Yahoo Finance 'Taxpayers face chaos' as HMRC replaces traditional tax returns with pre-filled forms
Millions of taxpayers face chaos over their annual returns, experts warn, as HMRC is rolling out new forms which will be pre-filled using its own data.
The so-called "simple assessment" system is a major departure from traditional self assessment tax returns, and is designed to save taxpayers the hassle of having to calculate how much tax they owe.
But experts estimate that one in ten returns pre-filled using HMRC's data will contain errors, which could lead to people paying too much or too little tax.
In addition those who find that the amount charged is too large or too small will have just 60 days to challenge and correct the amount.
Nimesh Shah, Partner at accounting firm Blick Rothenberg, said: “The concept of simple assessments makes sense but the UK's complex personal tax code makes the proposition largely unworkable. It is likely to lead to people paying the incorrect amount of tax.”
"Taxpayers are relying on HMRC's data being correct. In my experience the information HMRC holds about taxpayers which would be used for these purposes would be wrong in around one out of ten cases."
It comes as HMRC is for the first time using its powerful “Connect” system to draw on information from a myriad government and corporate sources to create a profile of each taxpayer’s total income.
Its simple assessment system is initially being trialed on two small groups of taxpayers, but a spokesman for HMRC told the Daily Telegraph that the system has been designed with the intention of taking millions of taxpayers out of traditional self assessment.
He said: "The rub for some customers in this old process was that HMRC already has all the information, they are providing to us on their tax returns. Self assessment was a complete and utter waste of their time. Simple assessment is the future but it’s only baby steps at the moment."
He added that higher rate tax payers who pay tax via PAYE, but who have regular untaxed income from other sources, could be switched to simple assessments "within a few years".
It is also thought that 1.7 million pensioners who are currently required to file a return could be lifted out of self assessment under the new system.
Currently around 11 million people have to complete a tax return every year to provide HMRC with information about their income, however HMRC is stepping up efforts to reduce this figure.
From next year new state pensioners with income more than the personal tax allowance in the tax year 2016 to 2017, and PAYE customers, who have underpaid tax and who cannot have that tax collected through their tax code will use simple assessments.
These taxpayers will receive letters in the coming days telling them they are being moved onto simple assessments.
Taxpayers with complex tax affairs and self-employed people are unlikely to be moved onto simple assessments at any stage.
Meanwhile HMRC's "Making Tax Digital" programme in which taxpayers and small businesses will be forced to complete four online returns a year has been delayed until 2020.
katie.morley@telegraph.co.uk
