Better use of new and improved third-party data

The ATT has responded to the HMRC consultation Better use of new and improved third-party data to make it easier to pay tax right first time. The consultation sought views on how to improve the quality of the third party data HMRC receives such as bank and building society interest, and about the potential for extending information collection to dividends. 

HMRC currently receive information on around 130 million bank and building society accounts each year. This data is matched by HMRC to individual taxpayers to enable them to produce tax computations and Simple Assessments to collect tax on interest and help to keep savers out of Self-Assessment.  However, according to the consultation, around 1 in 5 accounts cannot be matched to a taxpayer.  This has implications for HMRC's ability to collect the right tax from savers efficiently.  

The ATT agrees that the process of pre-populating bank and building society interest needs to be improved, as higher interest rates in recent years have meant that more people have had tax to pay on their savings income. Our response highlighted the kinds of problems with the current system that members have reported to us.  

As part of any changes, it is important that any third party data used by HMRC to calculate a taxpayer’s position is made available to the taxpayer and their agent in a format that can be easily checked and corrected. Even when HMRC has produced the calculation, based on information they hold, the taxpayer remains responsible for ensuring that their tax affairs are correct and complete. It is therefore vital that taxpayers can see and understand the data that HMRC has used. Taxpayers should also be told when HMRC has used estimates and be able to update or challenge them if needed. 

The consultation also asked for views on the merits of requiring financial institutions to provide details of dividend information to HMRC. While there would be some limitations to this data, we considered that on balance this would be welcome provided that sufficient detail is provided so that the taxpayer and their agent can check and challenge the figures. 

The ATT's full response is available to download.