HMRC Software Issues – We may not be able to file your Tax Return Online

HMRC has recently acknowledged that there are a number of issues affecting 2016/17 tax computations and the ability to file 2016/17 tax returns electronically.

In some cases we will have no option but to file your return the old fashioned way on paper.

This is what has happened.

In 2016/17 there are four allowances:

• Personal savings allowance (£1000 or £500 depending whether the tax payer is basic or higher rate tax payer)
• Dividends allowance – £5000
• Savings starting rate  – £5000 (depending on the level of non savings income)
• Personal allowance

Unfortunately, HMRC’s tax software seems incapable of allocating these allowances in the most efficient way, and as a result some tax payers will be exposed to higher tax liabilities than are actually due

Although HMRC has admitted these problems it would appear they have no intention of correcting them in the near future. Instead they have published a list of exclusions, which you can find here http://www.sa2000.co.uk/2017-exc-indi.pdf

When an exclusion applies, we will have no option but to file your return by paper.

You may recall that for many years now tax returns filed by paper have been subject to a shorter deadline of 31 October after the tax year end. As a result of these problems HMRC have confirmed that the paper filing deadline will be extended to 31 January 2018. They should then agree to cancel any penalties issued for a late filing of a paper return if it reaches them after 31 October.

This could cause inconvenience for all clients who need to verify their income for a third party. The most obvious example of this are those who are planning to make a mortgage application in the near future.

Filing your return electronically means it is possible to verify your income almost immediately. Where your return is filed on paper it can take weeks for HMRC to process it manually.

If you think this is going to affect you then we would encourage you to provide us with your 2016/17 tax return information as early as possible. Please contact our Personal Tax Manager, Maxine McIntosh at mm@rayneressex.com if you would like more information about these issues or to check if this will affect you.

Disclaimer: Please note that this leaflet is not intended to give specific technical advice and should not be construed as doing so.  It is designed to alert clients to some of the issues and not intended to give exhaustive coverage of the topic.  Professional advice should always be sought before action is either taken or refrained from as a result of information contained herein. This firm is not authorised under the Financial Services and Markets Act 2000 but we are able in certain circumstances to offer a limited range of investment services to clients because we are members of the Institute of Chartered Accountants in England and Wales.  We can provide these investment services if they are an incidental part of the professional services we have been engaged to provide.

June 2017