HMRC software fault?
Is it just me or does HMRC's own software calculate tax on interest incorrectly?
Interest is included on the return net, which is rounded (down) to the nearest pound. So if interest of £2.80 is earned gross, it gets added to the return as £2.00.
Then tax deducted at source is calculated by grossing up, so £2.00 divided by 80% is £2.50, meaning £0.50 tax has been deducted at source.
The net figure is then taxed at 10, 20, 40 or 50% respectively! In this case 10% so £0.20, whereas I believe it should be taxed on the gross providing a figure of £0.25.
So instead of being owed £0.25, my client is owed £0.30.
I hope you didn't ask "so what?", so what if my client earned £20,000.80 instead of £2.80? They would have an effective tax rate of 16% and get a £1,000 refund.
I presume commercial software works better but I can't wait for the court case where HMRC blame the tax payer for under-declaring tax by using HMRC's own software. I would be interested in a lawyers interpretation of whether you can sue HMRC for providing dodgy software.
All thanks and praise go to the client who provides you with interest figures on the 30 January.
Welcome to the future, it's broken.
- Share capital - death of a shareholder 482 15
- Legal Fees Allowable in dispute 187 4
- Bench-marking software, any ideas? 296 5
- Viewing folder contens en masse 197 6
- Auto Enrolment 80 1
- Not renewing AAT 846 11
- Company ceased trading 135 4
- Car benefit or not? 1,235 16
- Questions from Liquidator 2,117 22
- Casual Driver 399 6
- Email encryption 1,460 16
- New dividend taxation 717 4
- Another question on trusts and settlements 69 1
- Auto enrolment confusion 1,308 25
- Entrepreneur - want to submit accounts by myself 768 11
- Separate companies same Director buy from each other 415 8
- Are Property Design Exhibitions Claimable 160 3
- Agent online self service 636 14
- Accountant won't release working papers 3,129 54
- What's the best software for this? 458 4
- Self employed and HMRC Worldwide Subsistence Rates 685
- Property letting & CAs 414
- 2015 tax year end 408
- Interest paid - do new rules affect Tax Credits? 400
- FCA regulated company in a small group 353
- Self employed consultant working in Ireland 329
- Costly Accounting Software contract 262
- Market Invoice (P2P invoice discounting) tax treatment 244
- DTA tie-breaker issue 228
- Directors' advances and credits 226