HMRC says the issues preventing many taxpayers from filing their 2016/17 tax returns online will be fixed by 23 October 2017, but further problems have emerged.
HMRC announced in its working with tax agents blog that a fix to the 2016/17 self-assessment tax calculator will be in place by Monday 23 October. This was anticipated, as HMRC had said it was considering an in-year fix to the tax computation, to avoid mountains of paper tax returns being submitted after the 31 October paper filing deadline.
The fix will remove the exclusions numbered 48 to 56 and 58 to 59 for 2016/17 SA returns, which HMRC says cover the majority of cases.
However, the new version of the online filing exclusions list for 2016/17 (version five) includes 14 new exclusions, of which four have been created by the October fix. Two of those four knock-on exclusions concern chargeable gains from life policies which are taxed as income and are subject to top slicing relief.
The calculation of top-slicing relief is another area where tax experts disagree with HMRC’s method used in their version of the tax calculation, as I will explain in another article.
HMRC has also endorsed a workaround for exclusion number 60, which concerns the reporting of capital disposals where the net gain or loss is nil. This can occur where a non-resident taxpayer has sold UK residential property but must report that disposal to comply with Non Resident Capital Gains Tax (NRCGT) rules. In many cases, the main residence and lettings reliefs apply to reduce the taxpayer’s gain on the property to nil.
Software producers have been working hard to amend their software so it agrees with the new version of the tax computation to be released by HMRC on 23 October. Rob Ellis of BTCSoftware estimates that his firm has spent the equivalent of 14 working weeks to implement and test the October changes, but they will be ready for that release date, and their software will incorporate the disappointing number of additional exclusions for online filing.
Wait and file
HMRC is urging tax agents to hold off filing SA tax returns online until the fix is implemented on 23 October. Where the commercial tax return software indicates that a paper tax return is still required, the return should be submitted with a completed SA reasonable excuse form for not filing online, stating in box 6 that the return falls into one of the online filing exclusions. Without that form, a paper tax return received after 31 October will trigger an automatic £100 late filing penalty.
Where a paper or electronic tax return has been submitted with an incorrect tax computation for 2016/17, HMRC says it will capture those cases and issue a corrected computation on form SA302, together with a letter to the taxpayer. Let us know if you receive any of those correction letters.
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.