HMRC haven't yet calculated tax due

[stewamax]

Moderator Message:
Moved to Taxes board with shadow in DAK

A taxpayer submitted her 2017-8 return to HMRC on paper for HMRC to calculate tax due because it was ‘caught’ by one of the exclusions which are not handled by the HMRC’s online system or proprietary systems which are validated against HMRCs.
Her online account shows that it was received by HMRC well before the October 31st deadline.

HMRC has not, however, sent either a statement of tax due or refund, and her online account shows summary figures that are identical to the previous year! A call to HMRC elicits the comment that "the account will look odd because our system cannot handle that exclusion yet”.

DAK where this leaves the taxpayer? HMRC commits to do the calculation, hasn’t yet done it, and shows no signs of doing so before 1st February.
Her payments on account made in January 2018 and July 2018 should more than cover any tax liability, but HMRC may eventually decide different and levy a penalty.

[PinkDalek]

Moderator Message:
Moved to Taxes board with shadow in DAK

A taxpayer submitted her 2017-8 return to HMRC on paper for HMRC to calculate tax due because it was ‘caught’ by one of the exclusions … DAK where this leaves the taxpayer? HMRC commits to do the calculation, hasn’t yet done it, and shows no signs of doing so before 1st February.
Her payments on account made in January 2018 and July 2018 should more than cover any tax liability, but HMRC may eventually decide different and levy a penalty.

I don't see why a penalty should arise as the paper return was filed in date.

There may be late payment penalties and interest if the payments on account don't cover the liability. Presumably the taxpayer will also be making a payment on account before 31 January for 2018-19. She could always make an additional payment should she feel it appropriate, to attempt to cover any underpayment for 2017-18. That having been said, for the previous year HMRC announced:

Should their income tax liability calculation for 2016/17 be too low, or the deadline of 31 January be missed because of an exclusion, HMRC will not apply late filing, late payment penalties and/or interest

Maybe they'll take a similar approach where a submitted 2017-18 return has not been processed and no tax calculation has been issued.

[stewamax]

Moderator Message:
Moved to Taxes board with shadow in DAK

There may be late payment penalties and interest if the payments on account don't cover the liability. Presumably the taxpayer will also be making a payment on account before 31 January for 2018-19. She could always make an additional payment should she feel it appropriate, to attempt to cover any underpayment for 2017-18. That having been said, for the previous year HMRC announced:

Tnx PinkDalek - you raise a good point. As it happens, taxpayer reckons she has no liability to make advance payments for 2018-19: her balance between investment and employment/pensions income varies widely each year. But she mentioned that she was indeed contemplating making an 'ex gratia' (!) payment on account before 1st February to cover just the eventuality you mention.

[bungeejumper]

I have a vague recollection that this is a known problem for HMRC, bless their bureaucratic hearts. There was an article in the FT about it, some time last autumn. Will see if I can locate it.

BJ

[PinkDalek]

I have a vague recollection that this is a known problem for HMRC, bless their bureaucratic hearts. There was an article in the FT about it, some time last autumn. Will see if I can locate it.

BJ

The situation the OP describes is slightly different to the well publicised problems regarding Exclusions etc.

As at 20.11.18 this was the up to date position:

https://assets.publishing.service.gov.u ... i-v3.0.pdf


From elsewhere there were considerable delays to HMRC’s processing of 2016/17 paper returns for exclusion cases and Ideally, the relevant exclusion number should be clearly marked on the return so that it is diverted to the specialist team that processes returns for exclusion cases.

[stewamax]

Taxpayer posted a covering letter with her return specifying that the return was caught by exclusion #81 (Top slicing relief) created I believe by cashing in some old Prudential insurance-linked bonds.
I will suggest that before 31st January she write another letter to HMRC explaining that as far as she can see online:
- the tax liability from the return has not yet been calculated
- she hasn't had a demand or refund from them
- she is due a refund

I will leave it up to her to decide whether she pays something more on account just to be doubly sure.
It is a touch maddening as she was caught with a different exception last year, again related to HMRC's incorrect implementation of the personal savings allowance

[PinkDalek]

Taxpayer posted a covering letter with her return specifying that the return was caught by exclusion #81 (Top slicing relief) ...

Self Assessment Individual Exclusions for online filing - 2017/18 ...

81 … It is estimated that up to 6,000 customers will be affected.

Customers and up to 6,000 of them! Not that it helps but it looks like that unresolved exclusion is the one with the highest number of taxpayers involved, where the numbers are shown.

Please do keep the Topic updated as to when the taxpayer eventually gets the Tax Calculation.

[stewamax]

Taxpayer did indeed write another letter to HMRC in January explaining that, as far as she could see online, the tax liability from the Return had not yet been calculated, that she hadn't had a demand or refund from them and that she is due a refund.

She received a written reply from them today accepting that the paper Return has been received by them in time, that they are remiss, and that "if you incur any additional charges or interest please appeal in writing and we will remove them". Plus a final apology for inconvenience.

[stewamax]

Taxpayer has now received her "Self Assessment - Tax calculation" letter from HMRC.
Oh goody!

But in spite of her sending the original return with a note explaining that it had been submitted on paper for them to calculate because it was caught by exclusion #81, HMRC's calculation miscalculated the top-slicing relief due; they appear to have used their standard SATR number-crunching system that does not tale into account the effect of either the Starting Rate or the Personal Savings Allowance.
In Taxpayers case she was due a further £500 relief (£100 in real money).

She has now sent them the correct detailed top-slicing relief calculation (which is not to be sneezed at; it is about 60 lines in Excel)...