HMRC error with payments on account
May 09, 2019
News Tax Tips
A problem which originally arose during the 2017/18 tax year is continuing to cause headaches for HMRC. A series of computer errors has meant that some tax payers have not received any demand for 2018/19 payments on account (POA) on their tax statements. It’s an issue which affects not only the paper statements of account issued by HMRC, but also tax payers’ online personal tax accounts.
Who is required to make payments on account?
You need to make payments on account if (a) you file a self assessment tax return, (b) you have less than 80% of your tax collected at source under PAYE and (c) you pay more than £1,000 in income tax per year. If you’re self-employed this is likely to apply to you, and if you’re a company director you may also be affected as the majority of your income is likely to via company dividends.
What is the error affecting POA?
HMRC’s computer error means that tax payers are not being sent their usual demand for payments on account. The deadline of 31 July 2019 is likely to come and go without some tax payers receiving a reminder of the tax they owe. This then means that tax payers end up out of sync with their payments and potentially owe a much larger tax bill at a later date.
Although HMRC claims the error is only affecting a small number of tax payers, evidence from professional tax and accountancy bodies would suggest that the issue is significantly more far reaching. HMRC is not pro-actively doing anything to remedy the situation, and has just assured customers that if they get in touch then the problem will be put right and they won’t be charged any additional interest. HMRC has stated that the error of missing POA demands won’t be fixed before the next 31 July 2019 deadline date.
What to do
If you don’t recall having seen a demand for your 2018/19 POA, this may mean that by the 31 January 2019 deadline you only paid the outstanding tax due on your 2017/18 tax bill, and not the additional 50% of your 2018/19 tax bill. If the POA in both January and July 2019 are missed, this means that by 31 January 2020 you will have to pay your whole 2018/19 tax bill plus your POA for 2019/20 all in one go.
To avoid this situation and help spread the cost, you may find it possible to make payments on account voluntarily. Unfortunately this approach does carry the risk that HMRC’s computer system will automatically repay your voluntary tax payment! So another fail safe would be to deposit the amount of tax you’ll be due to pay into a savings account, so it is ready for payment by 31 January 2020.
No interest charges
If HMRC acknowledges that the demands for POA have been left off your tax statement, then you won’t have to pay any additional interest. Just make sure that you pay your total 2018/19 tax bill in full by 31 January 2020.
If you come across problems, please get in touch with the PT team and we’ll be happy to help.