OTS to review use of personal tax data from third parties

18 December 2020: The Office of Tax Simplification is examining whether HMRC can better use third-party data to pre-populate tax returns and reduce data input by taxpayers and agents.

The Office of Tax Simplification (OTS) has launched a review into whether there are “smarter ways” to use third-party data in the administration of personal taxes.

In a scoping document published on 17 December, the OTS confirms that alongside considering overarching principles for the use of third-party data in relation to taxpayers generally, it will be examining a “range of possible sources” of data. These will include:

• bank and building society interest,
• dividends from UK companies and distributions from authorised unit trusts,
• distributions from UK and overseas open-ended investment companies,
• pension contributions,
• gift aid
• chargeable events on gains from non-qualifying life policies, and
• royalties.

The OTS says it will also be considering data provided by investment and wealth managers, including information about chargeable gains, excess reportable income, interest, dividends and equalisation payments.

A call for evidence to inform the review is set to launch “shortly” according to the announcement, with the OTS aiming to publish its findings in the summer of 2021.

The OTS review follows a similar one it conducted in 2019 looking at the use of third-party data in relation to self-employment and property tax. Its final report outlined three areas for HMRC to explore further:

• The possibility of HMRC offering a fully integrated individual tax account.
• The role of third parties that play a significant role in relation to a group of taxpayers, and who would have sufficient information to enable effective third-party reporting.
• The types of self-employment business or rental business would most benefit from being able to report data periodically and pay tax through an integrated individual tax account.