Problems with online HMRC tax systems?

Taxpayers that are working on their current tax returns and found that they cannot use the HMRC software correctly because of problems within the system.

HMRC has spoken to software producers about revising tax calculations to combat the problems with the online filing of tax returns. Which is expected to go live in October.

A terrible year for HMRC

They have admitted to the order for deductions of allowances in the 2016/17 computation caused a majority of problems when designing the tax software systems for that year. It’s a common process to fix software after the end of the tax return season, to make sure that the same issues do not crop up again in the following tax year. In the meantime, the known problems are removed from the categories of tax returns which can be filed online.

For HMRC, this has been one of their worst years to date. Rob Ellis, (CEO of BTCSoftware) said that he cannot remember a year where there have been so many exclusions for filing tax returns online. (You can view the full list here)

Paper Tax Forms

If a taxpayer’s circumstances fall within one of these exclusions, the tax return must be filed on paper to avoid a potential incorrect tax computation from being generated. If a paper tax return is filed after 31 October, because of an online exclusion case, it will qualify for a reasonable excuse for not filing one online. However, to make sure you avoid a penalty, there will need to be a reasonable excuse form submitted along with the paper tax return documents.

An in-year fix

In the prospect of many paper tax returns being anticipated, HMRC has considered issuing an in-year fix for the tax return software. This has never been completed in the history of self-assessments. The proposed fix will cover exclusions 48-56, 58 and 59, which all related to the ordering of allowances. However, there will only be one in-year fix issued, and HMRC are crossing their fingers in the hope that these adjustments will not cause any more problems for tax calculation.

Communication to taxpayers

Lots of tax agents and software producers are worried that some tax returns that have already been submitted with created incorrect tax computations. This is because relevant exclusion wasn’t identified before the return was submitted. This will only apply to either online ad paper tax returns.

HMRC are considering how to communicate with affected taxpayers through a separate letter. However, discussions will take place between HMRC and professional bodies to decide how taxpayers will be informed.