HMRC has admitted that there are additional situations in which SA tax returns submitted online will produce an incorrect tax computation for 2016/17. So what should taxpayers do if their tax calculation doesn’t agree with that issued by HMRC?
HMRC released version 9 of the SA individual exclusions for online filing on 24 January 2018.
Rob Ellis of BTC software explained: “The latest exclusion update from HMRC not only introduces five more complex exclusions, it also updates 12 exclusions which have already been built into third-party tax software. Issuing these so late in the self-assessment filing season gives software development companies no chance to implement, test and release these in advance of the January 31st deadline.”
HMRC does not want to discourage taxpayers from filing their tax returns at this late stage, so the advice is to file in time for the deadline, and file online where that is possible. The taxpayer should pay the amount of tax shown as due on HMRC’s tax computation, and any under or overpayment resulting from a later adjustment to the tax computation can be paid or refunded later.
HMRC sent this message to the software developers to pass on to their customers:
“Should their income tax liability calculation for 2016/17 be too low, or the deadline of 31 January be missed because of an exclusion, HMRC will not apply late filing, late payment penalties and/or interest”.
Taxpayers who find they can’t file online because their tax affairs fit within one of the online filing exclusions, which were built into third-party software before January 2018, need to file a paper tax return without delay. They should enclose a reasonable excuse form for not filing online, which includes the statement that they fall into one of the exclusions.
HMRC has stated that where there has been an automatic issue of a late filing penalty in this situation, it will accept that a reasonable excuse applies, and the penalties will be withdrawn.
In February, or possibly later, HMRC will identify any tax returns filed online where the tax calculation is incorrect. It will also make any required corrections to the income tax liability calculation for 2016/17 and to the 2017/18 payments on account.
The taxpayer will be informed by letter of the correct income tax liability calculation for 2016/17 and any revision to 2017/18 payments on account, and when those revised amounts need to be paid. HMRC will confirm to those taxpayers that they will not have to pay late payment penalties and/or interest attributable to any additional amount arising from the correction if it is paid before the revised due date.
The statement from HMRC did not mention what will happen if the taxpayer has overpaid tax due to an incorrect tax computation.
How many are affected?
HMRC maintains that there are a small number of taxpayers who are affected by the exclusions to online filing, and thus are unable to get an accurate self assessment income tax liability calculation for 2016/17. HMRC stated: “Our forecasts suggest that exclusions for 2016/17 will only impact a very small proportion of SA customers (a fraction of 1%)”.
As HMRC expects around 11 million SA tax returns to be filed for 2016/17, up to 110,000 individuals could fall within the online filing exclusions.
Next year’s problem
HMRC says it is aware that some of the existing tax computational issues will impact 2017/18 tax returns, and it is currently devising a strategy to address those issues.
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.