Electronic fix for tax return problems anticipated
HMRC has told software producers that a revised tax calculation to fix some of the online filing problems for 2016/17 returns may be issued to go live in October.
Worst year ever
HMRC has admitted that the ordering of allowances and deductions in the 2016/17 SA tax computation has caused the majority of problems when designing the tax software standards for that year. Its normal procedure would be to fix the software standards after the end of the SA tax return filing season, so the problems identified don’t reoccur for the next tax year. In the meantime, all the identified problems are excluded from the categories of tax returns which can be filed online.
Rob Ellis, CEO of BTCSoftware, can’t remember a year when there have been so many exclusions from filing SA tax returns online. For the 2016/17 tax returns 16 new examples have been added to the online filing exclusions list, which is now in version 4; there is a version 5 of this list under construction.
Volumes of paper
If a taxpayer’s circumstances fall within one of the exclusions, the tax return must be filed on paper to avoid an incorrect tax computation from being generated. If a paper tax return, for an online exclusions case, is filed after 31 October, it will qualify as a reasonable excuse for not filing online. However, to avoid a penalty being issued, the tax agent should submit this reasonable excuse form with the paper tax return.
Several AccountingWEB members commenting on my earlier article say they have seen a large number of clients who fall within the exclusions. For example, taxpayers with high levels of interest or dividend income and little or no earnings.
Timing of submissions
In the months of April to September, relatively low volumes of tax returns are submitted. HMRC’s records show that the majority of the returns are submitted from October onwards, and around half of all tax returns are submitted online in January (see graph for 2015/16 returns). Thus, to avoid a mountain of paper tax returns landing on HMRC, a fix for the online submission problems needs to be found sooner rather than later.
The professional bodies including the CIOT and ICAEW Tax Faculty have advised members to delay filing paper tax returns for a ‘few weeks until details of the possible solutions are available’.
In year fix
In view of the anticipated number of paper tax returns, HMRC is considering issuing an in-year fix for the tax return software standards. This has never been done before in the history of self-assessment. The “fix” will cover exclusions numbered 48 to 56, 58 and 59, which all relate to the ordering of allowances. There will be only one in-year fix issued, and HMRC are hoping that this adjustment to the standards for the tax calculation won’t generate more problems.
How long?
Ellis confirmed that BTCSoftware would need about six weeks to programme and test any new software standards provided by HMRC for the 2016/17 tax returns. In order to roll-out a new version of the tax return software in say October, HMRC would need to provide the revised tax computation to the software producers by mid-August.
Communication to taxpayers
Many tax agents and software producers are anxious that some tax returns which have already been submitted have generated incorrect tax computations, as the relevant exclusion wasn’t identified before the return was submitted. This could apply to either online and paper tax returns. HMRC should be able to pick-out the affected online submissions, but the paper tax returns won’t be identified until they are processed.
HMRC is considering how it can communicate this issue to the affected taxpayers, by way of an amended tax computation (SA 302) or a separate letter. In either case discussions will take place between HMRC and the professional bodies as to how taxpayers will be informed.
Please let us know how you are communicating the online filing exclusions to your clients. Are you having to charge an additional fee for the extra work involved?
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Rebecca Cave is now retired from 35 years in the tax world, including eight years as AccountingWEB's consulting tax editor.
Replies (27)
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We should all send in paper returns before 31/10.
That'll serve them right for failing to do their job right first time round.
Was the HMRC screw-up careless or deliberate? I presume careless. Since it was raised by the software houses and not by HMRC themselves, I presume that's classed as prompted. So who at HMRC is going to pay the penalties? Oh sorry, I just remembered that it's only their 'customers' who are supposed to be infallible.
Thankyou Rebecca for keeping me up to date with a clear and helpful article
All the best
Sally
I'm afraid the previous Chancellor George Osborne did the country no favours by adding some ridiculous complications to the personal tax regime. He should have sought some proper advice before announcing the changes.
Agreed. They were "sound bites" as "vote catchers". He had absolutely no idea what he was doing and - I suppose - neither did his so-called "advisors".
How about just abolish penalties for paper returns just for this tax year only? As I'm sure some people will forget to add a reasonable excuse and will have the headache of penalty appeals. Which we all know is so much fun
So, if the fix is applied and an incorrect return has been submitted, then surely if we re-run potential problem clients within our software after the fix update it should give different figures and we can file an amended return?
I have looked at the list of exclusions and I have to say, I thought I was intelligent, but now I'm not so sure!! Some of that list looks like algebra to me - never my favourite!
Frankly, I pay an exorbitant amount of money for my software every year and don't expect to have to do a manual calculation for every client to see if they are affected by this - how am I supposed to make a profit doing that?
Not the taxpayers fault, so I am just gritting my teeth and bearing the (small) extra cost. PTP software seems to be getting the calculation right and just warns me to file on paper when necessary.
I read the comment, "Ellis confirmed that BTCSoftware would need about six weeks to programme and test any new software standards provided by HMRC for the 2016/17 tax returns" with growing dismay.
His firm, like others, were amongst those finding the errors in HMRC's software. Reading this implies, the real testing is not carried out by HMRC but left to Rob's and other firms to see if it works.
Reminds me of two songs, both of which reflect my age, "Welcome back, my friends to the show that never ends.
We're so glad you could attend! Come inside! Come inside!" Emerson Lake and Palmer 1974 ; "And common sense is ringing out the bell. This ain't no technological breakdown, Oh no, this is the road to hell" Chris Rea 1989
My ears are ringing with the last stanza of Karn Evil 9 where man struggles to maintain his presence as the dominant species on Earth and the computers assert that they have surpassed their creators:
"I am all there is. Negative! Primitive! Limited! I let you live!"
"But I gave you life!"
"What else could you do?"
"To do what is right."
"I'm perfect! Are you?"
Let's hope we don't end up in a desolate world dominated by HMRC (failing)IT.
...and fast forward one year when Scottish resident taxpayers pay UK tax rates on savings income & gains, and Scottish tax rates on non-savings income.
If we can't get the answers right with one UK rate regime, what's it all going to look like for 2018 returns?
I agree with one of the early comments....send in your paper returns - the Revenue would appear to be filling their pants at the prospect of the amount of paper that will fill their offices and suddenly have realised the consequences of their negligence.
Forward any penalties to George Osborne.
These dilettantes need to take responsibility for their fiascos.
A word of thanks for keeping us informed. I have had a couple exclusions already - one unusual one with a large chargeable event gain resulting in total income in excess of £100K.
I guess in the current climate of austerity I'll just have to pick up the extra cost of paper filing, etc myself as I doubt the client will pay!
Er.. surely he can pay your " marginal" fee if he has chargeable events of 100k plus?
Or not-- perhaps that s how he got rich!
Well, I have been holding off for a fix applied and I have just been told by HMRC to submit my personal on-line self-assessment despite the errors in the computation and give them a call in 3 days! What joy.....
HMRC has just announced a talking points webinar on 23 August to discuss the 2016/17 SA Return online submission issues and resulting exclusions.
HMRC say they will explain the process for waiving the 31st October deadline and allowing submission of paper SA returns.
Scroll down this page to find registration button: https://www.gov.uk/government/news/webinars-e-learning-and-videos-if-you...
I will attend this webinar and report back, but feel free to join me!
HMRC restrict webinar attendance at 1000 attendees. I booked an MTD webinar and when I dialled in was told the maximum numbers had already been reached: and HMRC were holding 4 MTD webinars. Rebecca, can you get HMRC to increase the maximum number of permitted attendees? There's no reason to restrict at 1000 because we're all muted (that's how HMRC likes its agents).
I love the graph, I am unsure how accurate it is, I would have thought November, December would have been higher, I would have thought there would have been more of a stepped rise to January.
The data from which the graph was constructed came from HMRC. It shows the number of 2015/16 SA tax returns filed electronically using HMRC's own software and third party products.
Who will pay the price at HMRC? Either someone at HMRC gave the programmers the wrong data or the programmers didn't code HMRC's systems correctly. If the mistake was within HMRC then disciplinary action should be taken against the officers (heads would roll in the private sector). If the mistake was made by the IT contractors then they should pay compensation.
HMRC shouldn't have just 1 fix because of the risk of breaking something else: we know HMRC are incapable of testing their systems because that's why we're in this mess. So HMRC should instead fix the oldest case now, the next case next week and so on. This will give each fix time to be tested sand hopefully restrict any new problems. HMRC claim to be using "agile technology" so let's see it in action!
I'm puzzled re BTC. I use PTP which calculates the correct tax and tells you when you need to file on paper. Doesn't BTC calculate the correct tax?
It's an embarrassment and a disgrace that the UK national tax authority's IT can't calculate tax correctly. How many millions are we taxpayers paying for HMRC's IT? Heads should roll.
Get them in front of the PAC again....this is a farce and heads should roll, they can explain the balls up with the Class 2/4 NIC calcs from 15/16 too.
It isn't just the exclusion cases this year, look at the general FBI and RTI. We're still waiting for responses to returns FBI'd on Monday and RTIs from last Thursday. What is happening at HMRC?
It isn't just the exclusion cases this year, look at the general FBI and RTI. We're still waiting for responses to returns FBI'd on Monday and RTIs from last Thursday. What is happening at HMRC?
Difficult to be sure, but I believe it's slowly imploding.