What do HMRC know?

MetaPhysical

I always have and will continue to report my values accurately to HMRC.  I would not dare do otherwise.

HMRC and DWP cannot even get state pension top-ups sorted out by working together accurately.  So it begs the question, how do HMRC tally up what you report on your SA with what the banks, building societies, on-line platforms and others report?  There must be tens of billions, trillions even of fiscal events across the tax base.  I know they take it on trust that you enter the values accurately on pain of prosecution - which of course we all do.  However, what if one mistakenly reported, say, one's bank interest was £2000 instead of £2500?  Will that be picked up by whatever intelligence works on the IT systems back at HMRC?    What would the consequence of such a mistake?  I know they are investing a lot in AI systems that are increasingly being brought to bare on this.

Phoenix72

Yes HMRC systems do a comparison of what has been declared vs what the banks tell them.

Consequences? A possible compliance check with interest and penalties om the underpaid tax.

MetaPhysical

That must be one heck of a system to tally everything like that.  It further begs the question, if it can do all of that then why do so many of us need to be doing SA in the first place if it "knows" our salary is above thresholds for child benefit, and it knows we made a pension contribution because the provider told them, etc ?  

badmemory

Because of the information they receive from elsewhere they are now in some cases refusing to allow a person to file self assessment & issue a simple assessment instead.

Albermarle

badmemory said:

Because of the information they receive from elsewhere they are now in some cases refusing to allow a person to file self assessment & issue a simple assessment instead.

This happened to me 4 years ago, whilst I was still working and claiming 40% tax relief on pension contributions.
They just said after this year no more SA's and blocked me when I tried. I think there was push for less people to do SA's which faltered, but now seems to be happening again.

Albermarle

MetaPhysical said:

That must be one heck of a system to tally everything like that.  It further begs the question, if it can do all of that then why do so many of us need to be doing SA in the first place if it "knows" our salary is above thresholds for child benefit, and it knows we made a pension contribution because the provider told them, etc ?  

Presumably because it takes time for each issue to become more automated and tested.

MetaPhysical

Our tax system is so complex with different reliefs, allowances, offsets, incomes and pension contribution one-off payments that the SA is the one place where it's easy to just reconcile your entire tax liabilities in one place. 
I was told I did not need to do a SA last year but I did one anyway because I have two income streams and need to claim the tax allowance on one-off pension contributions as well as claim some employment allowances.  I had overpaid by £600.  Would I have gotten this money without doing the SA?  I am not so sure...

sheramber

HMRC  will review th information held with what is supplied but any action is unlikely to be before the second half of the tax year.

You are required to notify them timeously , which is done by submitting a return.

By the time HMRC  get round to reviewing it you could be liable for penalties  or interest on late payments.

badmemory

I have always had my simple assessment (once they stopped me doing a self assessment) by the end of July following the end of the tax year on 5th April.  You then have until the end of January (so another 6 months) to notify them of any issues or just to pay.  I have been told that payments on account do not apply to simple assessments.