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Return of the undead tax computations

31st Oct 2018
Tax Writer Taxwriter Ltd
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The self-assessment tax computations for 2016/17 should now be dead and buried in the HMRC vaults, but we hear that up to 30,000 computations will be resurrected to potentially spawn further tax liabilities and interest.

Last year’s nightmare

The 2016/17 SA tax return season was a nightmare because so many SA tax returns were excluded from online filing. This was due to the HMRC’s computer rejecting tax returns with computations which lay within the tax law, but outside of the boundaries of the official personal tax calculation.

The scope of the exclusions increased during the year until version 9 of the exclusions list for 2016/17 was issued on 24 January 2018. HMRC also took the unprecedented step of amending the official tax computation mid-year, in October 2017.  

The excluded tax returns had to be filed in paper form. However, where the return was submitted early in the season it may have been accepted as an online submission by HMRC’s computer, but the processing of the return would have resulted in an incorrect tax computation being issued. 

Check the comp

HMRC is now reviewing around 30,000 tax computations arising from SA tax returns submitted online that fell within one of the online filing exclusions for 2016/17. HMRC will start reworking those tax computations on 19 November 2018 and the process is expected to take about a week.

In many cases the affected 2016/17 tax returns were submitted online by unrepresented taxpayers who were not able to check whether the resulting tax computation was correct or not. This batch of reviewed tax returns may also include some submitted online by tax agents early in the 2016/17 season, before the agent realised an exclusion would apply.

Tax agents ignored

If HMRC’s review finds that the tax position as reflected in the taxpayer’s tax statement for 2016/17 is not correct, the taxpayer will receive a revised tax computation (form SA302).

The agent of that taxpayer will not receive a copy of the amended SA302. The ATT, CIOT and other professional accountancy bodies have expressed their disappointment at HMRC’s decision not to send copies of the SA302 to the tax agent.

You will need to warn your clients to contact you if they do receive an amended tax computation for 2016/17. If the revised tax computation is still incorrect, any amendments must be submitted on paper to HMRC, and not online.  

More tax to pay

Where the taxpayer has an additional amount of tax to pay as a result of the corrected tax computation, they will have 28 days to pay the amount due before late payment penalties and interest start to apply. It is not clear how long HMRC will take to repay tax which has been overpaid as a result of its computer calculating the tax due incorrectly.   

Paper returns

Tax returns for 2016/17 that fell within one of the online exclusions, and which were correctly submitted on paper, have been processed separately. However, this processing has taken ages, and in some cases this resulted in SA payments on account for 2017/18 not being created for the taxpayer, or if they were created the amount demanded was incorrect.

HMRC should now have corrected all these instances of missing or incorrect demands for payments on account for 2017/18 where the tax was due by 31 July 2018. The taxpayer’s online personal tax account (PTA) should have been adjusted, but of course, tax agents can’t view their clients’ PTA.

Replies (10)

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By jeremyiwhite
31st Oct 2018 20:13

Very messy

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Hallerud at Easter
By DJKL
01st Nov 2018 10:45

Great lesson learned one would hope , just because we have computers it does not mean we should make tax computations more and more complicated, Chancellors and the Treasury ought to take note.

If we were back in the 1980s with pen, ink and posting in tax computations to HMRC the trickiest bit would be an election for separate taxation calculation for husband and wife and remembering the small relief for National Savings Ordinary Account interest.

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Replying to DJKL:
By Nick Graves
02nd Nov 2018 10:46

The 1/2 Class 4 relief used to [***] up mental tax computation adjustments when finalising the accounts with the client.

But that was about as hard as it got.

Where as all this Office of Tax Complification stuff has achieved 2/3 of 3/5 of...

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Replying to Nick Graves:
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By Comptable
02nd Nov 2018 13:02

I had not realised that the Office of Tax Complexification had (slightly) decomplexificated its name.
Has it ever decomplexificated anything else?

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By why always me
02nd Nov 2018 12:06

Why would they not send to agents who are capable of actually checking the assessment.

Another attempt to bypass agents who are deemed immoral for wanting to claim all reliefs LEGALLY available to our client.

HMRC continue to spout incorrect assessments and demands and seem unaccountable for the rubbish they produce. It would be P45's all round and business closed if we were as incompetent.

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By dmmarler
02nd Nov 2018 12:13

What about taxpayers who submitted on paper (because they do not have online access) and therefore cannot see the online tax account (PTA)?

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By tedbuck
02nd Nov 2018 12:43

Perhaps the profession should cease to co-operate with HMRC and reduce their endeavours to firefighting their errors.
I have submitted helpful hints to them but they really just ignore them. Perhaps, instead, I should send them a bill for all the times they **** things up and we then have to sort it out for them. I do this where the sums involved are material but what about all the other hours spent trying to explain where they went wrong to someone who just doesn't understand.
Someone in one of our highly paid Institutes might try having a word in their ears and point out that the system works better with co-operation.
They used to send agents copies of CT acknowledgements so we could easily remind clients of CT due. They stopped. Clients forget to pay on time so it is passed to DMB who issue a letter or two. Surely a far greater cost than a stamp on a computer generated envelope.
Same happens with RTI statements which are sent out willy nilly to say that tax is overpaid or unpaid but no further information given and it is very often HMRC misallocating payments that causes the problem.
We all want the system to work smoothly but HMRC have their own ideas - just wait until MTD hits IT - it will be chaos I suspect.

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By AndrewV12
03rd Nov 2018 09:19

Like someone once told me about filed tax returns, they are accepted by HMRC, but that does not mean to say they are approved by HMRC.

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By johnjenkins
05th Nov 2018 09:35

I like that. Tax payer has to pay within 28 days yet HMRC have no idea when they will pay any refund.
As HMRC have to treat every tax payer of a similar ilk, the same, surely there is a case for HMRC to repay within 28 days.

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By Moo
05th Nov 2018 10:18

Rebecca, have HMRC given any indication which filing exclusions are involved here? 30,000 returns to be reviewed is a relatively small number so it would be interesting to know which of the many errors in their calculations they are looking for.

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