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HMRC computer errors cause tax return grief

18th Jan 2019
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As we hit the busiest 10 days for filing tax returns, HMRC’s computer is experiencing systems errors, spewing out incorrect penalties and wiping some tax payments due.   

Penalty lottery

AccountingWEB member Penelope Pitstop reported that they had received a penalty notice for the late filing of a 2017/18 trust tax return, which was filed online on 2 January 2019. The HMRC online services page shows the tax return as received. The deadline for filing that tax return is 31 January 2019, so it was not filed late and the penalty is therefore wrong.

Other AccountingWEB members reported similar incorrect late filing penalties for returns filed in early January 2019. Do let us know in the comments section below if your client has received a premature late filing penalty.

Recurring problem

There was a known problem last year with trust tax returns, which are not as automated as individuals’ SA returns, and in some cases HMRC rekey the electronically delivered data. Hence, the late filing flag can be triggered if there is a hold-up in recording the data once the return has been received by HMRC.

Last year Clifford Chance partner Dan Neidle, filed a 2016/17 trust return on time and recieved an incorrect late filing penalty. This prompted him to issue a freeedom of information request, through which he discovered that HMRC cancelled over 1.2m late filing notices over the three years to 2016. HMRC does not record which of those penalties were cancelled due to a successful appeal, and which were issued in error by HMRC.

This year Dan submitted the 2017/18 tax return for the same trust online on 2 January 2019, and received a late filing penalty dated 8 January 2019. He commented on twitter: "I can happily regard the penalty as a joke - it is clearly invalid on its face. But there are many taxpayers who would be deeply concerned by it. HMRC should be proactively identifying those affected and writing to them asap withdrawing the penalty."

AccountingWEB member Ajtms had to complain all the way to the Tax Ombudsman about incorrect late filing penalties issued for a variety of his trust returns for 2016/17, and some of those incorrect penalties extended over a six-year period. 

The quickest way to deal with an incorrect late filing penalty is to ring HMRC and get it cancelled. However, the very fact that an incorrect late filing penalty can arise for a tax return submitted on time shows there is a serious error within HMRC’s systems.

Missing tax demands

A second computer error has resulted in the amount due as a payment on account (PAO) for 2018/19 being missed from taxpayers’ statements. This problem applies to the taxpayer’s online personal tax account, as well as to paper statements of account. In some cases, the CGT payment due on 31 January is also missing.

Only a scratch

HMRC has recognised that this is an issue in a response on the Agent Forum dated 9 January 2019, saying: “We are aware of an issue with payment on accounts for a small number of customers for returns from tax year 2017-18. Anyone who is affected should contact us and we’ll put it right.”

However, judging by the number of queries on the HMRC Agent Forum, this is a widespread problem.  

What to do

Where your client’s tax statement is wrong you need to contact HMRC and they should be able to correct the PAO manually.

Also, advise the client to pay the correct amount of tax due rather than the lower figure as shown on their incorrect statement. HMRC has said that no one will be charged additional interest because of this problem, but don’t count on the HMRC computer getting that right as well.

Replies (30)

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By lincolnartist
18th Jan 2019 20:41

Here's an idea HMRC, spend money on sorting out your current systems before wasting thousands on unnecessary ones. Oh, too late.....

Thanks (10)
Replying to lincolnartist:
RLI
By lionofludesch
20th Jan 2019 15:42

Thousands ?

Thanks (1)
Replying to lionofludesch:
Tornado
By Tornado
21st Jan 2019 16:17

1,200 to be precise.

That is 1,200 millions of course.

Thanks (1)
Chris M
By mr. mischief
20th Jan 2019 19:48

My best so far this season is a client who noticed a tax repayment for over £800 back in early 2016 for money he had never received. He called HMRC and was told it was paid to my accountancy firm.

I pointed out to my client that he had never had an accountant until he appointed me on 3 December 2017.

The thing is, you get so much of this drivel on the phone lines you being to wonder if it is cokk-up or conspiracy.

Dismal service, 2 out of 10 on a very good day, but more normally this country offers 1 out of 10.

Thanks (4)
Replying to mr. mischief:
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By lincolnartist
21st Jan 2019 08:51

Talking of dismal service, a client had lost their P60 and payslips in moving house. Employment API giving no results (quelle surprise) and when I called HMRC they would only post out the details to the client. Really??? It must take longer to process that request then quickly read out what was on their screen.
Almost had a Karl Pilkington moment with them.

Thanks (3)
Replying to lincolnartist:
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By KateR
21st Jan 2019 10:00

No surprise there - a few years ago HMRC announced that they were ceasing to give out PAYE information over the phone.

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By Expat24
21st Jan 2019 09:58

OK for HMRC to say ring up and get it sorted over the phone but who pays for our time doing this (on many clients) and placating a client who thinks we have not done our job correctly! Plus it's January, who has the time?!

HMRC are not fit for purpose.

Thanks (9)
Replying to Expat24:
Bee
By May bee
21st Jan 2019 10:45

My thoughts exactly Expat! I can't tell you the hours I spend contacting HMRC about something they/their systems have got wrong. Clients don't want to pay for it as 'its not their fault' either. I totally see their point and it is just another one of those things we absorb.

HMRC are not fit for purpose but I still seem to keep seeing reports about another top dog who has earned a gong at HMRC! Disaster.

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By JohnB
21st Jan 2019 10:22

What could possibly go wrong with MTD?

Thanks (5)
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By RogerMT
21st Jan 2019 10:43

Just told a client to pay the correct amount, including the missing POA for 2018/19, and I will ring HMRC in February, as the "on hold" times right now are not funny. Just imagine how HMRC are going to cope with exponentially increased workloads due to the Brexit folly and the application and collection of tariffs! Methinks MTD may well get put on the backburner indefinitely.

Thanks (2)
Replying to RogerMT:
By Nick Graves
21st Jan 2019 11:55

RogerMT wrote:

Just told a client to pay the correct amount, including the missing POA for 2018/19, and I will ring HMRC in February, as the "on hold" times right now are not funny. Just imagine how HMRC are going to cope with exponentially increased workloads due to the Brexit folly and the application and collection of tariffs! Methinks MTD may well get put on the backburner indefinitely.

What really boils my piss[***] is having to listen to interminable voice recordings telling me stuff that I already know or is completely irrelevant, only to be cut off eventually because the queues are too long.

Now I know how Paul Weller feels...

Thanks (2)
Replying to RogerMT:
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By david.bransbury
21st Jan 2019 14:04

Sorry Roger MTD is not going to disappear.

MTD for VAT is happening this year.

Because of the effort, accountants and their clients will do to make it work, it will happen. Then of course HMRC will take the credit which means MTD for IT and VAT is just round the corner.

Brexit is something that has been lumbered onto the HMRC. MTD is something the HMRC is desperate to put into place as they think they will get the tax gap down!

Thanks (0)
Replying to david.bransbury:
Tornado
By Tornado
21st Jan 2019 16:21

"MTD for VAT is happening this year"

So is Brexit .... perhaps

Thanks (2)
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By rosataylor
21st Jan 2019 10:50

HMRC are quite happy to rectify thier errors, however, thier errors are costing us and the tax payers time and enormous amount of money.

Some tax payers pay these penalties as they all think HMRC cant be wrong and some thinks that us agents are doing it wrong.

Can anyone do something about HMRC errors. Are they really not accountable for their errors. Are they allowed to continue at the expense of tax payer. Sorry we are not customers. Customers has choices. We dont.

Thanks (3)
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By sumo69
21st Jan 2019 11:01

There is also an issue with requests to code-out 17/18 underpayments to 19/20 on returns submitted before 30 December - I have had 2 clients have statements issued requesting payment of the balancing payment by 31 January for which I have had to call the Agent line to have corrected.

Thanks (1)
Replying to sumo69:
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By KateR
21st Jan 2019 12:10

So have I.
With so many new 'computer errors' how on earth can MTD work.

Thanks (1)
Replying to KateR:
RLI
By lionofludesch
21st Jan 2019 12:54

KateR wrote:

So have I.
With so many new 'computer errors' how on earth can MTD work.

Well, there's the MTD enigma.

HMRC claim software wiull reduce errors.

Software can't get Self Assessment right, leading to hundreds of exclusions.

Talk about sticking your head in the sand ......

Thanks (2)
Replying to sumo69:
By Paul D Utherone
22nd Jan 2019 12:22

...and me.

I noticed on one It was showing a balancing payment plus POA's, then the HMRC system updated and removed POA's, so I presumed that the system was sorting itself out (the return having been submitted on Christmas Eve) and gave it a couple of days. When nothing changed re the coding I rang ADL who corrected it, but in the meantime a demand had been posted to the client, so I got a slightly concerned "I've had a demand, I thought it was being coded out"

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By Mr J Andrews
21st Jan 2019 11:50

I disagree with simply ringing up HMRC to get their errors sorted.
I always insist for upon a written report to my client - with a copy to me - as to what went wrong, plus a formal apology to my client with some reassurance that better Care and Management { Section 1 TMA 1970 } of my client's affairs will prevail going forward. Needless to say, a measure of compensation is invariably sought.
Penal restitution must be seen to work equally .

Thanks (2)
Replying to Mr J Andrews:
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By Jack Spratt
21st Jan 2019 12:50

and do you always get those reports etc that you ask for?

Thanks (0)
Replying to Mr J Andrews:
Tornado
By Tornado
21st Jan 2019 16:26

"I always insist for upon a written report to my client - with a copy to me"

The computer had missed-off a payment on account for 2019. I phoned the agent line and the problem was fixed. I asked them to send an explanation to the client and me.

I received something that was a little difficult to understand and sure enough my client phonedf to ask what the hell it was. After some explanation my client saw some logic in the figures but typical of HMRC style, if you can make something easy complicated, then go for the complicated option.

Thanks (2)
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By Michael C Feltham
21st Jan 2019 13:58

Hmm...Reminds of the old golfing joke about the Texan oil zillionare who swept into Scotland in his private jet and demanded to play the Old course at St. Andrews.

When faced with a troubling Par Four he told the grizzled ex-professional old Scots caddie who knew each and every bump, borrow and nuance of the course:

"Y'all call this a par Four? Huh! In Texush, we'd call this a li'l biddy o'l par Two!"

Addressing his ball on the tee, he swung the club and topped the ball, dreadfully.

To which the caddie said, upon handing him his putter:

"Och the noo! This is one putt I cannie wait to see!"

MTDfb.

This is one ginormous [***]-up in progress, "I cannie wait to see!" either...

Thanks (0)
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By Vaughan Blake1
22nd Jan 2019 10:34

Not been a good week.

Long conversation with HMRC about an 'automatic adjustment' for an additional £100 on a clients 2016-17 calculation. No notification to client or us as to why. Agent helpline bod kept saying "it's an automatic adjustment done automatically", like a Monty Python sketch, but couldn't explain why. Turns out their computer has had another go at calculating tax on the 2016-17 chargeable event gain. I thought it was a spurious penalty at first. Now looks like 20% of £500 on the interest 0% rate band.

2016-17 SATR submitted manually due to an exclusion in December 2017 still not processed. The 2016-17 refund was virtually identical to the 2017-18 first instalment, so as neither processed, client thought all was well! Been told it was misplaced, but is now "in the queue".

IHT office was sent two IHT 100 forms in Feb 2018 each with a cheque. One cheque made it through the system, the other has been 'lost' despite going through the client's bank account. First alerted them to this in August 2018. Now tell me that it has gone into the self assessment system and will take about seven weeks to transfer back again.

Clients ringing up to say the payslip "doesn't agree to what you told me". (first instalment for 2018-19 missing).

And it's only Tuesday!

Thanks (0)
Chris M
By mr. mischief
22nd Jan 2019 14:42

What can possibly go wrong with Making Tax Digital?

Thanks (2)
Replying to mr. mischief:
RLI
By lionofludesch
22nd Jan 2019 14:55

JohnB was wondering the same yesdy.

Thanks (1)
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By EnglishRose
23rd Jan 2019 08:50

I didn't realise that same poor Clifford Chance man had been hit yet again.
It seems even worse this year as HMRC put out a press release that there were no problems despite people reporting this 2 jan filing issue for trust returns.
A few days later they have had to issue a correction i.e. they were totally wrong first time - to say those filing on 2 Jan a trust return had a problem as an HMRC human error led to about 652 people getting penalty notices.
https://www.bbc.co.uk/news/business-46952162

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Replying to EnglishRose:
By Paul D Utherone
23rd Jan 2019 09:39

They still seem to be saying that it's only 653 Trust return cases whilst the BBC report (and tweet from Dan Neidle that first alerted me at the weekend) is to do with a Personal return

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By Jane Evans
30th Jan 2019 11:17

I am getting really fed up with HMRC's errors. I have had a series of them in the last 2 weeks: Finish tax return and client is happy because they are due a tax refund. TR submitted and HMRC processes a larger refund because they have omitted the first POA for 2018/19.
Phone call to Agents Line has been answered promptly on each occasion. Problem is recognised but it is too late to stop the refund. Client now owes the POA and payment is due by 31.1.19. It is easier to make payment quickly and avoid penalties etc as these just cause more problems later. Client is abroad / away / doesn't have online banking etc so making a payment quickly is not ideal.

Has anyone any idea what happens with the RS? Can the client keep it.

Client is very understanding when I explain the problem and ask them to pay the POA even though the refund has not arrived yet. They know that HMRC is so chaotic they do not blame me.

Repeat this issue again and again.

No chance of HMRC compensating me for my time when I have other work that I should be doing.

How can HMRC have let their standards fall so appallingly?

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By UK Fred
01st Feb 2019 22:32

I fear that the introduction of MTD will only increase the number and complexity of [***]-ups by HMRC.

I have enough of them under RTI for payroll.

The worst is that submitting under RTI, I have had pay paid to and reported for one of a client's employees credited to another and the other then received a tax demand for £2,200 plus interest on the wages paid to the colleague. In 2018/19 one of the employees in this foul-up left employment in early 2018 tax year when a P45 was prepared and sent, but has had child tax credit stopped because, according to HMRC they are still employed by that client. The other employee had a notice telling them that they have paid insufficient contributions to qualify for an NI credit despite working full time all year.

What makes it worse it that I was told that the problem had been sorted out when it reared its head at the end of 2016/17, but it was also in the present year. Even worse, HMRC want me to have authority from both employees to speak to them about their tax situations when the problem all the while lies in processing errors of the RTI submissions by HMRC.

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By slimclaire
13th Feb 2019 11:56

HMRC are now advising that they will not manually update payments on account following new guidance. Has anyone seen a press release on this? This is to avoid interest charges according to the call centre worker I spoke to.

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