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.
- Excel problem - pivot tables and multiple data sources 195 5
- CIS and Close Company 184 6
- LLP members share of profits 611 32
- Can you declare dividends and not withdraw them 772 32
- Late P800 demand shows later year? 408 20
- Electronically supplied services - B2B 121 4
- Employment support allowance and self employed 41 1
- Registered Office 50 2
- Winding up a beneficiary will trust 87 1
- Online / Cloud Data Back Up 60 1
- Brain freeze - loss on disposal of company car 273 7
- VAT Box 7 and supplies from unregistered traders 529 17
- 64-8 on paper or online? 85 2
- Flat rate scheme - which rate to use? 333 10
- Management fees agreement 144 4
- Marginal rate relief not given on loss carry back 69 1
- Business travel apps 333 14
- VAT for Residential Property Developer 165 6
- Closed tax years 102 1
- New Employment Allowance 128 2
- Residential Property Purchase Above £750K 929
- Using Sage with Sofa Categories 656
- Understanding the implications of January 2015 VAT changes for downloads on threshold for VAT registration 383
- transferring simply accounting 2010 from xp to windows 7 329
- rent-a-room allowance for part of the year 250
- Paye procedures for CVA 241
- HMRC Second Income Campaign - not so much a question as heads up 237
- Expenses Re-imbursed on the VAT Flat Rate Scheme 182
- Compliance Checks - Time limits 179
- Pension Fixed Protection 179