HMRC published a consultation focusing on how it could make better use of the information it receives from third parties, to provide a more transparent service for customers that reduces end of year under- and over-payments. It also explored the future ambition for the use of third party information from 2018 onwards, which will enable HMRC to deliver the end of the tax return by 2020.

This consultation has now closed. More information on CTG’s position on the Making Tax Digital agenda can be found here.

Third party information, in this context, means information provided by an organisation, which customers would otherwise need to report to HMRC. Employers, banks, building societies, pension providers and other government departments are all examples of current third party information providers.

The main changes will be that:

• customers will never have to tell HMRC information it already has;
• HMRC will use third party information it already collects more effectively to reduce under- and over-payments that can be a source of frustration and confusion for customers;
• HMRC will enable customers to report more information about their income digitally through their digital tax account, in closer to real time, rather than through an annual tax return;
• HMRC will use third party information, information provided by customers through software, and information provided by customers directly into their digital tax accounts, to calculate tax due;
• digital tax accounts will give all customers a single, personalised view of their tax position across all of their liabilities and entitlements, making it much easier for customers, and their tax agent if they have one, to see and understand their overall tax position – showing a complete and up- 5 to-date picture of what will be due when, and what action, if any, customers need to take.

Summary of key questions

1. Where events during the year result in a change to a customer’s tax projection, what is the appropriate format and regularity of notification that HMRC should send to employers and customers?
2. If you are concerned over privacy impacts of HMRC’s plans for improving how we use third party information we already receive, do you have any suggestions for how these concerns could be resolved?
3. If a third party information provider is aware of how the ownership of a joint asset is split, do you think the third party provider should inform HMRC?
4. If you currently provide information to HMRC at year-end what would be the impact of moving to a more frequent in-year process, assuming that HMRC is able to align to your circumstances as described above?
5. What new sources of third party information would most enhance the customer experience and best contribute to the aim of ending the tax return for all?