ICAS response to the consultation on better use of third-party data to help get tax right

Susan Cattell outlines our response to a consultation on making more use of third-party data to make it easier to get tax right, including concerns we raised about taxpayers without National Insurance Numbers.

HMRC issued a consultation in March to explore how data it receives from third parties could be improved and used to help taxpayers get their tax right, for example though improved PAYE coding and pre-population. The main types of data covered were:

• Financial account information – including bank and building society interest (BBSI) and other interest.
• Card sales – data shared by providers of card acquiring services, such as merchant acquirers.

ICAS response

Our response concentrated on the proposals relating to BBSI, dividends and other investment income (not card sales data). We commented from the perspective of agents and individual taxpayers, not third-party data holders.

We supported the overall aims of improving PAYE coding and pre-population. However, we commented that that changes to third-party data provision wouldn’t be enough on their own to address the problems with end of year reconciliations or to ensure that taxpayers pay the right amount of tax. 

Fundamental improvements to HMRC’s underlying digital systems and processes are also essential, especially the Personal Tax Account, Simple Assessment and P800s. HMRC needs to provide a clear breakdown of interest from different sources (including paying institution and partial account details, so that different accounts with the same institution can be identified). HMRC having the data isn’t enough – it must be easily accessible to taxpayers (and their agents). Similarly, if HMRC intends to prepopulate self-assessment returns, the same breakdown of interest from different sources will be required.

Taxpayers must also be able to report dividends and other types of income to HMRC via a simple online route (probably the Personal Tax Account), without having to call HMRC. Even if HMRC collects additional information about some dividends from investment managers and financial institutions (one of the proposals in the consultation), this won’t capture all dividends (for example, where individuals have direct holdings).

Specific issues

Our response gave some feedback on data that would need to be reported for bank and building society accounts, to ensure that HMRC would be able to make effective use of the information to help taxpayers. We also supported quarterly reporting to HMRC, rather than monthly.

We repeated a comment from our previous responses to similar proposals. Taxpayers must have the right to correct any omissions or errors in data provided by third parties without needing to contact those providers. They should easily be able to make the corrections themselves for example, through the Personal Tax Account or by overriding a prepopulated return (or an agent should be able to do it for them). 

We also expressed concerns that the proposal that financial institutions should be required to obtain National Insurance Numbers (NINOs) from customers, could lead to those without NINOs having their access to accounts blocked. The consultation states that this isn’t the intention, and that it will be possible to report that some individuals do not have NINOs. However, it’s clear from the proposals that not providing NINOs for customers could involve extra administration, explanations to HMRC and potential disputes about penalties. This needs to be addressed so that institutions don’t decide that it would be simpler not to offer accounts to those without NINOs or to ‘debank’ existing customers.

Let us know what you think

We respond to tax consultations and calls for evidence and attend meetings with HMRC at which service levels, delays and other issues you raise with us are discussed. We welcome input from members to inform our work; email our tax team to share your insights and feedback.

Contact us