A glitch within the HMRC self assessment system has meant that some taxpayers were not informed of the amount of tax to pay on account by 31 January 2019 and this problem won’t be fixed before 31 July 2019.
In January 2019, HMRC was experiencing a number of computer errors including the omission of tax demands for payments on account (POA) for 2018/19 from some taxpayers’ statements. This problem applies to the taxpayer’s online personal tax account, as well as to paper statements of account issued by HMRC.
This problem also arose for 2017/18 where some taxpayers’ statements did not show the POA, which was due to be paid by 31 July 2018.
Who must make a POA?
Any taxpayer who is within self assessment who has less than 80% of their tax collected at source (eg under PAYE) and pays more than £1,000 in income tax per year needs to make a payment on account. This will apply to most self-employed individuals, and to many company directors who extract the majority of their income from their company as dividends.
Alice is self-employed and paid income tax of £8,000 for 2017/18, of which £7,500 was paid on account in two equal instalments on 31 January 2018 and 31 July 2018. She had to pay the balancing payment of £500 by 31 January 2019. However, she should also make a POA for 2018/19 of £4,000 by 31 January 2019, equal to half of her 2017/18 tax liability.
How many are affected?
HMRC recognises that this is a real issue. When contacted for comment on this story a Revenue spokesperson told AccountingWEB: “We are aware of an issue with payment reminders for a small number of customers. Anyone who is affected should contact us and we’ll put it right. Nobody will be charged additional interest due to this problem.”
However, judging by the number of queries on the HMRC agent forum, this is a widespread problem.
The professional tax and accountancy bodies have complained, and HMRC has apologised to those bodies, but it has made no attempt to tell the affected taxpayers what to do. HMRC has also said it can’t fix the problem of missing POA demands in time for the 31 July 2019 payment date.
What to do
If your client did not see a demand for their 2018/19 POA, they may have paid only the balancing payment due for 2017/18 by 31 January. In the example above, Alice would have paid £500 instead of £4,500.
When Alice completes her 2018/19 it shows she has a total tax liability of £10,000 for that year. Normally she would have paid £8,000 of that amount as POA in January and July 2019, but as she was not informed of the POA due by HMRC, she has to pay the full amount of £10,000 by 31 January 2020. Alice will also have to pay the POA for 2019/20 by 31 January 2020, so she will have a total tax bill of £15,000 to pay by 31 January 2020.
For clients in Alice’s position, you can advise them to may a voluntarily POA. However, there is a risk that this voluntary tax payment will be automatically repaid by HMRC’s computer.
It may be easier to advise clients to deposit all the tax due into a savings account and pay it all in January 2020.
HMRC has confirmed that if the demands for POA have been omitted from the taxpayer’s statement, that taxpayer will not be charged interest as long as full payment of all the tax due for 2018/19 is made by 31 January 2020.
If the taxpayer is charged interest in this situation, contact HMRC. The most effective way to do this is through the agent forum by emailing the details of the charge including the taxpayer’s UTR to the agent forum manager: [email protected].
Paid the right amount
If the taxpayer did pay the correct amount of tax by 31 January 2019, including the POA due, but their statement did not show a demand for the 2018/19 tax, this can be fixed.
The taxpayer (or tax agent) can ask HMRC to add the POA to the taxpayer’s record, which will ensure that the tax is not repaid. However, this adjustment can’t be done if the taxpayer has not, in fact, made a POA for 2018/19. If you experience problems with HMRC call centre staff refusing to reinstate payments on account on the grounds that it might generate incorrect interest charges, please contact the ATT technical staff: [email protected].
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.