Warning - HMRC have mucked up 2016-17 self-assessment

chrismac1
chrismac1 Posts: 2,585 Forumite
in Cutting tax
Despite having had a year to get this right, HMRC's own database software contains errors for 2016-17. In turn this means all commercial software replicates the errors, because in order to get the returns to file electronically suppliers must pass the HMRC flags including those which have been mucked up by HMRC.



The problems stem from the interaction between the separate allowances for savings and dividends, the personal allowance, and the additional rate of tax on income over £150,000. The two groups of taxpayers affected appear to be:
  1. those with total income made up of savings and non-savings income over £32,000 of which the non-savings income is between £11,000 and £16,000
  2. those with non-dividend income of £27,000 to £32,000 plus dividends which take their total income to more than £145,000
Individual taxpayers (not trustees or personal representatives) are entitled to the dividend allowance of £5,000, which taxes the first £5,000 of dividends at 0%, within the tax band the dividends fall into. Dividends are taxed as the highest slice of income.

In both of the above scenarios the tax due per HMRC will be £1,000 more than is legally due. What a surprise they screwed it up in that direction!
Hideous Muddles from Right Charlies
«13

Comments

  • Pennywise
    Pennywise Posts: 13,468 Forumite
    Name Dropper First Post First Anniversary
    Another reason why the ridiculous MTD rules coming in next April (2018) for which HMRC havn't yet decided on the detail MUST be delayed by at least 2 years. If they can't program the basic SA return system given a years' notice, they havn't a hope of getting their systems ready for a fundamental change such as MTD. It's just like watching a car crash.
  • chrismac1
    chrismac1 Posts: 2,585 Forumite
    edited 27 March 2017 at 8:51PM
    It's worth saying these are only the known errors. A numpty called George Osborne came up with numerous fiddly little allowances which interact with each other in complex ways. The 2 scenarios above are actually pretty straightforward, so the fact HMRC have bungled these having had a year to get it right is crap, even by their drivelly standards.

    It's almost certain that somewhere out there are some people with various more complex income streams than the known scenarios, which the twits running the UK tax system will have butchered even worse than the known erros.
    Hideous Muddles from Right Charlies
  • Wayne_O_Mac
    Wayne_O_Mac Posts: 236 Forumite
    Wolf! Wolf! No, honestly, there really is a wolf this time!
  • chrismac1
    chrismac1 Posts: 2,585 Forumite
    I'm sure everything will be just hunky dory next year when MTD plus the Scottish income tax come in at the same time.
    Hideous Muddles from Right Charlies
  • Cook_County
    Cook_County Posts: 3,085 Forumite
    First Anniversary First Post
    We all know that Tim Good & Giles Mooney are making a million quid or so out of accountants by selling this SHOCK HORROR story everywhere. Of course HMRC & other tax software can cope with it.
  • chrismac1
    chrismac1 Posts: 2,585 Forumite
    Just to be clear about this, today I had a client call me to say she was being threatened with a fine for failing to submit her VAT return for period 01/17. On the HMRC VAT database when I logged in it correctly showed her to have submitted 12/16 on time and that the next quarter to submit is 03/17.

    So we have to conclude the database just completely screwed up the letter it wrote her, which by the way had neither a person named on it or a phone number. Really unprofessional.

    I have 140 clients and I get on average one phone call per week about this sort of rubbish. My standard guidance to clients on this is:

    "Whilst the UK has the sixth largest economy in the world, our tax administration quality is probably more comparable to Bangladesh, with no disrespect to that country. Your first question when receiving a letter from HMRC should always be "Is this just an error-strewn load of drivel?" In my experience the answer will be yes around 30% of the time. Only once you are confident HMRC has actually managed to process things right, and add 1 plus 1 to get 2, should you decide you need to take any sort of action. If the HMRC letter contains threats and menaces please forward me a copy so I can get rid of them for you."

    NEVER, repeat NEVER, just accept anything from HMRC at face value.
    Hideous Muddles from Right Charlies
  • Pennywise
    Pennywise Posts: 13,468 Forumite
    Name Dropper First Post First Anniversary
    To add to Chrismac's experiences, I've just had a cracker.

    Husband and wife, both made various gift aid payments over the years, neither told me about them, so no claim made on their SA returns for higher rate tax relief.

    I wrote identical letters, posted the same day, the only differences being the client name and UTR numbers, and the amounts of gift aid claims being made to adjust prior year SA returns.

    Two letters back, received same day, neither named, one agreeing and saying payment plus interest being made. The other citing all kinds of rubbish reasons as to why a late claim can't be made.

    Just shows the lack of consistency between HMRC workers and lack of quality control and staff training.
  • uknick
    uknick Posts: 1,622 Forumite
    First Anniversary Name Dropper First Post
    http://www.accountingweb.co.uk/tax/hmrc-policy/errors-in-tax-return-software-force-paper-filing
  • Pennywise
    Pennywise Posts: 13,468 Forumite
    Name Dropper First Post First Anniversary
    Cook_County wrote: »
    We all know that Tim Good & Giles Mooney are making a million quid or so out of accountants by selling this SHOCK HORROR story everywhere. Of course HMRC & other tax software can cope with it.

    As confirmed by the accountingweb article above, HMRC & other tax software CAN'T cope with it and HMRC instructions are to submit a paper return instead.

    Trouble is, how do people know that what they submit electronically isn't right. I think taxpayers can reasonably be expected to assume that official tax submission software is correct. How would they know to check HMRC's list of circumstances when paper returns are needed? It doesn't look as if HMRC's system will flag up that your submission is wrong, so you'll blindly pay too much tax.

    Another point is what if you don't submit electronically until say December, then discover you have to file manually because the electronic system doesn't work properly, but you've missed the paper return filing deadline?

    You really couldn't make it up!
  • polymaff
    polymaff Posts: 3,903 Forumite
    First Anniversary Name Dropper First Post
    Last year's specification over-ran the start of the applicable year by three months.

    So SNAFU :)
This discussion has been closed.
★ ★ ★ Meet your Ambassadors

Categories

  • All Categories
  • 343K Banking & Borrowing
  • 250K Reduce Debt & Boost Income
  • 449.6K Spending & Discounts
  • 235.1K Work, Benefits & Business
  • 607.8K Mortgages, Homes & Bills
  • 173K Life & Family
  • 247.8K Travel & Transport
  • 1.5M Hobbies & Leisure
  • 15.9K Discuss & Feedback
  • 15.1K Coronavirus Support Boards