HMRC's problems with online filing multiply

Source: HM Revenue & Customs | | 13/07/2017

HMRC has long been encouraging us to file tax returns online.  As a practice we believe that is the way forward and having been filing them in that way for several years.  There will always be the odd occasion when a paper return is needed, but it appears now that there be a return to paper filing for a few more taxpayers, courtesy of HMRC's IT systems being unable to cope with some of the recent changes in its own legislation.  Oh dear, oh dear, oh dear!

If a taxpayers is affected in this way, HMRC allows a paper return to be filed by the deadline (31 January) for online filing rather the deadline for paper filing (the previous 31 October).  It calls the 'exclusions from online filing'.  The list of exclusions for 2016-17 has been updated with the publication of version 4.0 of the document. There are now a total of 32 live exclusions on the list, including 5 new additions specifically for this year.

Virtually every one of the items on the list exists because HMRC has been unable to update its software to properly deal with all the recent changes to the dividend tax, personal allowance and savings allowances from April 2016.  HMRC argues that a relatively small number of taxpayers will be affected by these issues, but we fear it may be more than they think.  It will certainly cause problems for those affected and some taxpayers will be required to step back in time and submit tax returns in paper form.

The additional exclusions for this year include:

  • taxpayers with savings and non-savings income over £32,000, of which the non-savings income is between £11,000 and £16,000; and
  • taxpayers with dividends of more than £118,000, where the taxpayer is liable to additional rate tax.

In a recent update HMRC said:

'HMRC is working hard to ensure that no tax is incorrectly assessed for a very small number of self assessment customers, who have a very unusual combination of income types. HMRC is committed to helping customers file online for 2016/17 and is discussing how best to achieve this with agent representatives and software providers. Further information will be provided, as soon as it becomes available.'

If you are affected by the inability of HMRC's software to cope with your return, and you need to file a paper return for 2016-17, HMRC will accept the submission of a paper return up to 31 January 2018 on the basis that the failings of HMRC's computers in this way gives the taxpayer a reasonable excuse for late submission.  HMRC advises that a reasonable excuse claim should be sent together with the paper return. HMRC has said that they expect to be able to fix these issues for 2017-18 and subsequent tax years.  We shall see.

We had a couple of exclusions for 2015-16 and, despite following the guidance above to the letter, the clients still received penalty notices, putting us to the trouble of appealing them and explaining to the clients that it was HMRC's incompetence and not ours!!

 

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