Partial fix for tax return filing problems

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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.  

Fix day

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.

Workarounds

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. 

Hard work

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.

Corrected computations

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.

Replies

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09th Oct 2017 09:55

10 exclusions fixed, and 14 introduced in the process.

You couldn't make it up, could you?

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09th Oct 2017 10:18

[***]....you couldn't make this up...well that's not entirely true...it was completely predictable given the shambles of everything else the Revenue ticker with.

The revenue want us to play ball yet if it all goes wrong we will have to complete yet more forms to submit with the Return, and possibly appeal if they then lose those extra pieces of paper.

If you want favours do something in return.

That said. in this particular case the simple solution would surely be to extend the paper return deadline to 31/1/18...the reality is no agent wants to submit by paper so they will not if the 'bugs' are fixed at the point of submission...

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to justsotax
09th Oct 2017 11:34

Extend the paper deadline? That is too a simple fix. Lets keep it complicated and unworkable please.

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By hiu612
to richardterhorst
09th Oct 2017 11:50

Exactly. Lets introduce a change right up against the paper deadline, and not worry about agents working on returns, possibly having sent paper ones for approval which, by the time they're signed and returned, might be able to be filed online. At which point we have to change process for fear of getting a penalty for something acceptable when sent out but unacceptable by the time it comes back.

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to justsotax
09th Oct 2017 12:41

Favour for favour? Cooperation?

I am old enough to remember the "good old days".

Currently waiting for P45 information to be posted to Australia. Direct feed of information - not working. Giving the information over the phone - as if!

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09th Oct 2017 10:36

Excluded cases, with suitable annotation, by paper have - after a few months wait - been returned with exactly the same calculation they would have undergone on-line - i.e. wrong.

I wonder if HMRC will automatically override these cases following a post-October 23rd on-line submission?

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09th Oct 2017 11:22

In case any are not aware the Australians too are having problems with the Tax Autorities computer systems and probally software.

Now is probally the time for another UK enquiry because as others have said MTD for VAT is due in 4 months and I expect more problems as this approaches.

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By Tornado
to pauljohnston
09th Oct 2017 12:12

"Now is probally the time for another UK enquiry because as others have said MTD for VAT is due in 4 months and I expect more problems as this approaches."

I think you mean 18 months (April 2019).

This is not going to help the development of MTD compliant software either -

https://ec.europa.eu/commission/news/towards-new-and-definitive-vat-syst...

Anyway, I think the best way to approach this mess is to ignore it and spend more time down the pub.

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09th Oct 2017 12:17

The UK Border Agency at Bristol Airport were also experiencing IT issues yesterday with many red lights flagging their passport reading machines were not working. Huge queues resulted.
I'd actually focus in on the people dreaming up our incredibly complicated tax system rather than wholly blame HMRC who struggle to keep up.

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to nigel.blakemore
09th Oct 2017 13:44

nigel.blakemore wrote:

I'd actually focus in on the people dreaming up our incredibly complicated tax system rather than wholly blame HMRC who struggle to keep up.


Much of the complication in the current tax code is there by regulations devolved to HMRC (to avoid parliamentary scrutiny, probably), so do we get to blame them twice?
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09th Oct 2017 12:23

Who thinks HMRC will be paying us for all this additional hassle and expense? Don't expect our clients will. What are the accounting bodies doing to protect our interests in all of this? Do I see the tumbleweed come rolling past...MTD just aound the corner too! Yes, you couldn't make it up!

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09th Oct 2017 12:25

I almost feel sorry for HMRC! And I certainly do for their front line officers.

I note that the SA302 and letter will be sent to the taxpayer - but not to the agent??

This would suggest that HMRC will write to clients saying that they have corrected the computation that their agent submitted but presumably not pointing out that this is HMRC's mistake in the first place.

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to mcgregorian
09th Oct 2017 13:06

mcgregorian wrote:

This would suggest that HMRC will write to clients saying that they have corrected the computation that their agent submitted but presumably not pointing out that this is HMRC's mistake in the first place.

If the agent submitted the tax return with an incorrect tax computation then why is it HMRCs mistake? Yes, HMRC were not computing the tax correctly but if the return was accepted then so were you. Sorry, I don't see why HMRC inability to calculate tax can excuse an agent's culpability for submitting an incorrect assessment.

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to Tim Vane
09th Oct 2017 16:58

I may have misunderstood what I read but I took it that HMTC were amending correct paper returns to bring them into line with their system i.e. wrong.

No excuse for submitting incorrect tax returns.

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to Tim Vane
09th Oct 2017 16:58

I may have misunderstood what I read but I took it that HMTC were amending correct paper returns to bring them into line with their system i.e. wrong.

No excuse for submitting incorrect tax returns.

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to Tim Vane
09th Oct 2017 16:58

I may have misunderstood what I read but I took it that HMTC were amending correct paper returns to bring them into line with their system i.e. wrong.

No excuse for submitting incorrect tax returns.

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to mcgregorian
09th Oct 2017 17:12

McGregorian, HMRC are manually overriding their incorrect digital system to get it to agree with the paper returns. Or at least that is what they are supposed to be doing but HMRC have yet to process any of my paper returns. I've just checked: HMRC acknowledge receipt of my first one on 07/07/17 but have still to capture it, 3 months later. I have spoken to the ADL. They said it is taking the full 3 months and have sent a referral off for my case. The referral will be processed by 30/10/17 which means my client's return could take almost 4 months to capture. This is an exclusion case 61 which is not being fixed in 2 weeks so other cases will have to be sent on paper. If HMRC can't cope with the slow flow of returns over the summer how are they going to cope during the peak period? This is not acceptable.

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to kevinringer
09th Oct 2017 18:37

kevinringer wrote:

HMRC are manually overriding their incorrect digital system to get it to agree with the paper returns.

To agree with what in the paper return, Kevin?

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to emanresu
10th Oct 2017 08:32

Yes - but as yet HMRC haven't processed any of mine.

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to kevinringer
10th Oct 2017 12:15

To agree with what in the paper return, Kevin?

Serious question.

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to emanresu
10th Oct 2017 12:55

Our software PTP calculates the correct tax. Iris supplied us with a spreadsheet tool which shows the correct tax and the HMRC incorrect tax. I check that PTP has calculated the correct tax and has the correct figures on TC1 and TC2. HMRC then adjust their calculation to agree with mine. Or that's the theory: HMRC haven't actually processed the paper return I sent at the start of July. I assume HMRC have their own calculator/tool which they can use to check my figures. Has anyone had an exclusion case paper return processed by HMRC yet?

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to kevinringer
10th Oct 2017 15:46

As mentioned earlier up the thread, we have HMRC responses to Paper SA100s. As I said:

"Excluded cases, with suitable annotation, by paper have - after a few months wait - been returned with exactly the same calculation they would have undergone on-line - i.e. wrong."

That seems to conflict directly with your "HMRC are manually overriding their incorrect digital system to get it to agree with the paper returns", but there's another point. The SA100 is, basically, a data document. Our software also gave us the correct analysis - but none of that makes it onto the SA100 - just the raw data.

So how would HMRC know how to "manually overrid[e] their incorrect digital system to get it to agree with the paper returns." when there is nothing in an SA100 for them to fit their processes to?

My understanding from HMRC was that paper SA100s., annotated as "submitted due to exclusion ##" would be manually processed - thereby getting around the acknowledged faults in the HMRC software. I was even told how expensive this manual processing would be. From our experience, that is just not happening.

Although I do have some indications of manual activity in that one item of SA100 data was mis-transcribed !

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09th Oct 2017 13:10

they don't help themselves though...having to fall in line with tax legislation they have no control over is one thing....taking a somewhat obnoxious stance regarding the provision of SA302/P60 information etc where they can decide their approach is another.

Personally my advise to all agents is where an 'exclusion error' has occurred send it in on paper. There are no benefits to holding on to it. Of course if hmrc wish to offer some incentive by all means....

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09th Oct 2017 13:15

Rebecca, is v5 list published? I can only find v4 online. Could you post the link please.

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to kevinringer
09th Oct 2017 13:29

Version 5 of the exclusions list is not on gov.uk yet, but the software producers have it.

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09th Oct 2017 15:21

So HMRC is urging tax agents to hold off filing returns until the 23 October 'fix' - assuming the 'fix' works and that no further Revenue [***] ups occur as a result of the 'fix'.

Coupled with the oxymoronic terminology 'working with tax agents blog' , this is sadly like red rag to a bull as far as I'm concerned . Let's see how many more returns I can file by 23 October.

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09th Oct 2017 21:20

arrange the following words into well know phrase or saying
"brewery arrange up a [***] in a"

Where does it say that HMRC is going to pick up our extra costs on this farce?

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to Jack Spratt
10th Oct 2017 08:36

Jack Spratt wrote:

Where does it say that HMRC is going to pick up our extra costs on this farce?

In the same place where HMRC say they will strive to give excellent service whereas in reality they think it is acceptable for them to take more than 3 months to process the paper returns.
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10th Oct 2017 09:26

keep on submitting paper returns....'you made your bed...!'

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27th Oct 2017 15:16

October 27th....just came across a tax return in my pending tray that I had been holding off filing until the bugs were fixed.
Opened up personal tax and did a "test in live" submission to see if it would go. Same error back regarding exclusion #51.
So I'm assuming they haven't fixed it yet? Anyone else still unable to submit?

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By DMGbus
to trinag24
27th Oct 2017 18:16

I would check with your software suppllier to see if you have their latest update.

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