Many taxpayers (though it is not clear exactly how many) may find that the payment on account demands they are expecting this month don’t arrive, meaning they could get a shock after Christmas.
This is because of problems with HMRC’s IT systems, during self-assessment tax return season, which affected calculations for 2018/19 payment on account.
Payment on account explained
Self-assessment taxpayers with annual tax demands of £1,000 or less, or those who have 80 per cent or more of their total annual tax collected at source (i.e. PAYE), do not have to make payments on account.
However, most individuals within self-assessment, with a tax bill of £1,000 or more, will settle their liabilities in instalments. This is done by making payments on account in January and July, followed by a final balancing payment in the next January.
The amounts that are due depend on the individual’s tax liability from the previous year.
Demands become disaster
Late in 2018, it became apparent that HMRC systems had not always processed payments on account for 2018/19 correctly. Consequently, a number of taxpayers’ self-assessment statements did not include demands for the January 2019 payment on account.
Unless those affected made contact with HMRC to correct their position at the time, they will not have received a demand in June or July for the second payment on account, which would be due by 31 July 2019.
The Association of Taxation Technicians (ATT) has been told by HMRC that taxpayers do not need to do anything, if they have not received payment on account demands for 2018/19.
Instead, the taxpayer will receive a demand from HMRC for the full amount of tax in January 2020. HMRC has also confirmed that it will not charge any interest for late payment – assuming no further IT glitches!
Sarah Dixon, Tax Manager at George Hay, said: “In the event that a taxpayer does not make any payments on account during 2019, then the tax bill that arrives in January 2020 could be significantly larger than expected.
Individuals whose demands are delayed, should either set aside the funds needed ahead of January 2020 or, if they wish, they can make a voluntary payment on account to HMRC of their July payment – and their January payment if that was also missed.
The risk with making a voluntary payment is that, where HMRC has no record of an outstanding liability, its systems may see this as overpayment and automated refunds may be triggered at a later date.
We have had a couple of instances where clients who have made the payment, have been refunded by HMRC. We have advised these clients not to spend the money, so that they can be confident that they have the funds available to fulfil their obligations in the new year.”
How can we help?
If you have concerns about this announcement, or about fulfilling your tax liabilities, we would urge you to get in touch with your usual adviser.
If you’re not already working with us, by entrusting us with your annual tax return you can rest assured that we will handle your affairs efficiently, accurately and compliantly.
We will ensure that you are kept up to date with the latest news and updates relating to self-assessment and your tax obligations, and we can help you to fulfil your responsibilities accordingly; saving you time and money, helping you to grow your business and eliminating anxieties in the process.