HMRC refusing to fix website errors that will hit taxpayers with automatic fines

Publications that covered this story include The Times on 17 June.
  • Affected taxpayers likely to get £100 penalty for missing deadline

HMRC are refusing to fix errors on its Self Assessment tax return website that will hit many taxpayers with automatic fines.

Errors in HMRC’s Self Assessment web forms, used by more than 85% of Self Assessment taxpayers – over ten million people last year – mean that online returns will be rejected, and affected taxpayers will have to file again on paper.

This will result in many taxpayers unwittingly missing the filing deadline, as many leave it until close to the 31 January online deadline before completing their returns. As the paper filing deadline is 31 October, many will find their unexpected paper returns are already three months overdue.

This results in an automatic £100 penalty, although this can be appealed if it is filed before 31 January. If a paper return is received after 31 January, an appeal is likely to be rejected.

There are at least 18 errors in the web form. The most common relates to the new dividends and savings tax rates and allowances, introduced in April 2016, where HMRC’s systems have been unable to process many online returns correctly.

Other taxpayers affected include those who:

  • are due a tax refund due to a PAYE coding error in a previous year;
  • are claiming relief on a redemption of bonus shares; and
  • are Lloyds Underwriters who are entitled to tax credits on dividends.

We have encountered further issues which have not yet been recognised by HMRC, which suggests there may be many more scenarios in which online returns may be rejected.

Mike Crellin, tax director in our London office, says: “Getting hit with a £100 fine for HMRC’s poor coding is going to be very galling for a good number of taxpayers during the next tax filing season.”

“Even though the online filing deadline is still eight months away, HMRC have already said that the major problems are not going to be fixed for the 2016/17 year.”

“It’s slightly embarrassing for HMRC to force people back to old-fashioned paper when the web forms don’t work. It’s even worse when the taxpayers are automatically fined £100 for the privilege.”

“The most that taxpayers can do to protect themselves is not leave it too late, and allow for the possibility that they may need to file paper returns.”

“This raises some pretty big questions over the staffing, funding, technical development and project management of HMRC’s customer-facing services.”

“This also raises questions over Making Tax Digital, a project on an exponentially larger scale that is still to be delivered.”