The Office for Tax Simplification (OTS) has proposed that third parties, such as pension providers, should send information directly to HMRC for insertion into tax returns, eliminating the need for taxpayers to do it themselves.

The proposal, which was outlined as part of a consultation from the OTS that will end on 9 April, could be a boost for those who pay higher rate tax and who often fail to claim the additional tax relief that is due to them on pension contributions or charitable donations.

Recommendations from the OTS, which was set up by the government in 2010 to advise on ways in which the tax system could be made simpler for both individuals and businesses, are not binding on the government, but they have been influential in leading to changes in tax policy and administration.

The OTS said it was “seeking the views of those, such as financial institutions, charities, pension providers, and others that could potentially provide HMRC with customer data on their behalf”.

In response to the consultation, LCP partner, Steve Webb, has warned that, although the proposals “could be a boon for savers”, they could “add millions to the cost of pension tax relief”.

He continued: “It is a well-known problem that many people who put money into a personal pension fail to claim the higher rate tax relief to which they are entitled. Making this happen automatically via data sharing between the pension provider and HMRC would streamline this process and help more people appreciate the benefits of saving into a pension.

“But what is good for the saver may be regarded as bad news by the Treasury who would fear that the cost of tax relief could soar. It is to be hoped that the government will not block an idea which would make life simpler for taxpayers and give them the reliefs which they may currently miss out on.

“This is also a reminder for those currently filling in their tax returns to claim the relief to which they are entitled.”

Share Story: