Are you in danger of paying too much tax?

Unless their tax affairs are very straightforward, most entrepreneurial business owners leave the preparation of their self-assessment tax return to their accountant.

But by now almost all professional advisers who provide a personal tax return filing service for clients are aware that HMRC have been unable to incorporate all of the complexities of the personal tax computation within the HMRC self-assessment online filing system.

Yes, the complexities of personal tax calculations appear to have stumped HMRC’s online systems. In fact as I write this one of the examples in HMRC’s own guidelines is wrong and overstates the amount of tax a taxpayer should pay!

The tax rules surrounding income from dividends and interest, on top of an already complex taxation environment, have become a real headache for software providers and HMRC alike.

In some cases the accounting software your accountant uses may be over-calculating the amount of tax you should be paying.

As a result, there are a number of income combinations (referred to as exclusions) where the tax calculated by the HMRC system differs from the correct tax calculation. Exclusion case taxpayers must not file online: instead a paper return must be filed by 31 October 2017 the deadline for filing paper returns (albeit that paper filing instead by 31 January 2018 will be covered by the reasonable excuse provisions).

So without a reasonable excuse you could be fined for having to file a paper tax return because personal tax is so complicated that even HMRC can’t get the calculations right!

The various commercial software houses are dealing with the challenges presented by this unprecedented circumstance in various ways (some more successfully so than others, thus far). But how will the professional examiners and the tutorial organisations cope? If tax is too complicated even for HMRC, how can we expect exam candidates correctly to calculate liabilities?

Here’s what you should do if you think this situation may apply to you:

Contact your accountant and ask whether you may have to file a paper return for 2016/17 rather than file online.
Make sure your tax questionnaire from your accountant has been completed and returned. (Most accountants will send you a year-end tax questionnaire in April or May; if they already have all your income details, collected during the year, and intend to submit your return shortly they may not require an additional questionnaire).
Ask your accountant to confirm that their accounting software has been checked and will calculate the correct amount of tax you should pay. Your accountant should welcome this question because it shows you are ‘on top of’ your business numbers so don’t be put off.
If you are still concerned then you can download this paper entitled How to calculate personal taxes correctly.

If you need any further help, please let me know as we have a software tool that does calculate personal tax correctly although we will make a small charge for using this on your behalf.

​​​​​​​For clients of Guilford Accounting you can be assured that we will have used this tool to check your tax calculation before preparing your tax return.

Noel Guilford, Principal at Guilford Accounting
Noel Guilford is the principal of Guilford Accounting a small business accountancy practice specialising in advising owner-managed businesses on current accounting, finance, and tax matters. You can reach him via email at noel@guilfordaccounting.co.uk or by phone at 01244 660866. He is the author of the 'Figure it out - an entrepreneurs guide to understanding your business numbers' which you can obtain by visiting guilfordaccounting.co.uk.​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​ His latest book, How to Build a Successful Business' will be published in 2018.

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