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New SA errors emerge during January rush

24th Jan 2018
Head of Insight AccountingWEB
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More HMRC 2016-17 calcuation errors emerge
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More HMRC 2016-17 calcuation errors emerge

BTCSoftware has issued a warning to its customers about new and unanticipated HMRC exclusions that are showing up on current online 2016-17 self assessment returns. And further issues are continuing to appear as tax preparers head towards the 31 January deadline.

Five new exclusions have come to light, according to a BTC statement issued on Wednesday morning.

HMRC’s programmers are aware of the issues brought to their attention but do not have time to fix them at this point in the tax year. Even if they did correct the exemptions, software developers would not be able to pick up and implement them in time.

Instead, they are advising taxpayers and their agents to go ahead and file with the erroneous figures and pay the tax due – but alert HMRC of the situation. BTC suggested the best way to do this is in the additional information box on the main tax return form (SA100 box 19).

HMRC plans to resolve the issues after 31 January and will re-calculate affected returns.

“If the recalculation means, as a result of the official HMRC computation being incorrect, you have paid too little tax then you will be expected to make up the shortfall but you should not be fined or be charged interest,” an HMRC official told BTCSoftware.

Similarly, if you have paid too much tax, you will get a refund.

Spate of changes

The ICAEW Tax Faculty reported sightings of other errors. One relating to a small number of electronic SA900 returns for trusts was corrected on 16 January. Again, HMRC advised that payments should be based on the tax calculated by commercial software. The tax department will check and correct calculations on affected returns filed before that date.   

An error in HMRC’s calculator that does not allow the CGT annual exempt amount (and possibly any remaining basic rate band) to be wholly set against gains due at 18/28% rather than 10/20% is being investigated. And a couple of taxpayers have reportedly seen HMRC adjustments for marriage allowance reduce the liability, in one case to zero and in another to the previous value for payments on account. 

Tax lecturer and Absolute Software founder Tim Good, who started flagging up problem calculations last summer, recently uncovered another bizarre quirk where a net pension contribution (or gift aid donation) of £1,000 will increase the tax liability by £187.50.

“As far as I can tell, this is not covered by any of the exclusion cases,” Good said. “One of our users submitted a paper return in November 2017 exhibiting this error and received a letter on 10 January 2018 from the HMRC Assistant Officer that stated, ‘I have sought advice from our Technical Support who have advised that we cannot comment on the software that you use and that the calculation that we issued stands.’”

Like Good, BTCSoftware became aware of the emerging calculation issues after an eagle-eyed accountant queried an interest calculation in the software where a small reduction in interest income resulted in an increased tax liability.

BTCSoftware director Rob Ellis said these glitches were the side-effects of a spate of changes that have been introduced to the tax system.

As Della Hudson explained in August, the introduction of the dividend tax and dividend allowance, savings allowance and savings nil rate band have triggered a surge in calculation exclusions for the 2016/17 tax year, for which HMRC advises submitting a paper return.

Section 25 of The Income Tax Act 2007 requires reliefs and allowances to be deducted in a particular sequence to give the taxpayer the greatest benefit. But HMRC software specifications for the 2016-17 tax year were set up to use the personal, dividend, and savings allowances in a fixed order, which may not necessarily be in the best interests of the taxpayer.  

The issue also cropped up in Any Answers on 8 January, where one member wondered why their calculation differed from the one produced by their tax software. Portia Nina Levin was on hand to explain the discrepancy.

Many of these exclusions were fixed in October with an in-year update to HMRC’s systems, but the official exclusions list was updated to version 8.1 on 9 November with new exclusions.

“This year’s online filing season has proved significantly more challenging,” said Ellis. “With the sheer range of new taxation legislation to apply, along with HMRC’s ambition to further digitise tax filing, change (and learning from the changes) was inevitable.” 

Replies (36)

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By C.Y.Nical
25th Jan 2018 10:44

"Section 25 of The Income Tax Act 2007 requires reliefs and allowances to be deducted in a particular sequence to give the taxpayer the greatest benefit. But HMRC software specifications for the 2016-17 tax year were set up to use the personal, dividend, and savings allowances in a fixed order, which may not necessarily be in the best interests of the taxpayer. "
This has happened with my personal tax return. The HMRC calculator failed to produce the correct result (and therefore didn't comply with the law so far as I can see) so a paper return was filed. I was expecting to have to pay £3213.93 by 31 January. However HMRC are demanding £3733.23 which is £519.30 more than expected. They sent me a paper calculation with the following comment: 'You have self calculated the total income tax due, however the figure of £3,373.90 does not agree with my calculation. The return has been repaired. I have removed the figure at CAL1 box 1 and revenue calculated the tax due. Please let me know if you disagree with my calculation'. HMRC were informed by telephone that I did disagree and a promise of a call-back by the Technical Team was given. That was on 30 November but nothing has been heard since.
I have to decide whether to pay the figure I think is right, or pay the amount they are demanding. Either procedure can presumably be followed by an appeal but I am dithering about the decision.
HMRC is a desperately incompetent organisation. I have been filing tax returns since 1969 so I have seen the entire decline. I can still cope with this sort of thing at my current age but I am fearful about what it will be like when I am, say, ten years older and finding it harder to deal with this sort of complexity.

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By Dowland
25th Jan 2018 10:47

This situation is totally unacceptable.

I have a number of clients who have been impacted by the exclusion list issued in November. When I have spoken to my software suppliers (two different packages) I have been told that they do not know whether a return can be filed and suggest I speak to HRMC. When I speak to HMRC they do not really seem to know and just suggest that the return is filed on paper. This is not an issue generally but when your client lives thousands of miles away it makes life a little more challenging!

What is more concerning is that we, as Agents, are expected to note on returns where there are issues. Whilst I check evrey calculation produced so I can explain to clients why they have an under or overpayment I do not know every little in and out of the tax legislation to know whether the calculation produced is incorrect due to an HMRC error.

I realise that the software companies have to use the templates produced by HMRC and so if those are wrong then the software is going to be wrong.

Let's hope that every software company will issue a checker for 2016/2017 like BTCSoftware so that we can check if the returns we have filed thinking they are correct are actually correct.

HMRC should be severely repremanded for the complete shambles their IT system is in. With SA and the Trust Registration Service you wonder whether anyone at HMRC either know anything about tax or, more importanlty, IT.

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By KIKISROSSIDES
25th Jan 2018 11:03

and these is the organization to implement MTD! God help us all.

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Replying to KIKISROSSIDES:
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By DMBAcc
25th Jan 2018 13:09

I was going to make the exact same point. If it weren't soserious it would be laughable. HM Treasurery have got the MPs and ministers in their pockets and nothing we say or do short of not paying any tax (I mean all of us) will make HM Treasurery sit up and listen

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Replying to KIKISROSSIDES:
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By david5541
02nd Feb 2018 13:14

yes god help us all with such a hopeless dept implmenting mtd

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By NLB
25th Jan 2018 11:03

Yup. It a f**k up alright. In order to submit a return electronically rather than be on the exclusion list I had to leave a £1 CGT gain on something particular as the system could not cope with £0. Client happy with this to be able to file but technically it was incorrect. This is basic stuff and there is no one available of any competence to help on the phone. We are supposed to fetch data via API's but those are up and down over January and HMRC won't tell you the numbers over the phone despite this. Agent team sympathetic but unable to help as it is 'policy' not to give out numbers over the phone.

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Replying to NLB:
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By debrahuzzard
26th Jan 2018 07:26

Yes, I did exactly the same thing with a capital gain, had to leave a wee bit taxable to be able to file online. with the API prepopluation, they seem to be back working unless you are in a busy time when the system falls down again. I went on at 5am and was able to prepopulate all outstanding returns no problem, luckily I work from home!

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By jamiea4f
25th Jan 2018 11:06

I don't know about anyone else but this certainly fills me with confidence that HMRC's software is completely up to the task of dealing with MTD (amongst others). Absolute joke. The whole thing has been littered with various errors since last April, everything seems to be "temporary" involving some kind of half-arsed workround that involves at least one call to HMRC, which surely is what these online services were supposed to eliminate. Still I'm sure whoever's in charge of HMRC will still get their knight/dame-hood, so that's OK...

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By emanresu
25th Jan 2018 11:45

It will be no news to competent software developers that panic fixes on an overdue piece of software result in even more errors.

This software development task is a pretty simple one - and yet it has been badly handled from the start.

Incidentally s25 doesn't say "reliefs and allowances to be deducted in a particular sequence to give the taxpayer the greatest benefit", it says "deduct the reliefs and allowances in the way which will result in the greatest reduction in the taxpayer's liability to income tax". Those who can't appreciate the difference are well-qualified to join HMRC's software development team !

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Replying to emanresu:
John Stokdyk, AccountingWEB head of insight
By John Stokdyk
25th Jan 2018 16:14

You are correct to point out the discrepancy in the wording, emanresu - thanks for the sanity check.
As a writer I was paraphrasing Della's summary of the law's wording. I've done this long enough that I should have known better and gone back to the statutory definition as you have done. Text will be amended with a not along those lines.

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Replying to John Stokdyk:
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By emanresu
26th Jan 2018 09:42

Just for the record, John, that last paragraph of mine was meant as a parable, not a personal criticism.

One of the difficulties experienced in software development is where interpretation alters the facts. I've lost count of how many software design reviews that I've sat in on have hit a brick wall when the presenter says words to the effect of "Well, you know what I meant".

This, and other foibles, explain the inability of software such as HMRC SA to meet its performance specification (if that exists), its timescale and / or - I suspect - its budget.

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Morph
By kevinringer
25th Jan 2018 12:51

What are the five new exclusions? I don't see them detailed in the BTC statement.

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Replying to kevinringer:
John Stokdyk, AccountingWEB head of insight
By John Stokdyk
25th Jan 2018 16:26

HMRC had confirmed the number of new exclusions to BTC but was not saying what they were when they prepared their statement and I wrote this article.
A look at the 9 Nov exclusions list (the first table after item 82) shows that 78-82 are new exclusions, to do with the "top slicing" calculation of savings reliefs, dividend reliefs and insurance policy gains. You need to have a bit of spare time and a clear head to take in all the detail:
https://www.gov.uk/government/uploads/system/uploads/attachment_data/fil...

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By DMBAcc
25th Jan 2018 13:12

Has anyone called International Rescue? They are in the same fantasy world as HMRC after all.

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Replying to DMBAcc:
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By Peter Cane
25th Jan 2018 13:44

Sadly I think even dear old Mr Hackenbacker would be stumped with this, unless he got Braman to sort it! Come to think of it, even K9 & Adric from Doctor Who might struggle with this lot.

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Replying to Peter Cane:
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By Dib
26th Jan 2018 13:28

Sounds like a job for Orac, it could take control of other computers and reprogram them!

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By JohnB
25th Jan 2018 15:07

Comforting to know that 'we should not be fined or charged interest' as a result of HMRC's system failures.
I wonder how that will play when I next make an error and say that I don't expect HMRC to compensate or reward me.

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Replying to JohnB:
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By david5541
02nd Feb 2018 13:22

johnb would anyone know the section protecting tax payers//meaning they wont get fined//charged interest from errors caused by HMRC (SA) system failures?

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By C.Y.Nical
25th Jan 2018 16:27

So far nobody has commented on which option might be best for me- to pay the amount HMRC has demanded or pay the correct amount? I wish to set up the payment tomorrow so any comments would be appreciated.

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Replying to C.Y.Nical:
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By gtregidon
25th Jan 2018 17:14

Thanks C.Y.Nical - I was just about to make the same comment.
As well as my own return I've been asked for advice by clients, many of whom are in the same situation. I've manually done the calculations, and the software I used (TaxCalc) is correct, yet the revenue website is showing a figure which is more than double. As I know my figure is correct, do I pay that and write to them, or pay the higher amount and hope they return the balance in short order?!?!

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By C.Y.Nical
25th Jan 2018 18:36

Does anyone disagree with the following draft?

to Richard Dyson, Head of Personal Finance, Daily Telegraph
cc:
Mark Harper M.P., Forest of Dean constituency
Nicky Morgan MP, Chair, Treasury Committee, House of Commons
Matt Pantell - Senior Media and Policy Officer, Treasury Committee, House of Commons

Dear Mr. Dyson,

There is a scandal brewing at HMRC. Their software is requiring some taxpayers to pay more than they should, and despite many complaints they have done nothing to fix the problem. This is now acute because next Wednesday 31st January is the deadline for paying amounts due under the Self Assessment rules.

The problem is quite simple. HMRC software specifications for the 2016-17 tax year were set up to use the personal, dividend, and savings allowances in a fixed order, which may not necessarily be in the best interests of the taxpayer. The Income Tax Act 2007, Ch.3, s.25(2) requires persons preparing self assessments to 'deduct the reliefs and allowances in the way which will result in the greatest reduction in the taxpayer's liability to income tax'. Taxpayers and their advisers who comply with the law in the 2007 Act are receiving notices from HMRC stating that their calculations are incorrect and demanding additional tax.

In my own case, if the calculation of my tax is done correctly I owe £3,213.93. However HMRC are demanding £3,733.23 which is an overcharge of £519.30. They sent me their calculation with the following comment: 'You have self calculated the total income tax due, however the figure of £3,373.90 does not agree with my calculation. The return has been repaired. I have removed the figure at CAL1 box 1 and revenue calculated the tax due. Please let me know if you disagree with my calculation'. HMRC were informed by telephone on 30 November 2017 that I did disagree and they promised a call-back by the Technical Team. No such call-back has been received.

I am not the only person who is affected by this. If you visit an article about this on the website Accounting Web (link below) and scroll down to the comments you will see professional advisers complaining about this. My own adviser does not know what I should do. I have decided to pay the amount demanded and then try to lodge an appeal, but I repeat, this is a scandal.

Yours sincerely,

The legislation is here: https://www.legislation.gov.uk/ukpga/2007/3/section/25/data.pdf
The article on Accounting Web is here: https://www.accountingweb.co.uk/tax/personal-tax/new-sa-errors-emerge-du...

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Replying to C.Y.Nical:
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By AnnAccountant
25th Jan 2018 23:17

Why would he care? He just drafts SEO stuff. Like most modern rag writers.

Now, tell him British Gas owes your gran a fiver and you're cooking on (their) gas!

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By AnnAccountant
25th Jan 2018 23:20

Can't wait for MTD in some ways.

It's the excuse I need to go 100% advisory and 0% anything vaguely accounts related.

Then, you need something simple to fool around with some afternoons - balancing up something in Excel or the like

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By 0705736
26th Jan 2018 00:38

In reply to those asking what amount they should pay, surely the answer is that you should pay the amount you believe is correct. If you're right then HMRC will eventually have to agree with you. If you're wrong you may need to pay the balance later when they catch up with you.
I have to say however that (almost from the time when I first used tax software, but not quite) I haven't bothered to check the calculations because I'm paying a firm to get that right. With all the different allowances for this and that kind of income I haven't got a clue how to check the calculations now, unless they're very straightforward.
It does now worry me that I could be submitting clients' returns and advising them to pay incorrect amounts because of this farce.
Although HMRC are clearly at fault, I feel that the politicians have made things much worse by introducing these ridiculous exemptions and complications. We should get back to a situation where an intelligent taxpayer (and his accountant) can work out how much tax he has to pay without resorting to a computer.
Also, I feel that the software companies could be doing more to help us. Once they're aware of these cases where the officially-approved calculation produces the wrong answer, they should (at the point where we use their software to do the sums) tell us that the correct amounts of tax due are XYZ and not the amounts they are required to put on the tax returns, not just leave us and our clients to find out later.
In addition, surely HMRC should be required, once they've got all their calculations correct (which should be very soon after the end of this month), to recalculate the tax for everybody who's submitted a 2016/17 tax return, and advise them and their accountants of their findings.

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By stanbu
26th Jan 2018 11:36

Even filing on paper isn't foolproof. I told client that £20k was due in tax, filed on paper, and client got a tax refund of £500!! I suggested to the client that they should pay the correct amount of tax and they agreed.

I telephoned the agent line and they said refund was correct. I knew where the problem was and asked them to look at the relevant page. They said nothing was there. I then asked them to look at the relevant page on the actual return submitted and, lo and behold, it was there! HMRC had not transferred the information on that page!

Perhaps there will be at least one benefit when MTD arrives. It will at least cut off one area of HMRC cockups.

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Replying to stanbu:
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By GW
26th Jan 2018 15:52

stanbu wrote:

Perhaps there will be at least one benefit when MTD arrives. It will at least cut off one area of HMRC cockups.

and judging by RTI, replace it with several other ways to get it wrong

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By C.Y.Nical
26th Jan 2018 16:13

Well this is potentially embarrassing. My adviser took advice himself, from a tax specialist, and was told this:
'The personal allowance of £11,000 can be allocated to any form of income the individual chooses to minimise personal tax, then once the basic rate is triggered the income is taxed in the following steps
1. Non Saving income (employment, pension or property income)
2. Saving income including bank and building interest
3. Dividends"

Does anyone know which piece of legislation requires this order of calculation to be performed, so that ITA 2007 Ch.3, s.25(2) cannot be used to justify doing the calculation in a different (beneficial) order?

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Replying to C.Y.Nical:
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By emanresu
26th Jan 2018 20:31

Yet another example of "Well, you know what I meant"

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By North East Accountant
26th Jan 2018 17:58

HMRC has messed up the tax calculation so much it doesn't surprise me.

Wait until the new Scottish rates kick in and then further diverges, and then Wales and N Ireland to come.

Keep it simple HMRC!

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By john.gilbob.freeserve.co.
26th Jan 2018 20:34

This may help those who have received an incorrect SA302. I submitted my return on paper in November 2017 along with a reasonable excuse form as the tax calculation (following HMRC's algorithms) was incorrect. I even sent HMRC the correct tax calculation. In return not only did I receive an incorrect SA302 but a late tax return filing penalty as well.
I wrote to the Complaints Department at HMRC. It was only when I drew their attention to the legislation that they have finally backed down and agreed to amend my tax liability to the correct figure and withdraw the penalty.
So my advice to C.Y.Nical is to pay the lower (correct) liability and complain. Charge them for your time as well - its the only way they will eventually get the message.

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By Albasas
28th Jan 2018 06:45

Have a #60 exclusion here CGT. Add 0.01 p here take it away from another box there etc net result nil and return corrected. Hardly inspiring confidence in me that the CGT comps are correct when it involves rebasing cost for a non-resident UK taxpayer. Caveat Emptor type tax advice here due to software glitches? A minefield but given the complexities of our tax system then compounded upon in recent budgets predictable and unsurprising really.

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By BigBadWolf
29th Jan 2018 10:15

The Office of Tax Simplification ... really seems to have done a through job!

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Replying to BigBadWolf:
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By D V Fields
31st Jan 2018 21:50

BigBadWolf wrote:

The Office of Tax Simplification ... really seems to have done a through job!


Thorough even!
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By PhilGP
01st Feb 2018 22:01

I've found that document SA110 Tax Calculation Summary Notes 2016-17 from HMRC's website is absolutely riddled with errors.

It's obvious from comparison with the previous year's version of the document that boxes have been inserted, causing later boxes to be renumbered. Many of the formulae for other boxes that make reference to those renumbered boxes haven't been updated, and are left referencing the wrong boxes.

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By david5541
02nd Feb 2018 13:12

was anyone else aware of connection/software isssues with 31st january hmrc online filing all the tax returns filed on 31 january still show overdue on the HMRC site! as of 2/2/18!

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Replying to david5541:
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By DMGbus
02nd Feb 2018 13:28

The two SA returns that I filed on 31 January show on HMRC website (SA - named client - "Your current client ") as follows:

"Tax year ending 05 Apr 2017.

You can file or amend your tax return using commercial software."
Standard practice of HMRC for this message to be present for about 2 or 3 days after filing before becoming:
" Tax year ending 05 Apr 2017.
HM Revenue & Customs (HMRC) received your tax return on 31 Jan 2018. "

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