foreign interest will count.