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Phantom returns haunt tax season

HMRC says it is receiving “large numbers” of self assessment returns filed as amendments. What could be causing this strange phenomenon?

16th Jan 2020
Head of Insight AccountingWEB
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Returns submitted as amendments haunt tax season
iStock_Phantom returns_shinyfamily

Ever keen to help tax agents avoid delays during tax season, HMRC published a special Self Assessment Agent Update as the 31 January deadline nears.

Some of the reasons for delays are fairly mundane, such as using out-of-date software, but a couple of quirks continue to cause problems, most notably when marriage allowance relief is claimed and the taxpayer’s partner has not completed the marriage allowance transfer claim by phone, letter or online. (amended - see comment below, Ed), This could cause a delay, the department warned.

The guide also flags up an issue around “large numbers of returns online that were submitted as an amendment”.

When the original return has not been submitted, the tax department is unable to process the amendment. “Please make sure that the type of return that you are submitting is correct (live/test and full return/amendment) to avoid delays in processing,” the update added.

Tax software developers are aware of this odd behaviour, but suggested it might be due to a bug in one or two products as most programs require the user to take a conscious action to file an amendment, or will stop it from happening if a return hasn’t already been filed.

Thomson Reuters' Mark Purdue commented: “Receiving amended SA returns where no original has been submitted has been a big issue for HMRC for many years – they have frequently raised it with software providers, but it would appear to still be an issue.  

“Basically, the Government Gateway does not check whether an original is held when an amendment submission is made, and so it accepts it, but then cannot apply it to the HMRC record. It does, however, check that when an original submission is made it is not a duplicate and an original is already held. 

“In our software, we do not allow an amendment to be submitted unless we know the original has been received by HMRC. Where our software submitted the original, it automatically sets the amendment flag. Where the original was not submitted via our software [and] the user submits it as an original, HMRC rejects it [as] “original already held”, and then we re-submit it with the amendment flag. 

“At no point can a user manually tick the amendment flag, and so ‘stranded amendments’ is not an issue with our software.”

TaxCalc told AccountingWEB: “We haven’t encountered any issues with amended tax returns being submitted instead of an original through TaxCalc. This is because a user has to consciously tick a box to state that the tax return is an amended version.”

A quick straw poll in Any Answers turned up a few examples where members had filed amendments in error – usually by inadvertently ticking an Amendment button. HMRC’s oversight in not rejecting these returns irritated Tim Vane, but a couple of accountants moaned about interface designs that allowed this to happen in TaxCalc and Taxfiler.

AccountingWEB member tbk suggested the block on amended returns was probably beefed up to prevent hackers with HMRC Online credentials posting amendments that requested refunds to the fraudsters' bank accounts. “Could this be a mass fail along those lines?”

Replies (14)

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By Duggimon
17th Jan 2020 10:50

Genius. So the gateway can and does check if an original return is held, and uses this information to reject a return if it's a duplicate. So it's either a design decision or basic lack of competence, rather than a system limitation, that has prompted them to accept amended returns when no original is held.

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Morph
By kevinringer
17th Jan 2020 11:05

I've had a case. I successfully filed a return using PTP. The client didn't receive a demand. I checked online account and noticed the account said nothing was payable. I phoned HMRC. It turned out HMRC had captured a nil return the same day the system accepted my return. My return was also an original so that had not replaced HMRC's nil return. HMRC agreed they had made a mistake so HMRC unlogged the nil return but that also unlogged my return. HMRC asked me to file my return again. I did, but the software sent it as an amended one because as far as the software was concerned I had successfully filed the original one. A few days later I phoned HMRC. They said my amended one could not be captured because HMRC had removed the original. PTP permits you to alter the original/amended status so I refiled as an original but HMRC rejected it because there had already been an original! I spoke to HMRC yet again. They said they have to refer it and it'll take a week to fix. I waited a week but still not fixed.

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Replying to kevinringer:
By K81
17th Jan 2020 11:40

had exactly the same situation just this week, managed, finally to speak to a very helpful chap on the agent line who actually took all the information from the tax return over the phone & captured it - checked today & all is as it should be.

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Replying to K81:
Morph
By kevinringer
17th Jan 2020 13:16

So much for HMRC wanting to be the most digitally advanced tax authority in the world!

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Replying to kevinringer:
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By Vallery Lee
17th Jan 2020 13:13

This scary. I still have returns coming in for completion and so if this happens.......... fines no doubt with the client blaming me despite several reminders. Hope you get sorted

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Replying to Vallery Lee:
Morph
By kevinringer
17th Jan 2020 13:15

There won't be fines because you have proof you filed: though HMRC may issue a fine and you'll have to appeal.

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Morph
By kevinringer
17th Jan 2020 11:09

I've asked HMRC a question on the forum - why do returns have to have an 'original' or 'amended' status at all. When we submit a return the entire return is transmitted. I don't know how HMRC deal with it but we deal with as a whole new return. HMRC should accept the data as it is and if HMRC have already had a return HMRC should simply process it as an amendment and if HMRC have not already had a return HMRC should process it as an original.

When we send an amended RTI I'm not aware of this being transmitted with 'amended' status. Isn't it a case the whole RTI is re-transmitted as a new original?

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Replying to kevinringer:
By SteLacca
17th Jan 2020 13:41

I'd be interested in knowing what they say, since it's fundamentally easier (both practically and programmatically) to do it that way.

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Replying to kevinringer:
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By Steven Tucker
20th Jan 2020 09:20

For RTI Full Payment Submissions filed during the tax year*, there isn't a flag to say it is an amendment**. However, if it is amending an earlier FPS, the "this period" figures in the return should be the differences from the previously filed figures. I don't know what the impact is of getting this wrong - possibly incorrect Universal Credit payments? The return also includes Year To Date totals, which aren't subject to this rule.

Our software (and hopefully other software) works out the differences automatically, where the original was filed the same way.

* Earlier Year Updates can be filed after the end of the tax year and they are amendments.
** There is a late reporting reason code for amendments but, as far as I'm aware, that only affects penalties.

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By emanresu
17th Jan 2020 12:56

"...most notably when marriage allowance relief is **claimed on one tax return**. If the taxpayer’s **partner** has not completed the marriage allowance transfer claim by phone, letter or online, this could cause a delay, the department warned."

Whether the partner isn't, is or will be the elector, there is nothing to be "claimed on one tax return", John.

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Replying to emanresu:
By coolmanwithbeard
18th Jan 2020 07:53

Although you are correct in that there is no box to tick, the tax due on any submitted return will be wrong if the partner's election is not made.

The return will be accepted with this"incorrect" figure but it is likely to lead to HMRC issuing a correction. Better to get this resolved first. The advice with this has always been to get the partners return in first (if applicable) or to get the application made. This makes good sense.

Mike

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Replying to coolmanwithbeard:
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By emanresu
18th Jan 2020 09:20

No, the potential beneficiary's calculation will be correct, but the statement of account may not be as expected - until sometime after the election is made.

The one and only action required of the two tax-payers is that one - the right one - should elect for MAT. So it is the first - and the last - thing they should do... ;)

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By thomas34
17th Jan 2020 13:32

HMRC don't specify to which year the amendments relate. I've certainly filed two amended 17/18 returns recently because when completing the 18/19 returns I noticed minor errors. They didn't affect the liabilities concerned but in one case I failed to complete the "loss carried forward" box on a furnished holiday let. I'm therefore owning up to contributing to HMRC's observations and apologise for the panic.

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Replying to thomas34:
Morph
By kevinringer
17th Jan 2020 13:36

Thomas, I don't think HMRC are commenting on genuine amended returns such as what you have filed. They're commenting on returns filed as amendments for 2018-19 when an original has not been filed.

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