Demand grows for HMRC software oversight

iStock_000018424017_Small.jpg

iStock_Slobo_Protest
Practice correspondent
Sift Media
Share this content
Tags
6

RSM’s senior tax partner George Bull has joined the chorus demanding independent oversight of HMRC software standards in the wake of an error that led to thousands of pounds in overpaid tax.

AccountingWEB has previously reported on a loss relief error that crept under the radar of software houses and HMRC. Accountant Glenn Collingbourne discovered the problem with the restriction for sideways relief for losses (and certain interest deductions) which is capped at the greater of: £50,000 and 25% of the taxpayer’s adjusted total income for the tax year (ITA 2007, s 24A).

The genesis of the issue lay with the standard that HMRC used as the foundation of the manual tax calculation being incorrect (which, it should be noted, has now been corrected). Software providers followed that standard leading to an error where large losses were claimed.

When a return is filed online, HMRC takes the tax figure calculated by commercial software and compares it to the one calculated by their software. If they do not match, the submission is rejected and if the standard set by HMRC is incorrect, all tax returns software will be wrong in that respect.

Writing in RSM's weekly tax brief, Bull said in 2013/14 commercial software correctly performed the calculations correctly. But, “HMRC’s computers refused to accept the returns. We were advised that the calculations were wrong and had to edit the returns to show the higher figure before HMRC would accept the returns.

“This meant that a number of clients had overpaid 2013/14 tax because they had followed HMRC’s rules. We are now claiming back thousands of pounds of overpaid tax on behalf of those clients.”

HMRC is at present both the tax collector and controller of software standards. And worryingly, the error could be emblematic of errors that have crept into HMRC’s software undetected; errors that aren’t aligned with tax law. “Sadly, but perhaps not surprisingly, this is not an isolated example of the problem. [The] recent errors in HMRC’s income tax self-assessment software meant that a number of clients overpaid tax which we subsequently had to reclaim from HMRC on their behalf,” wrote Bull.

The worry now is that as tax migrates to the digital realm, there is no central, independent oversight body to check the logic in online forms produced by all government departments to ensure that it adheres to tax law.

Or, as AccountingWEB’s tax policy editor Rebecca Cave previously observed, “All this talk of digital accounts, quarterly reporting, and paying tax in real time, assumes that the software behind the tax calculations is correct and in line with tax law. Who checks that this is the case?”

Independent, structured oversight, said Bull, will ensure “[a]ll citizens, and the commercial software companies who are so important in helping citizens discharge their digital duties to the State, can then have confidence that they are working on firm foundations”.

Replies

Please login or register to join the discussion.

avatar
07th Jan 2016 10:14

We have been here before

Extract above

Or, as AccountingWEB’s tax policy editor Rebecca Cave previously observed, “All this talk of digital accounts, quarterly reporting, and paying tax in real time, assumes that the software behind the tax calculations is correct and in line with tax law. Who checks that this is the case?”

 

SIIIIIGGGGGGGGGGGhhhhhhhhhhhhhhhh

 

 

Thanks (0)
07th Jan 2016 11:29

Me

AndrewV12 wrote:

Extract above

Or, as AccountingWEB’s tax policy editor Rebecca Cave previously observed, “All this talk of digital accounts, quarterly reporting, and paying tax in real time, assumes that the software behind the tax calculations is correct and in line with tax law. Who checks that this is the case?”

Well, I certainly do.

I work the tax out myself before I complete the return and see if HMRC agree.

It's as much a check that I've entered everything to be fair.

Thanks (2)
avatar
07th Jan 2016 10:36

Another Tax Calculation Error

I have heard that there is also an error in computing the rent a room allowance but I don't have any further details as yet. A friend of mine has said that it was brought to her attention when her manual tax calculation did not agree with the calculation produced online by the Revenue.  She has queried it with them and they have agreed there is an error.  However, I don't have any further details as yet.

Thanks (0)
avatar
By mabzden
07th Jan 2016 11:07

Storm in a teacup?

I would be interested to know how many people are actually affected by this issue. I'm guessing not that many.

 

 

Thanks (1)
avatar
By hiu612
07th Jan 2016 17:37

Divorces

There was a similar issue noticed in the software underlying many divorce settlements recently, along the line of it took the assets into account but not the liabilities. From memory that glitch had been there since Apr-14 and had only just been noticed, and was estimated to have impacted on a large number of settlements in that period.

 

It seems so fundamental that the software standard needs to match the law that it is hard to imagine why something isn't already in place

Thanks (1)
avatar
By Wesram
11th Jan 2016 17:34

HMRC software and the law

It's also important that HMRC's software is fully compliant with the law and not simply HMRC's interpretation of the law.....the two can be poles apart from a simply read of some of HMRC's manuals

Thanks (0)