The House of Lords Economic Affairs Committee's report on the Draft Finance Bill 2016, raises a number of areas of concern.
The Chairman of the Committee said that “We are concerned that the Government’s consultation and communication about imminent and important changes in the Finance Bill has been so poor.”
The Committee says that HMRC communications strategy is “inadequate” and is concerned about:
- Communication: important changes to the taxation of savings and dividends will come into effect in a matter of weeks. Taxpayers are unaware of this and should be notified directly of the changes.
- Complexity: the complexity of the tax system and compliance burden placed on individual taxpayers is growing. The government must demonstrate how it is delivering a simpler tax system.
- Consultation: the consultation required by the 'new approach' to tax policy making is not being carried out consistently.
- Confusion: the absence of any roadmap for changes to the taxation of savings and dividends results in confusion and hinders taxpayer’s ability to plan for the longer term.
The Committee has called for:
- A public awareness campaign about the changes to savings income taxation, to be led by HMRC in partnership with banks, building societies and other financial institutions, to inform savers of both their tax obligations and the need to review their savings choices in the light of the changes.
- HMRC to take urgent action to clarify and publicise its plans for implementing the new Simple Assessments which are intended to replace Self-Assessments for some taxpayers, and to clarify the responsibilities of taxpayers and the information they can expect to receive from HMRC and third parties.
- A comprehensive assessment of the impact on businesses and individuals of the longer-term move to digital accounts, and for HMRC to undertake a full assessment to address the significant and widespread concerns about plans for mandatory digital record keeping to support quarterly reporting by businesses.
Whilst proposals that will simplify the taxation of savings for most individuals were welcomed, the Committee pointed out that for some the change will bring significant complications and there will unfortunate results for those on the edges of marginal tax bands.
The Committee welcomed the move to put the Office of Tax Simplification on a statutory basis and complimented the OTS on its work, recommending that the OTS should be given a bigger role in the design of tax policy and greater resources.
Comment
Subscribers to this webservice can follow new developments across the taxes by using our Finance Acts 2015/16: rolling tax planner
We also have detailed guides to:
Dividend income (subscriber guide)
Detailed guidance on the new tax regime, updated to include the new rules on the application of the £5,000 nil-rate band taken from the draft legislation.
Savings income: tax on interest
Including detailed working to show how the new 2016/17 savings allowance and savings band will interact with the new dividend allowance and other income.
