UK Self-Assessment: Post-Submission Challenges

Now that the 2017/18 tax return deadline has passed, our personal tax specialists provide guidance on how to address a range of post-submission challenges, some of which you may not be aware of.

1. Disappearing Payments on Account

Individuals who are within the payment on account regime, and so need to make advanced payments towards their next tax bill, need to be aware of an ongoing software glitch at HMRC (Her Majesty’s Revenue and Customs), which effectively removes the requirement to make payments on account for the 2018/19 tax year.

If the issue was brought to HMRC’s attention prior to the first payment on account due date, they would enter the payments manually. However, as we are now beyond 31 January 2019, HMRC is refusing to introduce these to customer’s accounts unless there was sufficient credit available at that time in order to cover the first payment.

In cases where the payments on account are not triggered or manually added by HMRC, the taxpayer can make the decision to pay or leave any tax payable for 2018/19 until 31 January 2020 and simply make a larger balancing tax payment. No interest charges will be levied by HMRC.

The same issue occurred in a small number of cases last year. While HMRC cannot pinpoint precisely why this continues to happen, they have suggested that it seems to affect those that have only marginally tripped over into the payment on account regime (i.e. where less than 80% of the overall tax liability for the year has been deducted at source).

2. Delays in Processing Amended Tax Returns

Once a Self-Assessment Tax Return is submitted by the 31 January due date, HMRC has until the following 31 January to enquire into it. This is known as ‘the enquiry window’.

During that time, a taxpayer or their agent may make an amendment to the tax return if they find, for example, that there has been an omission. The amendment may be made online or in writing.

Any taxpayers that have written to HMRC previously may be aware of extended delays in processing amendment requests and on the odd occasion, their letters have been known to mysteriously disappear. This is why it is preferable to make the amendment online.

Unfortunately, there have been certain cases where returns have been re-submitted online within the one-year amendment/enquiry window and have simply sat there unprocessed, effectively caught in limbo.

It can take some time before this comes to light and can be problematic where, for example, a large credit is anticipated for 2016/17, which would cover a balancing tax payment for 2017/18. 

3. Ongoing Class 2 National Insurance Problems

In July 2015, Class 2 National Insurance (contributions made by self-employed people if their profits are £6,205 or more a year) ceased to be collected from those in business on their own account via direct debit. The responsibility for collecting payment shifted from the National Insurance Contributions Office (NICO) to HMRC Self-Assessment. Class 2 National Insurance preserves the right to certain state benefits, including providing a year’s credit towards a future state retirement pension (35 qualifying years required).

There have been problems since 2015/16 where the link between the old NICO record and the Self-Assessment record is broken. One well publicised way of breaking the link was through the taxpayer cancelling their direct debit around the time that the transition to Self-Assessment took place. According to HMRC, they explicitly recommended that taxpayers did not cancel direct debits for this very reason.

The consequence is that when a tax return is submitted for a sole trader, partner or member of an LLP showing a Class 2 NI liability (£148.20 for 2017/18), HMRC automatically removes the liability and issues a revised calculation believing that the individual is not registered as self-employed, a partner or member of an LLP.

4. Scams

The criminal fraternity out there continue to invent all manner of weird and wonderful ways to try and extract funds from the accounts of unsuspecting members of the public.  Criminals pretending to be HMRC is a common ruse.

One recently publicised scam involves a telephone call from someone claiming to be an officer of HMRC, requesting that the recipient contact a particular telephone number, and threatening to issue a warrant for the recipients arrest if action is not taken immediately.

Firstly, HMRC would never behave in this manner and whilst they do sometimes telephone customers who have outstanding arrears, they would never call in relation to a slightly late tax return form. With around a million tax returns filed late every year, this would create a considerable amount of work!

HMRC would simply issue a £100 penalty notice in late February and I am pleased to advise that failing to submit a tax return is definitely not punishable by arrest and/or imprisonment.

Whilst the above covers a selection of post 31 January issues that can arise, this is just the tip of the iceberg, metaphorically speaking. Contact us to discuss a tax advisory and compliance service that helps avoid any pitfalls and provides peace of mind.

Our next personal tax breakfast briefing is scheduled for 19 March 2019; to register your interest in attending this event, please contact info@acacomplianceeurope.com.

How ACA Can Help

ACA provides a complete private client tax advisory and compliance service, including the preparation of annual tax returns and tax calculations, and advising on income, inheritance, and capital gains taxes. Our team also advises on international tax issues and can act as an agent to handle HMRC inquiries.

ACA Aponix provides a broad suite of services to help firms identify and remediate cybersecurity, technology and privacy risk. Our award-winning cybersecurity and technology risk assessments include reviews of cash controls, payroll workflows, and vendor relationship/platform vulnerabilities. We also offer cyber awareness training and phishing testing which can help staff recognize and prevent social engineering, scams, and related cyber threats.