The tax man wants banks and building societies to hand over information about rent payments made to buy to let landlords as they are paid as part of a ‘big data’ expansion.
Although financial institutions and letting agents already have to make annual returns about buy to let transactions, HM Revenue & Customs (HMRC) claims the data does not include enough detail.
Ruth Owen, director general for personal tax, said that the shift to personal digital accounts for taxpayers and small businesses meant that HMRC required more frequent reporting of financial transactions from third parties.
HMRC also wanted embedded information showing who made the payment and to which property the rent was related.
“We don’t want to wait until the end of the year for customer information. Quality is an issue. At the moment, it is hard to match the data. And the depth and breadth of information that banks and building societies have, for example about other products that customers use is available but not reported,” she said.
Owen explained that HMRC wanted digital tax services to have more up-to-date information so tax codes could include information about income from savings and investments to close the gap between the time someone earned money and when they paid tax on the income.
HMRC’s chief digital and information officer Mark Dearnley explained the tax authority had problems understanding the data received because no standard format was in place and that correcting mistakes highlighted by a taxpayer was an issue.
The plan is for real time tax reporting by linking pay roll and digital accounts to information reported by third parties to reduce the burden on taxpayers to tell HMRC about their income and for the digital account to calculate and assess tax due on a rolling basis.
HMRC wants to adjust tax codes on a pay as you go basis for small amounts of income and to present online bills for larger or less predictable amounts of income.
HMRC will reveal more detail about the plans in a consultation due for early in 2016.