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.
- Sage Cheque Printing - Still in the dark ages! 67 1
- HMRC interview re client authorisation 220 2
- Cost of demolition of a shed - revenue or capital? 552 13
- Do I need to see receipts ? 737 11
- ICPA 486 8
- Are any of you members of The Institute of Financial Accountants - Accountnats certificate 283 3
- Physiotherapy 55 1
- Changing shareholding ratio 122 3
- Community Interest Company 62 1
- New intermediaries reporting requirements 115 1
- SA1 forms 365 12
- Rolled up interest and late interest rules 142 5
- Goodwill Entrepreneurs Relief 130 1
- Share disclosure re- Power of Attorney 151 5
- VAT on services to EC customer 176 3
- Delayed option to tax 187 3
- Are you going to Tick and Bash on 21 May? 870 23
- Auto enrolment: What’s your plan? 380 3
- Cloud backups – know what you are getting … 431 7
- Redundancy Pay 369 4
- Sainsbury's mangement 824
- Avanti Accounts 673
- Have I done the right thing? 652
- Calling franchise accountants 632
- Continuity Agreement 627
- Consolidated accounting software (or cloud based) 482
- Sage One Reports - do they add up? 356
- Scammers 325
- Advice please! 232
- Becoming a subcontractor to Accountancy Practices 216