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.
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.
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.
About Rebecca Cave
Consulting tax editor for Accountingweb.co.uk. I also co-author several annual tax books for Bloomsbury Professional and write newsletters for other publishers.