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ICAEW supports greater pre-population of tax returns


Published: 18 Jul 2023 Update History

Pre-population has the potential to increase accuracy and reduce taxpayer compliance obligations. However, it must be balanced with mechanisms for taxpayers to check and amend pre-populated data.

HMRC’s consultation document on information and data considers changes to the way that HMRC collects data for potential pre-population of taxpayer returns. It also outlines potential reform of its power to obtain information from third parties under Sch 36, Finance Act 2008. 

In its response, ICAEW’s Tax Faculty expressed support for greater pre-population of tax returns to increase accuracy and reduce taxpayer compliance obligations. However, if HMRC is to retain the principle that a taxpayer is legally responsible for the completeness and accuracy of their return, it warned that mechanisms must be put in place to make it easy for taxpayers to check and amend pre-populated data. 

The faculty also supports the proposal to introduce a new tax identification number to apply to all taxpayers (businesses, individuals, and other entities). It highlighted the weaknesses involved in using national insurance numbers, which are not available to every individual subject to UK tax. 

The faculty would prefer HMRC to review its use of existing powers to obtain information from third parties before introducing any further reforms. It noted that third party information notices should only be issued in cases where requests via other means have not succeeded. 

It also noted that, during compliance interventions, HMRC case workers generally request information from taxpayers and agents within a short timescale (often 30 days) but do not deal with this information in the same timely manner. This creates a feeling of unfairness in the enquiry process. A more collaborative approach by HMRC could lead to faster resolution of enquiries without the need for HMRC to resort to third party information notices. 

Finally, the Tax Faculty was critical of the proposal to include further complexity in the penalties regime by including variability in penalties based on the taxpayer’s prior compliance behaviour. It considered that, if anything, the existing regime could be simplified. 

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