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Have HMRC been foiled by their own complexity?

We have written about Making Tax Digital in the past couple of months (and will probably be writing about it again in the coming months) and we have discussed the complexity of the UK tax system more often than we would like – now these themes are merging!

It seems the complex UK tax system has now defeated even HMRC! HMRC’s software for the current tax year treats the dividend and personal savings allowances incorrectly with the result that the tax bill for a number of people with particular combinations of savings income, non-savings income and dividend income will be incorrectly calculated if they use HMRC’s software to file their tax return. If they use third party software (or, more probably, their accountant uses it) which calculates the tax correctly the HMRC software will not accept the return.

HMRC’s solution? Not as you might expect, “bear with us while we get it sorted” but to make anyone affected submit a paper return! They clearly don’t intend to try and fix the problem any time soon because they point out that although the normal deadline for submitting paper returns is 31 October anyone affected by the software problem will not be penalised provided they get their paper return in by the normal deadline of 31 January. They will, however, have to claim the exemption from a late filing penalty rather than being granted exemption automatically.

And where does Making Tax Digital come in? It is the irony of HMRC saying “Making Tax Digital is a key part of the government’s plans to make it easier for individuals and businesses to get their tax right and keep on top of their affairs – meaning the end of the annual tax return for millions.” On the other hand, HMRC is solving a problem by imposing the chore of completing paper tax returns – we had to check that it wasn’t 1st April!

AIMS Accountants for Business – if you like the way we think you’ll like the way we work