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HMRC explains 'identical' paper SA return policy
From the beginning of the new tax year on 6 April, HMRC has said it will no longer accept the paper "facsimilie" returns generated by tax computation programs. Instead, it will only accept paper returns that are submitted on original tax forms, or the new PDF versions, which it deems to be "identical" rather than reproductions.A recent Any Answers query and debates since Lord Carter announced the end of paper substitutes in his 2007 review of HMRC's online services indicates that the semantics surrounding the new tax forms has left many advisers confused.
As part of the department's recent series of agent roadshows, officials have been explaining the nuances behind the policy change. This report is drawn from comments made by HMRC's Nigel Henshaw at the recent Digita conference.
In HMRC's view, the PDF versions of the new style tax returns that you can download from its website are "identical" representations of the official forms, where those printed out by tax systems are "substitutes". Apart from encouraging much wider use of Adobe Acrobat, this policy change will also save the tax authorities a lot of work in approving return formats from different software developers every year. The simplest solution, adopted by many developers, is to incorporate the PDF forms into their tax applications.
The issue of who is allowed to file paper returns, and when, remains the subject of much speculation because of sensitivities over HMRC's legal powers in this area.
Around 1% of taxpayers will not be covered by the published returns. They include MPs and others "dealt with under separate arrangement" - the criteria are published in a PDF on HMRC's Working Together site. These taxpayers can continue to submit paper returns until 31 January.
HMRC officials have to tie themselves in knots not to make definitive statements about what constitutes grounds for rejecting a return, or the reasons for not filing online such as acting for a new taxpayer who does not yet have a UTR.
"Because we're accepting paper for this 1%, legally we have to accept it for any other taxpayer," Henshaw said. Any non-qualifying paper returns submitted after 31 October will get a penalty notice.
But some leeway was evident in Henshaw's response on the type of returns the department would accept - with the exception of late partnership returns, where there would be an automatic a penalty.. "Identical", for example, did not mean that it had to be the same colour as the official return - just that the detail was an exact match. Rather than stating the legal ambiguities clearly, HMRC has indicated that it will adopt a reasonable approach to these issues, as long as its relaxed stance is not abused by tax agents.
One way of avoiding the penalty is to make sure there's no tax outstanding by 31 January, he advised. "As long as the tax is paid by the end of January, the penalty will be reduced to nil - the same as it is now."
Late and improper return penalties are not based on the assessed liability, they are based on the amount outstanding at end January. However, paying off the tax does not write the penalty off completely. "If you slap in an amended return a day later and the liability is increased, the penalty would be reapplied," he said.
Although they will be constrained from filing paper returns, many practitioners still want to use paper forms as file copies and to to prove that clients have authorised the returns they file online. HMRC's Henshaw pointed out, "We no longer require a wet signature if it's sent online. An email statement is acceptable." When filing returns, the online system generates a 32-digit code and including that in an email to the client asking for approval will verify that the authorisation relates to that exact return. If any detail is changed on the form, the code would change too. When the return is accepted online, the receipt will bear the same code as the filed return.
"We're not being insistent that you have got to have a pen and paper copy, it's a matter of what your professional indemnity insurer demands," said Henshaw.
Tax software suppliers have all been educating their users about these issues. Sage recently issued a whitepaper, while TaxCalc has a section devoted to the 2008 changes on its website.
Number of comments: 6
AccountingWEB.co.uk 26-Mar-2008
Categories: Tax News, Software
Times read: 6190
I wonder how many other vendors will also abandon paper forms. There is very little software to download and see what approaches people are taking - with 6th April is not long off - let us see what is available then !
David Forbes
Forbes Computer Systems Ltd
For several years I have just copied the pdfs in and stuck our data fields over the boxes. I would be mad to do all the work I used to, typesetting the forms all over again, just to get an inferior looking product.
Indeed the advent of these pdfs was a tremendous boon, and I cannot see what effect the HMRC announcement has if I am using their artwork already.
EXCEPT - for some reason the new forms are a ghastly 'machine readable' mess. Rather than go through the hassle of trying to get the numbers and letters to fit into these boxes, I shall probably not bother with the paper forms.
So in the case of "FairBalance Taxes" HMRC will probably get its paperless way by default.
Thanks for the suggestion, Lizzie - it's something we talked about doing on AccountingWEB a few years ago, when we used to have a "Self Assessment centre" page.
Although the spirit was there, we didn't have the resources then to tackle the project. But now that you have raised the idea, I'll see what we can do to work it into our editorial schedule.
John Stokdyk
Technology editor
AccountingWEB.co.uk
This article prompts me to say, wouldn't it be a good idea if someone wrote an article on how you set up to file on line using available software such as Digita etc to assist all those who will be switching to filing on line!
The majority of Forbes customers already file electronically - ask any that use this facility and they would not consider for a moment going back to paper filing. You just complete the return in the normal way and then press the FBI tab and it goes directly to the HMRC computer.
As part of the Carter review the HMRC is encouraging online filing.
For those returns that it is not possible to file electronically it is still possible to file on paper providing your software produces a return that is identical to the official version.
ProTax for 2008 uses the HMRC PDFs directly to comply with these requirements. Wider use of the paper returns within ProTax, by people for whom online filing services are available, would run counter to Government's implementation of Lord Carter's recommendations, jeopardising customer service and efficiency benefits.
However, if such paper output is used by taxpayers or their agents, for Returns which could be filed online, it will be accepted but must be submitted to HMRC by the paper filing date of 31 October.
If HMRC found significant inappropriate use of this solution, they will have to consider withdrawing this facility. This would mean, even for the very small group that do not have the option of online filing, computer generated output would no longer be accepted as a valid Return. If you do not already subscribe to the electronic filing module we would very strongly encourage you to add this to your proforma.
David Forbes
Forbes Computer Systems Ltd
It is interesting to note that the list of exceptions given on the HMRC website has grown from 5 a few weeks ago to 13 at the moment. It now includes returns which include a foreign pension (with the 10% deduction). This is likely to impact on a far greater number of returns than the MPs and other PD1 cases.
What else will be excluded before we start the new tax return season?
