Making better use of third party data: a vision for the future
This new OTS report explores ways to use third party data to make tax easier for millions of people.
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In this report, the Office of Tax Simplification (OTS) sets out a vision for how government could make tax easier for people through making better use of data held by third parties, such as bank interest, and the steps that would need to be taken towards making it a reality.
Bill Dodwell, OTS Tax Director, said:
The introduction by HMRC of the Single Customer Account, powered by data received by HMRC from a range of third parties as well as from the taxpayer, represents an exciting opportunity to simplify things for taxpayers, increase trust in HMRC and enable easier and better tax compliance.
The report considers the kinds of tax data individuals could find it helpful for third parties to automatically transfer to HMRC, and how this might best be embedded into the next stage of its work on the Single Customer Account.
If this vision were fully realised, instead of millions of individuals having to locate and provide HMRC details of potentially taxable income and gains on their savings and investments, or their contributions to pension schemes, this data could instead be directly transferred to HMRC by banks and other financial organisations, and reflected in their online tax account, tax code or Self Assessment return.
The report makes 9 recommendations which, in particular, encourage the government to:
- ensure that data reported to HMRC by third parties is visible to taxpayers and their agents through the Single Customer Account, and used to update tax codes and support the completion of individuals’ tax returns
- set out a clear roadmap of the stages through which changes would be consulted on and made
- consult widely on the balance of responsibilities as between data providers, software providers, agents, taxpayers and HMRC, and the extent to which it would be reasonable for taxpayers to rely on the data provided
- explore how best to enable taxpayers to see and validate data matched to their account, and to provide an appropriate mechanism for them to query or amend the data
Notes for editors
The OTS is the independent adviser to government on tax simplification, challenging tax complexity to help all users of the tax system; it does not implement changes - these are a matter for government and for Parliament.
The OTS works to improve the experience of all who interact with the tax system. It aims to reduce the administrative burden - which is what people encounter in practice - as well as simplifying the rules. Simplification of the technical and administrative aspects of tax are each important, both to taxpayers and HMRC.
The vision set out in this report fits naturally with the government’s 10-year vision to build a trusted, modern tax administration system which involves taxpayers being able ‘to view their tax position and tell HMRC anything it needs to know through a single online account’. The government committed £68m to this Single Customer Account and the underlying Single Customer Record in Budget 2021.
Following the publication of its call for evidence for this review, the OTS consulted with a wide range of organisations, including many who would be involved in providing such data, receiving strong support for the direction of travel presented in the report, provided sufficient time was allowed for the necessary systems and other changes to be made.
The Single Customer Account will replace the current online Personal Tax Account and Business Tax Account, with further functionality being added over time. The Single Customer Record sits behind the Single Customer Account to bring together the different taxes and data sources associated with a particular taxpayer.
Press Enquiries only please contact Julie Gillespie, OTS Press Officer 03000 585028.