Making tax easier through smarter use of third party data – OTS Call for Evidence

The Office of Tax Simplification held a call for evidence, which closed on 9 April 2021 – on its review of ways to make tax easier for people through smarter use of third party data. This followed publication of the scoping document for this review on 17 December 2020. The call for evidence noted:

“The review is considering alternative ways for HMRC to receive and use information that is already provided in some form either by individuals or third parties, rather than considering the provision of new types of information.

So for example, instead of millions of individuals having to provide to HMRC details of potentially taxable income and gains on their investments, the review will consider whether it could instead be uploaded by their investment or wealth management company and reflected in their online tax account or self-assessment return.

In addition, many people who are eligible to claim relief from higher rates of tax for charitable donations or pension contributions, do not currently do so. This review will consider whether this information could instead be reported to HMRC on the individual’s behalf by a third party and be prepopulated into their return or claimed through the online tax account, and the potential benefits and drawbacks of such an approach.”

Following a meeting with OTS officials during the consultation period, CTG developed a response to the call for evidence in conjunction with the Future of Gift Aid project group, which it leads.

OTS review of third party data reporting – CTG response (9 April 2021)

The response focuses primarily on issues relating to Gift Aid. Proposals are made for minor legislative changes to facilitate a digital Gift Aid system that is fit for the future. CTG welcomes efforts to use technology to maximise Gift Aid higher rate relief, noting the important role that intermediaries can play in this process. The response notes that any changes must be staggered and recognise the practical realities of many small, often volunteer-led charities, which are currently ill-equipped to submit large volumes of donor data to HMRC (whose own systems may struggle to cope without significant investment).