ICAEW’s Tax Faculty has responded to HMRC’s Call for evidence: Income Tax Self Assessment registration for the self-employed and landlords in ICAEW REP 29/22.
The call for evidence suggests that those with income from self-employment or property might be required to notify HMRC within a specified period after the income source starts. Alternatively, notification might be triggered when a turnover threshold is reached. HMRC also suggests that the current deadline of six months from the end of the tax year might be reduced.
ICAEW does not support these proposals, arguing that a single date that applies to all taxpayers is more certain and much simpler to communicate. An earlier notification requirement with penalties charged for failing to meet that obligation would increase the number of disputes and appeals.
Failure to notify penalties are generally based on the tax unpaid on 31 January following the end of the tax year, which makes that the effective notification deadline. ICAEW suggests that remains the case to maximise the opportunity for taxpayers to register.
There is considerable scope for improving systems and processes and for better education and communication within the current legal framework. ICAEW suggests that these should include educating taxpayers about the advantages of early registration, budgeting and maintaining good accounting records.
A review of the self assessment criteria (ie, the internal rules that HMRC uses to determine who needs to file an income tax self assessment return) and alignment of the notification and registration requirements should take priority.
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