Simple Assessments

Do you remember how personal tax worked before self-assessment? The inland revenue would raise an estimated tax assessment; the taxpayer would appeal, a tax return would be submitted and eventually the figures would be agreed, then the tax would be paid. HMRC seem to have turned the clock back to pre-self assessment days with a new power to raise ‘simple assessments’ from the 15th of September 2016.

A simple assessment is made by HMRC not by the taxpayer, so it is the opposite of a self-assessment made alongside a SA tax return. HMRC can raise a simple assessment when it has the information that the taxpayer has received income or gains which are not taxed under PAYE but that taxpayer hasn’t submitted a SA tax return for the year, and is not due to submit one.

HMRC envisage that simple assessments will be used where the taxpayer’s main source of income is taxed under the PAYE, but he also has upto £10,000 of other taxable income or gains. This income threshold is not set in legislation.

The taxpayer will have 60 days to query the simple assessment. The tax will be payable by 31 of January after the tax year end, or if the simple assessment is issued after the 31st of October following the tax year, the tax will be payable three months after the date of the assessment. The taxpayer will not have to make payments on account after receiving a simple assessment, as would be the case when making a SA tax return.

It is likely that an explanation of the tax demanded on a simple assessment will only be available in the taxpayer’s personal digital tax account. There is no guidance from HMRC about how simple assessments will work in practice, but HMRC does have the power to raise them for 20016/17 and later years.