Warning: HMRC Calculation Errors
HMRC have waved the white flag, surrendered and admitted defeat adding four new scenarios to their excluded cases list.
HMRC have been working hard to overcome the challenges they have experienced with Class 2 NIC, Marriage allowance and updating their calculation to include the new savings starting rate, personal savings allowance and dividend rate. But have thrown their hands in the air and admitted defeat as four scenarios have slipped through the net.
Consequently, these have now been added to their excluded cases list which means they can’t be filed online.
This announcement has come very late which means that software houses have not had sufficient warning to prevent filing.
Important Notice: This means it is currently possible to file a 2016/17 return online with the incorrect amount of tax calculated and it be accepted by HMRC.
Following detailed reviews and communications with them, IRIS has confirmed that in four specific scenarios HMRC have made errors within the 2016/17 tax calculation for individuals IRIS are continuing to work closely with HMRC on an update to the tax calculation and expect this in our next available release due out shortly. This will enable the corrected returns to be produced and filed manually.
Who is affected?
|HMRC Exclusion ID
|Description of the issue
Clients with income below the Personal Allowance and Savings Starting Rate (£16,000) and a chargeable event gain will have a lower tax liability calculated than is actually due.
Problem: The £5,000 starting rate band is not being deducted from the basic rate band.
Clients with non-savings income below the Personal Allowance and Savings Starting Rate (£16,000) and savings income above the Personal Savings Allowance will have a higher tax liability calculated than is actually due.
Problem: The 5,000 starting rate band is not being used on the savings income.
Higher rate tax payers with income over £145,000, dividends that don’t exceed £5k in the basic rate band and dividends in the higher rate band will have a higher tax liability calculated than is actually due.
Problem: The dividend income falls into the basic and higher rate band, the basic rate band is reduced correctly but the whole £5k is also being deducted from the higher rate band.
Lloyds underwriters with dividend income where they are entitled to dividend tax credit will have a higher tax liability calculated than is actually due.
Problem: Lloyds Dividends received between 1 April 16 and 6 April 16 are not having the dividend tax credit applied.
How IRIS can help
HMRC confirmed these issues would be added to their list of exclusions for online filing for 2016/17 too close to our main product launch date, meaning that we have been unable to update our tax products to correct the HMRC calculation error or block electronic filing of affected clients for our Spring release that went live on 6 April.
We have however been able to create a FREE spreadsheet tool which will allow you to enter the high level income details for your clients and see if they are affected and the corrected calculation results. This tool covers exclusions 50, 51 and 52.*
Please note: For the reasons mentioned above, the IRIS HMRC Calculation checker tool should be used at your own risk. Use of the tool also confirms acceptance of our standard terms and conditions.