25 March 2019
The system for assessing and collecting tax is so huge and complex that it is not surprising that faults arise from time to time. This year HMRC is suffering additional pressure and two problems have cropped up which might lead you to pay the wrong amount of tax or to become liable to penalties. This would be a good time to check your tax affairs.
Are you required to make a payment on account?
Those of us whose tax is not entirely collected by the PAYE system, typically the self-employed or recipients of substantial investment income, should have two dates indelibly printed on their minds, 31 January and 31 July. These are the dates by which we need to pay our tax. Fortunately, most taxpayers will be reminded in good time by their accountants, and, for the others, HMRC are normally quite efficient at communicating. However, this year there has been a glitch affecting an undisclosed number of taxpayers.
As you are no doubt aware, the self-assessment payment on or before 31 January 2019 consists of two parts: first, any tax still outstanding in respect of the 2017/18 year, and second, a payment on account of the current 2018/19 year. The payment on account, calculated as one half of the previous year’s liability, is due unless:
- the previous year’s self-assessment liability was less than £1,000; or
- more than 80% of the current year’s liability has already been paid (e.g. deducted at source from current income); or
- the taxpayer has applied on their SA return to reduce the payment on account (if, for example, the current year’s income is known to be less than the previous year).
HMRC have advised that, due to a systems error, some taxpayers have been notified of their liability to pay the first part of the 31 January bill (the amount representing the balance of the 2017/18 liability), but not the payment on account of 2018/19. Under normal circumstances, HMRC charges interest on tax paid late but a spokesman is on record as saying, “We are aware of an issue with payment reminders for a small number of customers. Anyone who is affected should contact us and we’ll put it right. Nobody will be charged additional interest due to this problem.”
Late advice of penalties
It seems that HMRC have not started 2019 well because another problem has come to light. This concerns the 700,000 taxpayers who failed to file their self-assessment returns by 31 January, and who, unless they can provide a reasonable excuse, will each suffer a late-filing penalty of £100. HMRC has stated that, due to having to allocate additional staff to the Brexit issue, penalty notices will not be issued this year until April. By law these notices have to be issued by 30 April, but usually they are sent much earlier.
The problem for those who are not aware that they have been charged is that if a tax return is over three months late, i.e. not received by HMRC by 1 May, a penalty of £10 is charged for every additional day the return is late. It is not unusual for taxpayers to believe that they have filed their return but for HMRC not to have logged it. In such cases, it is possible this year that such a taxpayer may be into the £10 per day penalty regime before they receive any warning.
Time to check
If you are already a client of UHY Torgersens, we will have advised you of the total amount you needed to pay on 31 January, including the 2018/19 payment on account. If you have been advised by HMRC to pay a different amount you should get in touch with your usual contact at our office as soon as possible. Any reader of this blog who does not have a professional tax adviser and has any doubts over the amount of tax paid or indeed, whether HMRC has received their self-assessment return, should urgently check their online personal tax account and their online submission receipt. If you need assistance, please contact Martin Johnson on 0191 567 8611 or email firstname.lastname@example.org.
As one of the leading firms of accountants in the North East, with offices in Newcastle, Sunderland and Jarrow, we have the expertise to advise you on a wide range of accountancy, tax and business issues. If you would like to speak to one of our local experts, please call 0191 567 8611 or e-mail email@example.com.