Tax Writer Taxwriter Ltd
Columnist
Share this content

HMRC computer wipes out tax demands

12th Apr 2019
Tax Writer Taxwriter Ltd
Columnist
Share this content
Clear Internet History
istock_jdwfoto_aw

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.

Example

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.

Erroneous repayments

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.

No interest

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].

Replies (14)

Please login or register to join the discussion.

avatar
By memyself-eye
12th Apr 2019 16:32

That word 'customers' again....

Thanks (5)
avatar
By Kaylee100
13th Apr 2019 10:29

Its terrible.

We are spending hours putting this stuff right.

Thanks (3)
avatar
By Vallery Lee
15th Apr 2019 10:32

I know that this is unacceptable BUT software always tells you what you need to pay by the end of January and also by the end of July, So payments can be made in good time.
However as the "glitch" is the HMRC software I hope that fines are not forthcoming

Thanks (1)
avatar
By Mr J Andrews
15th Apr 2019 10:40

As Rebecca opens , this POAXIT issue is just one of a number of HMRC's computer errors ; mistakes which recur and seemingly incapable of being resolved within a reasonable timescale.
Just imagine the furore , compensation claims and head rolling if this happened within a plc , professional practice etc.
Yet the Revenue carry on regardless and get away with a third rate service pretending MTD will answer all their prayers. Too late ; the former Inland Revenue is now in its worst managed state in history.

Thanks (6)
avatar
By jamiea4f
15th Apr 2019 10:43

Let's make tax digital they said. What could possibly go wrong.....

Thanks (5)
avatar
By L Haldane
15th Apr 2019 10:49

.........clearly HMRC have no idea how to make tax digital. God help us all as we launch into MTD. I have never felt more like a lemming than I do now !

Thanks (7)
avatar
By anthonystorey
15th Apr 2019 11:00

This happened to me personally but I paid what was due in January and nothing has been refunded to me. I wonder if HMRC will give me interest on the apparent overpayment.
I haven't got the time to check out all my clients but if they contact me I tell them to pay what's due and not what HMRC say is due. My guess is that most will just pay the lower amount demanded without querying it.
I wonder if HMRC have included this in their tax gap figures along with all the class 2 NICs that their computers didn't want to collect.
I also wonder where the next taxpayer giveaway will be. Could it have something to do with VAT?

Thanks (0)
avatar
By Pam Moreland
15th Apr 2019 11:24

In my practice this seems to be affecting non self employed cases, mainly those with PAYE employment or pension income rather than the self employed. To date I have located 14 cases out of 267 potentials which is still 5%, small but not insignificant. I have had the payments in account reinstated but was unable to prevent a couple of repayments and the inevitable interest charge which is now being appealed. The worst thing about this is that it is the second year running this has happened and it means yet more work for us to data mine who is affected, telephone HMRC and then make sure payments are made or, if they do not pay, that at least they know that they will have a large bill coming in January 2020. HMRC staff I have spoken to also seem unaware that interest will not be charged so that is something to watch.

Thanks (1)
avatar
By tedbuck
15th Apr 2019 12:34

And these are the civil servants who run the Government and decide to cancel preparations for No Deal Brexit.

You wouldn't mind so much if they were efficient, understood what they are doing, did it properly and timeously (to use their word) and thought further forward than the next sound-bite.

I remember the days when the Inland Revenue were helpful and actually knew what they were doing then they brought in computers and clever tax planners who thought they knew what they were doing but don't. So now we have a tax system that few people understand. Did I hear that the CIOT pass rate had dropped to about 40%? If the specialists cannot cope how on earth is Joe Public supposed to do so?

Thanks (1)
avatar
By C.Y.Nical
15th Apr 2019 13:13

This happened to me - I never got any demand or statement this January.

Thanks (0)
avatar
By CptCave
15th Apr 2019 15:15

"this adjustment can’t be done if the taxpayer has not, in fact, made a POA for 2018/19"

When I've called I had HMRC, staff have successfully reinstated POA for 18/19 before it has been paid as they looked at the tax return and agreed POA should be made for those clients.

Am I a rare and lucky case?

Thanks (1)
avatar
By Terry Hyman
15th Apr 2019 16:09

I have come across this with my own daughter but decided to do nothing about it and she just made the payment eventually, when demanded. No interest charged.
What I find interesting is that HMRC don't appear to back-up their records. ALL competent people do this, so why don't they?

Thanks (1)
avatar
By mickeyparish
16th Apr 2019 14:40

HMRC are getting all sorts of things wrong. My self-employed son was asked to pay non-existent student loan repayments and charged interest for non-payment. He paid up, thinking he must have made a mistake. Now he has to try to get it back ! They are just making more work for their "customers" as well as for themselves.

Thanks (1)
Morph
By kevinringer
22nd Apr 2019 13:55

SA has been with us since 1996. At the time it was such a radical change that I would have expected loads of errors but there weren't any. Why is it that 20 years down the road HMRC's systems can't cope? And at the same time HMRC is forcing through MTD.

Thanks (0)