HMRC to fix 2016/17 tax calculation to resolve some of the online filing issues.
HMRC are currently in discussions about whether or not to fix the 2016/17 tax calculation mid-way through the year. There are a number of scenarios where HMRC have got the allocation of allowances wrong and so the tax calculation is not always calculating the correct liability. This will be the first time HMRC has ever resolved these issues mid-way through a tax year. Normally these would not be addressed by HMRC until after the end of the tax return filing season so that they do not occur for the following tax year.
Currently all issues are added to the Exclusions list, which means that if a taxpayer’s circumstances falls within one of the specified scenarios; the tax return must be filed on paper to avoid an incorrect tax computation from being generated.
IRIS immediately took the stance that the tax calculation should be correct, so when these errors were discovered we issued updates to our products to correct them. However, while this means the right tax will be calculated by the product it cannot be submitted online as the HMRC calculation for the same taxpayer will be incorrect and therefore the Return will be rejected.
What does this mean for IRIS customers?
If HMRC do go ahead and issue a fix to their tax calculation in October it will mean that IRIS customers can continue to use their products as they currently are, and will once again be able to submit the Return online.
Once HMRC correct their calculation, IRIS will need to remove all warnings and prompts in the products to let users know that their client has fallen into one of the scenarios. This will obviously also involve a large amount of testing against HMRC’s updated tax calculation to ensure that it is correct.