27 Apr 2017

Dividend allowance causes problem for HMRC’s systems

18 April 2017

An error in HMRC’s software will leave some taxpayers having to file paper returns.

HMRC’s self-assessment software for 2016-17 contains a specification error affecting the dividend and personal savings allowances introduced in April 2016. It affects taxpayers who file online using HMRC’s software or third-party packages.

The department is working to fix the problem and has added these situations to its list of self-assessment individual exclusions for online filing for 2016-17:

‘51 – Where the customer has non-savings income less than the personal allowance and savings starting rate (SSR) (£16,000) plus savings income not covered by any personal savings allowance they are entitled to, the SSR of £5,000 is not being given.

‘52 – Some customers who have non- savings/savings/dividend income and their income exceeds the basic rate band (BRB) the calculator is incorrectly reducing the higher rate band by the £5,000 dividend allowance rather than by the amount of the allowance not used in the BRB.’

In each circumstance, HMRC says taxpayers affected should submit a paper return so they do not overpay tax. Returns filed after 31 October should include a ‘reasonable excuse’ claim citing the exclusions.

Andrew Browne, head of tax at Bishop Fleming, called the error ‘astonishing’. He said: ‘We are just 12 months away from the tax system being digitised, yet HMRC cannot even correctly digitise one aspect and is instead asking for paper returns. It does not bode well for its Making Tax Digital project.’

An HMRC spokesperson said: ‘No tax has been wrongly paid or assessed. A very small percentage of self-assessment taxpayers who have an unusual combination of income types currently have to use paper tax returns.’

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