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How to react to the new online filing exclusions

26th Jan 2018
Tax Writer Taxwriter Ltd
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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?

Late call

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.”

Practical advice

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of a late filing penalty in this situation, it will accept that a reasonable excuse applies, and the penalties will be withdrawn.

HMRC corrections

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.

Replies (10)

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By Mr Trellis of N Wales
26th Jan 2018 12:34

"The taxpayer should pay the amount of tax shown as due on HMRC’s tax computation". This can't be right. HMRC can't ask for more tax than is legally due and I doubt that many taxpayers would be willing to pay such sums. If HMRC is prepared to forgo interest on late paid tax then I expect some taxpayers will wish to take advantage of this largess, but surely under the PCRT we should be telling clients to pay the right tax at the right time.

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PJ
By paulgrca.net
26th Jan 2018 12:49

What about refunding tax payers additional cost arising from this matter!

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By Mr Trellis of N Wales
26th Jan 2018 12:51

Regarding HMRC's promise not to apply LFPs if the deadline is missed, how will HMRC distinguish between deadlines missed for this reason and plain tardy returns? I expect that they won't. My advice is to post a paper return to HMRC before before 31/1. That will be proof that the software issue is the only reason the return was not filed on time.

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Chris M
By mr. mischief
29th Jan 2018 09:22

What an utter shambles!

I will be writing - again, it worked last time! - to the House Of Lords and House of Commons Treasury Committees to update them on the new reasons why Making Tax Diabolical is even more stupid now tham it was before.

This self-assessment season is going to feature. These numpties running HMRC actually want this mess 6 times a year instead of just once!

Thanks (4)
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By hondaman
29th Jan 2018 11:33

Reasonable excuse claim form completed, to which was attached the software error message and a copy of the relevant section of the HMRC exclusions list, and these were sent with the paper tax return filed with HMRC.
Last week I received the agent's copy of a late filing penalty notice and a call from my client asking what all this was about. I have enough sodding work to do without dealing with appeals that shouldn't have to be made!!!
Anyone else experience this?

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Replying to hondaman:
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By Homeworker
29th Jan 2018 11:42

hondaman wrote:

Reasonable excuse claim form completed, to which was attached the software error message and a copy of the relevant section of the HMRC exclusions list, and these were sent with the paper tax return filed with HMRC.
Last week I received the agent's copy of a late filing penalty notice and a call from my client asking what all this was about. I have enough sodding work to do without dealing with appeals that shouldn't have to be made!!!
Anyone else experience this?


Am expecting the same. I discovered 2 weeks ago when preparing a return for an overseas resident with child benefit to be paid back that the return could not be filed online due to the filing exclusions. As she lives in Cyprus, where postal services are challenging, I was only able to post the return to HMRC on Saturday. I have warned her she will likely receive a penalty notice!
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By gbowyer
29th Jan 2018 11:54

hondaman wrote:

Reasonable excuse claim form completed, to which was attached the software error message and a copy of the relevant section of the HMRC exclusions list, and these were sent with the paper tax return filed with HMRC.
Last week I received the agent's copy of a late filing penalty notice and a call from my client asking what all this was about. I have enough sodding work to do without dealing with appeals that shouldn't have to be made!!!
Anyone else experience this?

Yes, and spoken to HMRC twice who deny anything is wrong. Client has now received another demand for the wrong amount which is not due. Just what I need at the end of January!

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Replying to gbowyer:
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By KevinMcC
29th Jan 2018 17:38

I had this as well just before Christmas.

The return was an excluded case, so I submitted it on paper, along with a letter explaining it was an excluded case, and including the reasonable excuse claim form. That ought to do it I thought.

Come back in January to a late filing penalty. I call HMRC, confident all they'll have to do is check their system for my letter and form and that'll be that (naive fool that I am).

No, as a penalty had been issued, I had to write in and appeal, and to top it off, it was my fault that HMRC had to do it this way.

According to the call centre operative, it was my fault anyway as I sent other documents along with the return, and apparently that's not how the HMRC mail room works. If you send other documents then these can't be actioned separately, apparently...

I suggested that if the return came with another document, then perhaps that other document could be scanned along with the return, or at least separately so it could also be dealt with, but he seemed to think this a foolish idea and that sending separate letters for each thing you wanted HMRC to deal with was the only reasonable way to proceed. I'd have thought he was winding me up but he was so adamant that what they were doing was correct.

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By ModnyiFryer
30th Jan 2018 09:45

this is just hilarious

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Replying to ModnyiFryer:
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By rockallj
31st Jan 2018 15:27

ModnyiFryer wrote:

this is just hilarious


................ if it wasn't so serious a waste of our time and efforts, AGAIN!!
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