The group has also welcomed the call for a broader review of safeguards and sanctions to ensure a taxpayer does not suffer the consequences of a data error which is not their own fault.
The OTS’s report into the use of third party data was published as part of HMRC’s modernisation of the tax administration framework with its recommendations echo those made by the group in its paper, “A better deal for the low-income taxpayer”.
Furthermore, while the group supports the offices’ recommendation for a clear roadmap setting out how “the greater use of third party data could be implemented”, it cautions that the timescale for implementation should not simply be “dictated” by how long it would take third parties and HMRC to implement new systems to facilitate the data flow.
Victoria Todd, head of LITRG, said: “We recognise the benefits of HMRC receiving data directly from third parties with a view to helping taxpayers get their tax right, and we support this in principle.
“However, HMRC’s existing use of third party data does not always work smoothly. The use of estimated bank interest in tax codes can sometimes be difficult for the taxpayer to review, leading to overpayments of tax.”
She added: “If use of third party data is to increase, then it is not only critical that the data is made as reliable as possible by placing a legal responsibility on third parties to get the data-reporting right.”