For a taxpayer who receives a pre-populated tax return it is proposed that the following obligations arise:
- they must respond to that return within a prescribed period of time;Â
- the required response would be to either confirm the return is complete and accurate or provide further adjustment information;
- once the response is received, the taxpayer would be treated as having completed their self-assessment;Â Â
- if no response is received from the taxpayer, Inland Revenue would be able to make a default assessment to progress the return processing until one is received;Â Â Â
- finally, following the response (or default assessment), the remainder of the return process would follow with no proposed change (for example, payment of a remaining liability by the due date, setting of applicable interest or penalties etc.).
Keeping the self-assessment model
A taxpayerâ€™s return, or more accurately their self-assessment, is often the trigger point for a wide range of compliance and administrative actions by Inland Revenue.Â As the Government is not proposing to move away from the self-assessment model, in the future a taxpayerâ€™s response to a pre-populated return would become their self-assessment. This means taxpayers would continue to be responsible for interpreting and applying tax laws to their particular circumstances, assisted by guidance from Inland Revenue or advice from their tax agents.
Responding to the return
It is proposed that a taxpayer issued with a pre-populated return must respond to that return within a prescribed period, similar to how the current system requires returns to be filed by prescribed due dates.Â If a pre-populated tax return captures all of the relevant information, then the taxpayer will simply need to respond with a confirmation that the return is complete and accurate.Â In other situations, the pre-populated return may be incomplete and the taxpayer may need to add further information, or amend the pre-populated information if it is inaccurate, to complete the return and then send the revised return in response.
The date on which Inland Revenue receives a taxpayerâ€™s response would be treated as the date the assessment is made. Â This would allow Inland Revenue and the taxpayer to progress with the return process on the understanding that the tax liability, as determined by the taxpayer, is intended to be final.
Amending the return
There are practical limits to the accuracy of the information which Inland Revenue can use to pre-populate which may mean that, in some cases, assumptions about a taxpayerâ€™s individual circumstances may need to be made.
To protect taxpayers from potentially incorrect assumptions it is proposed that a taxpayer will be able to amend all pre-populated information.
This approach would help to ensure that taxpayers do not become over-reliant on pre-population and fail to correct genuine errors.Â Although this could lead to increased compliance costs as taxpayers incur costs correcting return errors, it is preferred to not allowing pre-populated information to be amended as the ability to amend information is more in line with the self-assessment model and likely to produce a more accurate outcome in most cases.
This approach, therefore, makes it clear that taxpayers will continue to be responsible for the accuracy of their assessment, as they are currently.Â It also allows other elements of tax administration and compliance to continue to apply, for example penalties on underpayments or for certain types of errors/behaviours.
Failing to respond
If a taxpayer fails to respond to their pre-populated return within the prescribed period, it is proposed that the pre-populated return becomes their â€˜defaultâ€™ assessment. This default position would remain in place until the taxpayer contacts Inland Revenue to either correct or confirm the return.
An alternative approach of â€˜deemed acceptanceâ€™ was also considered, but is not the preferred approach. A deemed acceptance would mean that a pre-populated return is accepted as the taxpayerâ€™s final assessment if no response is received. This approach is not consistent with the self-assessment model as there is no opportunity for the taxpayer to respond.Â It may also discourage taxpayers from completingÂ the process when the return understates income.
For taxpayers receiving pre-populated returns do you agree with the proposed process for outlining the related obligations and responsibilities?