“If You Don’t Ask, You Don’t Get…”
Is an adage that HMRC probably knows all too well at the moment. Due to a failure of the HMRC self-assessment system, some taxpayers haven’t been informed of the amount of tax to pay on account by 31 January 2019. This problem won’t be fixed before 31 July 2019.
It’s not a new problem, though. The same thing happened when in July 2018, payments due for 31 July 2018 were not being notified. Anyone in self-assessment with less than 80% of their tax collected at source, for example through PAYE, paying more than £1,000 through their tax return per year needs to make a payment on account.
This will apply to most self-employed individuals but also possibly landlords and increasingly company directors who take out a lot of income from their company as dividends.
Let’s Consider a Typical Self-Assessment Case
For example, Barbie, a self-employed marriage guidance counsellor, paid income tax of £9,000 for 2017/18, of which £7,500 had been paid on account in two equal instalments on 31 January 2018 (£3750) and 31 July 2018 (£3750).
She had to pay the balancing payment of £1500 by 31 January 2019. However, she should also make a payment on account for 2018/19 of £4,500 by 31 January 2019, equal to half of her 2017/18 total tax liability (£9000).
Still With Us? Hang On: It’s Worth It
The professional tax and accountancy bodies have complained to HMRC and apologies have been received but there is apparently no way HMRC can identify those affected and remind them!
HMRC has said it cannot resolve the problem of missing tax demands in time for the 31 July 2019 payment date. If you did not receive a tax demand for 2018-19 due by 31 January 2019 you may have only paid the balance of tax due for 2017-18.
Going back to Barbie, she would have therefore incorrectly paid just the £1500 instead of £6000 (£1,500 plus the first £4,500). If Barbie fills out her own tax return now for 2018-19 it will not show she has paid the £4500 in January 2019 and also another £4500 due for July 2019.
But it Only Delays the Inevitable
The result of this is that Barbie will have a much larger tax bill to pay in January 2020 when the balance of tax due is payable. You are probably saying … “why not just pay the amounts without a demand”. It is possible that the payment will be accepted but also likely that it will be returned by the HMRC computer as “not due”.
HMRC has confirmed that if the demands for payments on account have not been made the taxpayer will not be charged interest as long as full payment of all the tax due for 2018/19 is made by 31 January 2020.
In these circumstances, it may be wise to park the money in a savings account until HMRC can sort themselves out. If you do get charged interest, your tax agent can take this up with HMRC to get the situation reversed.
This is the latest of a long list of errors with HMRC’s computer systems. Earlier this year we learned that penalty notices for not submitting the 2017-18 tax returns on time were going to be delayed until April 2019. Normally they are issued in February.
Because of this, some taxpayers will be unaware they’ve clocked up additional penalties for continuing failure to submit returns. So, HMRC will probably have to wait longer for those tax returns.
Now, we don’t condone not sending in your tax return on time, but the lesson again to HMRC is “If you don’t ask, you don’t get”!