Taxpayers Not Being Informed of Important Changes

HMRCA House of Lords committee has criticised the lack of communication regarding upcoming changes to tax. The reforms in question will affect the way that dividends and savings interest are taxed, and the committee believes that many affected taxpayers remain unaware of them as a result of poor communication on HMRC’s part.

As well as describing HMRC’s strategy for communicating the changes to taxpayers as “inadequate,” the House of Lords Economic Affairs Committee also criticised the nature of the reforms. They are, the committee said, complicated and carry a lot of potential for confusion.

One of the main changes that is due to take effect in the near future is an end of the tax deduction scheme. Under the scheme, most savings interest is taxed by banks as it is paid, leaving the individual saver with no need to take action. With the end of the scheme, this will no longer be the case and some savers may be newly required to file tax returns and pay tax on their savings interest manually.

Most taxpayers, the committee has said, are not even aware of the fact that this change is going to be made, let alone whether they now need to file a tax return because of it. According to the chairman of the House of Lords Economic Affairs Committee, Lord Hollick, “A great many savers will have no idea that from April they may for the first time have to check whether they need to report or pay tax on interest they have received, rather than have their bank deduct the tax they owe.”

Leaving ordinary taxpayers unaware of such “important and imminent changes” is, the committee said, problematic. According to chairman of the committee Lord Hollick, “Changes to how we are taxed can have a huge impact on financial planning, including savings and pension arrangements.” As such, the committee called for HMRC to lead a campaign of public awareness, which should be carried out in partnership with major financial institutions such as banks and building societies. The committee also called for the development of a new, more rigorous strategy for the communication of upcoming tax changes to those affected.

Another aspect of the tax system that the committee singled out for criticism was the increasing degree to which the burden of tax compliance is placed onto individuals instead of specialists and institutions. It said that the government should demonstrate a clear, practical strategy for the simplification of the tax system.

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