HMRC identifies a number of digital tax anomalies, and assures taxpayers affected by these problems that they will not be penalised

Are you having problems with the digital tax system, or are finding it increasingly difficult to submit your self-assessment returns online? Well, you might take some comfort from the fact that you are not alone. Many self-employed workers are facing similar problems. Even HM Revenues & Customs seems to be struggling with system errors and incorrect tax calculations following its latest algorithm changes.

So what is the problem affecting online self-assessment returns?

Well, as far back as April this year HM Revenue & Customs was made aware of certain software glitches that were causing problems for customers. As a result of changes made to digital tax algorithms, HMRC’s online calculators were not being updated to reflect the changes made in tax allowances.

HMRC opted to use Absolute Software’s spreadsheet calculator algorithms as the basis for its calculation software for the current financial year.  When problems were flagged up by the software developer, HMRC assured it that it would get the problem sorted out. However, it would appear that has not happened. David Good, director of Absolute Software, said:

“I had a meeting with HMRC last November to clarify the computational issues and it looked as though they were going to be able to get it sorted in time for the new reporting season. But apparently, the team responsible for coding the main HMRC self-assessment system was simply unable to complete the task from the Excel algorithms in time.”

HMRC has said, in response, that it is currently looking at options to fix errors that are affecting a number of taxpayers when submitting self-assessment forms online, and that individuals with specific tax codes will for the time being have to resort to filing their returns on paper instead. A spokesperson for the Revenue said:

“HMRC is working hard to ensure that no tax is incorrectly assessed. A very small number of self-assessment taxpayers who have a very unusual combination of income types will have to use paper tax returns.”

Which taxpayers are affected by the latest digital tax anomaly?

Self-assessment taxpayers who have a number of income sources who try to submit digital tax returns are finding that HMRC’s servers are currently unable to calculate the correct amount of tax due. Because of the discrepancies in the calculations following the latest algorithm changes, HMRC servers are rejecting any tax returns generated by third party software, even if these show the correct tax calculation.

As a result of this discrepancy, taxpayers will now have to complete a paper return. That in itself is not an issue so long as taxpayers do not leave filing until the last minute: what is an issue is that the taxpayers who unsuccessfully tried to file a digital tax return run the risk of missing the filing deadline, and could face late filing penalties as a result. However, HMRC has subsequently confirmed that any taxpayer who has been affected by circumstances beyond their control will not be penalised. These ‘circumstances’ are identified by HMRC as ‘exclusions’ each year. After the tax software irregularities were identified, HMRC collaborated with software developers and subsequently identified and added 16 exclusions for 2016/17.

So what are the repercussions for customers who are unable to submit a digital tax return?

Customers who notify HMRC that they are affected by an exclusion when submitting a paper return will not be charged a late submissions penalty. The paper return must be received by the deadline for online submissions.

“Any customer who submits online will have their calculation updated by HMRC to make sure they pay the right tax.” HMRC has stated.

Are you worried about filling in your self-assessment form online, or experiencing problems with the digital tax system? Then speak to Steven Glicher accountants for expert advice. For further information, call Steven Glicher on 0161 485 8007, or email

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