The Office of Tax Simplification has published a report outlining how third party data, including information from your bank, could be shared with HMRC in order to assist tax payers with their annual self-assessment tax returns. Information that could be shared includes:
- Bank and building society interest
- Other interest
- Pension contributions
- Dividends and other investment income
- Excess reportable income
- Capital gains on sales of investment
- Chargeable event gains
It is not necessarily the case that all of these will come into effect, particularly as the first 5 items are easier to report on than the last two. The vision is to automatically provide HMRC with details of potentially taxable income and savings or investment gains, rather than requiring individuals to locate and provide HMRC with the information.
Whilst the plan might feel very intrusive, the rationale is to simplify processes for all concerned and increase the accuracy of tax records held by HMRC. However, it is this second point, accuracy of data provided by third parties which could prove difficult. It is unclear whether taxpayers would be able to correct erroneous information, and this surely has to be an essential feature of any such data-sharing system.
Furthermore, there needs to be consideration of who is ultimately responsible for information provided to HMRC. Currently it is very clearly down to each individual taxpayer to ensure that their tax records held by HMRC are fully up to date and accurate, however what if they are reliant on inaccurate data supplied by third parties?
Clearly more work needs to be done, however it does seem likely that there will be some sort of automatic data-sharing in future and we will keep you updated on developments.