The Chartered Institute of Taxation (CIOT) has urged HMRC not to make changes to the registration process for Income Tax Self-Assessment (ITSA), claiming that changes currently under consideration would cause upheaval for freelancers, landlords and small business owners, among others.
Under current rules, self-employed workers are required to notify HMRC of their ITSA liability at least six months after the end of the tax year in which they became liable. HMRC then has time to issue them with a Unique Taxpayer Reference (UTR) and a notice to file. Taxpayers then must complete and submit their tax return by the deadline.
However, HMRC has now opened a consultation seeking evidence on reforming the rules. The government is considering bringing forward the point at which freelancers notify HMRC of their liability, with some arguing that this would help instil good tax habits and create a better overall taxpayer experience.
Despite welcoming the consultation, the CIOT claims that such changes will negatively impact self-employed workers, among other groups. It has instead urged HMRC to improve awareness about how and when freelancers and other people liable for ITSA need to register.
CIOT Director of Public Policy John Cullinane said that there was “no need” for the changes and that they would “inflict significant upheaval on the newly self-employed and first time landlords with changes to when they register to pay income tax.”
Cullinane added that the current ITSA registration process “works well for most taxpayers” and that there is “insufficient evidence” to alter the deadline, with the current system providing “consistency, certainty and simplicity for taxpayers and their advisers.”
Cullinane urged HMRC to instead focus on improving its public education work and online guidance, as well as working to make the registration process more straightforward. He claimed that current issues create difficulties for taxpayers, for example, the length of time it sometimes takes to obtain a UTR.
Mr Cullinane concluded: “We urge HMRC to undertake detailed consultation to assess the impact on other parts of the self assessment regime if any changes are taken forward, such as bringing forward the registration deadline, linking it to the date a business starts trading or even abolishing the legal notification obligation altogether.”
