Education not deadline upheaval needed for the newly self-employed

The Chartered Institute of Taxation (CIOT) has welcomed today’s announcement by HMRC that it will not be changing the timing of when the self-employed and landlords have to register with HMRC.

CIOT was concerned the change would lead to upheaval for taxpayers while offering few benefits. The Institute encourages HMRC to focus their efforts on improving education and processes.

Currently, a self-employed person or landlord is required to give notice to HMRC of their liability for Income Tax Self-Assessment (ITSA) no more than six months after the end of the tax year in which the taxpayer became liable to tax. This gives HMRC time to issue the taxpayer with a Unique Taxpayer Reference (if they do not already have one), a notice to file a tax return, and the taxpayer time to complete and submit it by the statutory deadline (31 January).

In a recent call for evidence¹, HMRC sought to understand the challenges currently faced by taxpayers in meeting their obligations, and proposed alternatives such as reducing the current six-month deadline to two, three or four months, or using the business’s start date to trigger a notification liability.

In today’s response² to the call for evidence, the government confirms that it has listened to views about bringing forward the date of the current obligation to notify liability, and understood taxpayer concerns about creating a new ITSA registration obligation, and will not progress any changes now.

John Cullinane, CIOT Director of Public Policy, said:

“We are pleased that the government agrees there is currently no need for HMRC to inflict what would represent significant upheaval on the newly self-employed and first time landlords with changes to when they have to register to pay income tax.

“We believe the current Income Tax Self-Assessment registration process works well for most taxpayers, and there is insufficient evidence to change the current statutory deadline.”

The government says it remains committed to identifying new businesses earlier, and that it will further explore other options, including better communication of the current deadlines, innovative ways to educate new and potential future taxpayers earlier, and whether the obligation to notify could be merged with the more familiar filing and payment obligations around 31 January.

John Cullinane commented:

“It is right that HMRC should focus on improving its public education work and their own online guidance. As a starting point, HMRC may wish to undertake research amongst those businesses who have recently registered for ITSA, to identify what triggered their registration. That will provide a useful evidence base on which to develop a communications strategy.

“Even where awareness exists, there can be difficulties in navigating HMRC’s systems, such as creating a Government Gateway account or obtaining a Unique Taxpayer Reference (UTR), and in the meantime a taxpayer cannot file returns or pay the tax they owe. This is where we believe HMRC need to focus their attention and resources so that the registration process can work successfully and quickly for every taxpayer.”