‘HMRC should receive bank data’ says OTS
The Office of Tax Simplification (OTS) is recommending that banks and financial institutions should share client information, such as account interest, with HMRC. This is in a bid to speed up data provision to the new Single Customer Account.
The OTS says the reporting of data from these third party organisations will make reporting easier for areas such as the following:
- Individuals’ savings and investment income, including dividends.
- How Individuals claim tax relief on pensions contributions.
- How Individuals claim tax relief on gift aided charitable donations.
To make such reporting mandatory, all parties would need to create new systems, but the ITS claims there could be significant benefits:
- Easier and more accurate updates to tax codes become possible.
- Pre-population of individual’s tax return data becomes possible.
- Fewer people could be required to prepare and submit a tax return.
What is a Single Customer Account?
The single customer account is planned to replace the current online personal tax account and business tax account, with extra functionality being added later. A single customer record will sit behind the single customer account to bring together the different taxes and data sources associated with a particular taxpayer.
The scheme was allocated £68m in the Budget earlier this year; HMRC are currently working on the creation of the new system. The potential for mandatory transfer of data to HMRC forms part of the work on the next stages of the account.
Data Accuracy Concerns
Initial responses to the suggested data transfer have included concerns around data accuracy. These concerns included the risk of banks providing incorrect data, and the potential impact of such incorrect data being applied to a taxpayer’s record.
The OTS report acknowledged the concern, but went on to say ‘Where the data has been matched correctly, but is inaccurate, there should be a straightforward mechanism for the taxpayer to query or amend this, and they should be able to overwrite what has been prepopulated into a return.’
The report makes nine recommendations which includes encouraging the government to:
- Ensure that data reported to HMRC by third parties is visible to taxpayers and their agents through the single customer account, and used to update tax codes and support the completion of individuals’ tax returns;
- Set out a clear roadmap of the stages through which changes would be consulted on and made;
- Consult widely on the balance of responsibilities as between data providers, software providers, agents, taxpayers and HMRC, and the extent to which it would be reasonable for taxpayers to rely on the data provided; and
- Explore how best to enable taxpayers to see and validate data matched to their account, and to provide an appropriate mechanism for them to query or amend the data.
Bill Dodwell, OTS tax director, said ‘If this vision were fully realised, instead of millions of individuals having to locate and provide HMRC with details of potentially taxable income and gains on their savings and investments, or their contributions to pension schemes, this data could instead be directly transferred to HMRC by banks and other financial organisations, and reflected in their online tax account, tax code or self assessment return.’
Huge efforts are required by accountancy firms across the country to obtain this type of information from clients during the preparation of the annual Self Assessment returns. Similarly, clients spend a considerable amount of time collating all of this detail to send to us! As a result, our initial thoughts are that this transfer of data could be beneficial. It’s likely to be at least five years away at the moment, so we still have some collation and data entry to do before we get to this point.
If we’ve already received your Tax Return information for the year ended 5th April 2021, thank you very much! If you’re unsure what we might need, you can check here, or get in touch! We’ll happily chat it through with you.
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