I have several clients who are pensioners with a small amount of taxable income – whether or not they pay tax on it, depending on the amount – who are still being asked for a self-assessment return. I think this new initiative from HMRC may cover that more satisfactorily in future, though I’m cautious if (i) it would override any actual tax calculation, and (ii) it means a return to paper communication.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

 From accountingweb.co.uk:

As yet there is still no detailed guidance available on gov.uk concerning simple assessments, but we expect some guidance to appear in the next two weeks.

The policy paper for simple assessments suggests that this new procedure will be used where the taxpayer’s main source of income is taxed under PAYE, but he or she also has up to £10,000 of other taxable income or gains. This income threshold has not been included in the legislation.

Not a tax return

A simple assessment is a tax assessment made by HMRC, not by the taxpayer, so it is the opposite of a self assessment made alongside an SA tax return. If the taxpayer has received notice to file an SA tax return, HMRC must withdraw that notice before issuing a simple assessment to the taxpayer. HMRC has up to four years from the end of the tax year to issue a simple assessment.

Who receives a simple assessment 

The aim of the simple assessment procedure is to take the taxpayer out of the SA system, where they have only a small amount of income or gains which is not taxed under PAYE.

We understand that for 2016/17 the simple assessment procedure will mainly be used for taxpayers whose tax underpayment cannot be coded out. These taxpayers will be the first to receive a simple assessment from mid-August 2017.

Taxpayers who reached pension age in 2016/17 will be notified in August or September whether they will be within the new regime for 2016/17, then, if required, the simple assessment form PA302 will be issued in October 2017.

Pensioners with income which just exceeds their personal allowance will remain in SA for 2016/17 but will be taken out of SA and put into the simple assessment regime for 2017/18.

Appeal period

The taxpayer has 60 days to query the simple assessment or such longer period as HMRC allows. It is very important that the taxpayer reacts to the simple assessment within this period, as once the assessment becomes binding, the tax liability becomes payable and there is little the taxpayer can do to challenge it. The simple assessment is not a “determination” which can be replaced by submitting a tax return.

Paying the tax

The normal tax payment date applies, so for 2016/17 the tax due is payable by 31 January 2018. Although if the simple assessment is issued after 31 October following the tax year, the tax will be payable three months after the date of the assessment. The taxpayer doesn’t have to make payments on account after receiving a simple assessment.

Not digital

The simple assessment powers are entirely separate to the requirements for individuals to report income through their digital tax account under MTD. It is expected that the simple assessment will be an entirely paper procedure.