We have been priming you to expect a new type of personal tax assessment called “simple assessment” since 3 November 2016. We had understood that these new assessments would commence in August, but HMRC has confirmed that the first simple assessments will arrive with taxpayers this week.
HMRC has published some brief guidance on how the simple assessment mechanism will work, but it is not much help to taxpayers or advisers. This is what you need to know:
The first groups of taxpayers to receive a simple assessment for 2016/17 will be:
- those started to draw the state pension in 2016/17 where their total income exceeds their personal allowance for that year.
- individuals taxed under PAYE who have an income tax liability for 2016/17 which can’t be collected through their PAYE code, perhaps because it is too large.
These taxpayers should not be within self-assessment already.
All pensioners who started to draw the state pension before 6 April 2017, and who are within SA as their allowances don’t cover all of their income, will be removed from SA for 2018/19 and will receive a simple assessment instead.
It is alarming that the HMRC guidance says that all of these pensioners will be removed from SA, as many of those individuals will have variable amounts of income, such as insurance policy gains (see below) or rental income. In those cases, the simple assessment procedure will not be appropriate, and we will have to ask HMRC to keep our client within SA so they can accurately report their income, expenses and gains.
The simple assessment will arrive as a letter, and we as the taxpayer’s agent, may not get a copy. The letter will tell the taxpayer when the tax is payable. This should be by 31 January 2018 for 2016/17 assessments, but that deadline has not been included in the HMRC guidance. This is because that guidance mixes up the procedure for P800 tax calculations and simple assessments. For advice on how to check a P800 calculation see our newsletter of 28 July 2016.
The simple assessment can be appealed within 60 days of issue, but the HMRC guidance is very unclear about how to do this. We suggest that where the simple assessment is incorrect we should appeal in writing on behalf of our client following the guidance under “Appeal against a tax decision”.
For more information contact DFC accountants in Cardiff, Wales.