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Exclusions from 2021/22 self assessment online filing

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Published: 30 Nov 2022 Update History

HMRC has released a list of tax returns that cannot be filed online due to software issues. ICAEW’s Tax Faculty summarises some of the circumstances this applies to.

Software used to file individuals’ tax returns online may sometimes result in an over or underpayment of tax, owing to issues within the software system. In these cases, the return will need to be filed on paper. If a return is unable to be filed online due to an exclusion identified by HMRC, this is a reasonable excuse for filing on paper after the 31 October deadline for paper returns. No penalty will be charged by HMRC, provided the return is filed by 31 January (the online filing deadline) and a reasonable excuse claim is included in the return.

Where a paper return is filed in an exclusion case, this should be very clearly noted on the front page of the return, along with the reference number for the exclusion that applies.

The list below summarises a few of the more common scenarios.

The full list of the exclusions from online filing due to software issues is published on HMRC’s website.

Situation for individual taxpayer Error 

Higher rate taxpayers who have:

  • non-saving income less than their available reliefs and allowances;
  • savings income above the starting rate band; and
  • dividend income above the dividend allowance.

The allowances and reliefs may not be allocated against income in the most beneficial way.

This may lead to an overpayment of tax.

Advisers may wish to calculate the tax liability manually to make best use of the dividend tax rates, the tax-free dividend allowance and the personal savings allowance.

Higher rate taxpayers who have:

  • non-savings income less than the personal allowance and the starting rate band; and
  • savings income and dividend income.
The allowances and reliefs may not be allocated against income in the most beneficial way.

This may lead to an overpayment of tax.

Advisers may wish to calculate the tax liability manually to make best use of the dividend tax rates, the tax-free dividend allowance and the personal savings allowance.

Taxpayers with two or more of the same type of trade and:

  • are claiming overlap relief against a profit on one trade; and
  • have a loss on the second trade that can be offset against same year income.
Overlap relief may be treated incorrectly and increase a capped loss (greater of £50,000 and 25% of income).

This may lead to too much loss relief and an underpayment of tax.

Dual or non-UK residents who are:

  • claiming partial relief from UK tax on savings and / or dividend income under a double taxation agreement; and
  • claiming relief for residential finance costs in relation to a property rental business.
Savings and/or dividend income are being treated as non-savings income. This may lead to an inflated adjusted net income figure, calculating too much relief for residential finance costs.

This may lead to too much tax relief and an underpayment of tax.
Individuals with trust income where the notional tax should be restricted to the amount of tax charged on that type of income (eg, where only part of the income falls into the higher rate). Notional tax may not be restricted.

This may lead to an underpayment of tax.
Non-domiciled individuals who are remitting dividend income earned between 5 April 2008 and 6 April 2016. The notional tax credit is not being restricted where the grossed-up dividend amount is larger than the non-savings income being charged to tax.

This may lead to an underpayment of tax.
Taxpayers with pre-incorporation losses. Pre-incorporation losses being set against profits of the same trade are being incorrectly restricted.

This may lead to an overpayment of tax due to reduced loss relief.

This may also affect the calculation of adjusted net income that may impact the calculation of various allowances and charges.
 
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