Collecting tax due should be HMRC’s number one priority, but it has failed to issue some taxpayers with payments on account (POA) demands for 2018/19.
Taxpayers within self assessment who owe tax of £1,000 or more generally have to make two payments on account of tax due for the 2018/19 year, by 31 January 2019 and 31 July 2019.
These POA demands should each be equal to half the total amount of tax calculated as payable for 2017/18. The HMRC computer should send out demands for these POA amounts in good time to allow the taxpayer to find the money before 31 January and 31 July 2019, but this year it has failed to do so in every case.
This problem for 2018/19 was apparent in January 2019, as reported by Laurence52 in Any Answers and many other AccountingWEB members. HMRC was aware of the issue and told tax agents it would be fixed, but it hasn’t. There was also a similar but less widespread problem which arose for the 2017/18 payments on account.
The professional tax and accountancy bodies have complained, and HMRC has apologised to them. But it has made no attempt to tell affected taxpayers what to do.
What to tell clients
If your client did not see a request for 2018/19 POA, they may have paid only the balancing payment due for 2017/18 by 31 January and not the higher figure you will have advised. If no POA demand was issued in January 2019, unless HMRC has manually altered the taxpayer’s record on prompting by you or the taxpayer, a July POA is unlikely to be issued.
If the taxpayer has not paid either 2018/19 POAs, they will have to pay all of their 2018/19 SA tax due by 31 January 2020. This could amount to a very large sum.
Based on her 2017/18 tax return, Susan should have two POAs to pay of £5,000 in each of January and July 2019, but she didn’t receive those tax demands. Her 2018/19 tax return shows the total tax liability to be £13,000 for that year.
If Susan does not pay her 2018/19 POAs she will have to pay the following by 31 January 2020:
2018/19 all tax: £13,000
2019/20 POA: £6,500
Total due: £19,500
There is a real risk that Susan could find it very difficult to pay such a large sum in one go in January 2020 and fall into debt.
Pay, or save the tax?
In the above example, Susan may want to make a voluntary payment of POA to HMRC. However, there is a risk that a voluntary payment will be automatically repaid by HMRC’s computer which doesn’t recognise that the tax is due.
To avoid payment ping-pong, you could suggest that the taxpayer deposit all the tax due into a savings account so it is ready to pay out to HMRC in January 2020.
If you do this, be very careful not to recommend a particular savings account or product as this amounts to investment advice governed by the Financial Services and Markets Act 2000, and you must be authorised to give such guidance.
HMRC has confirmed that if the demands for POAs have been omitted from the taxpayer’s tax statement, the taxpayer will not be charged interest on the late payments, as long as full payment of all the tax due for 2018/19 is made by 31 January 2020.
An HMRC spokesperson told AccountingWEB: “We are aware of an issue with payment reminders for a small number of customers. Anyone who is affected can contact us and we’ll put it right. Nobody will be charged additional interest due to this problem, as long as they pay the full amount due by the 31 January 2020.”
The spokesperson went on to reaffirm that the issue only affects returns from tax year 2017-18.
Client paid POA?
If your client did pay the correct amount of tax by 31 January 2019, including the POA which you advised, but their tax statement did not show a demand for 2018/19 tax, this can be fixed.
You can ask HMRC to add the payment made on account to the taxpayer’s record, which will ensure the tax is not repaid. This adjustment can only be done if the taxpayer did, in fact, make a POA in January 2019.