Tax administrative burdens eased for 300,000 people but proposals could have gone further
Yesterday’s announcement that people with low trading incomes will be relieved from the requirement to file a Self Assessment tax return is welcome but this was a missed opportunity to reduce administrative burdens more widely, according to BDO.
Under proposals announced yesterday, the reporting threshold for trading income will rise from £1,000 to £3,000 within this parliament, relieving HMRC of the burden of processing tax returns and some individual taxpayers from having to file them.
While this will be a welcome paperwork easement to the estimated 300,000 people who will no longer be subject to Self Assessment, they will still have to pay the tax on trading incomes above £1,000.
Instead of filing a Self Assessment return, those with low trading incomes from side hustles (from £1,000 to £3,000) will have to either pay via a simple tax bill or perhaps through their PAYE tax code.
The government also announced that there will be a new reward scheme for tax informants launched later this year. This will look to target serious non-compliance by large corporates, wealthy individuals, offshore and avoidance schemes, with informants being offered a proportion of the tax take.
Dawn Register, a tax dispute resolution partner at BDO said: “While those making money from side hustles will benefit from some easing of their administrative requirements, this won’t absolve them of the obligation to pay the tax which may have to be collected through other means.
“All in all, today’s announcement feels a bit peripheral. If you really want to take more people out of Self Assessment, why not go further by increasing the threshold for savings income? This would help many thousands of pensioners and others with relatively simple financial affairs who have been pulled into Self Assessment by fiscal drag.
“Frankly, we would like to have seen a little more imagination to create genuine simplification for taxpayers, the vast majority of whom just want to pay the right amount of tax in the easiest possible way.
“Today’s announcement about a new informant scheme taking inspiration from the US and Canadian models is also an interesting development.
“While we await the exact details of the scheme, this does represent a big culture shift. Although there is a rewards scheme already in place, if the new inducements on offer are attractive enough, it could encourage a new ‘culture of snitching’ which hasn’t really been a feature of the UK tax system to date.
“However, HMRC already has access to vast amounts of data from national and international sources to help them identify and focus their investigations. This might be a better place to start if they want to start clamping down on serious non-compliance and close the tax gap.”