Return of the undead tax computations
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.
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.