Exclusions have arisen due to the previous introduction of additional allowances. Bands for certain types of income which has made the calculation of the tax liability more complex. HMRC systems expect our software to match their method of calculation in order for the returns to be filed electronically. However, the legislation states HMRC should deduct the reliefs and allowances in the way which will result in the greatest reduction in the taxpayer's liability to income tax; this is not always the case in their methodology.
Whilst some of last years' issues have been corrected by HMRC, some remain and some have also been added. Consequently, our software may not provide the correct calculation and for most scenarios affected, before filing, TaxCalc will identify the exclusion number and provide instructions on how to deal with this, in the return.
Special Cases represent issues that HMRC have identified as requiring a workaround in order to prevent a filing rejection. Where possible, we have taken care of these workarounds within the software or have provided a message before live filing to advise how to deal with the workaround. There are limited scenarios where a paper return will need to be filed. Some examples of special cases are:
Before filing, TaxCalc will identify the Special Case number and provide instructions on how to deal with the workaround.
HMRC Special Cases List 2019/20
Should paper filing be required, to print your tax return with a Reasonable Excuse form attached:
Some exclusions were identified or updated by HMRC between December 2020 and January 2021 which we have been unable to implement in the software for 2019/20. This is due to either outstanding queries with HMRC on the specific criteria to capture the correct scenarios or insufficient time to develop and test changes to the software. In order to ensure minimal impact to customers during the busy filing season.
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HMRC Reference |
Description |
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110 |
Individuals taxed using the remittance basis have their remitted income (relevant foreign income) treated as non-savings income. Other ‘non-relevant’ foreign income is currently entered into the same boxes on the return as remitted income. This is causing the calculation to use the savings and dividends 0% bands on remitted income incorrectly resulting in a lower tax charge. |
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121 |
Individuals who have income within the higher rate band, non-savings income less than their reliefs/allowances, savings income above the starting rate band and dividend income above the dividend allowance could be affected. In some instances their allowances are being offset against dividend income when it is more beneficial to offset them against savings income. |
|
124 |
Non-UK residents who belong to a partnership which has written off or released an amount from a company loan (treated as income), may be affected. If the individual also receives a dividend which has an associated notional tax credit it is currently being offset against the write-off income incorrectly. |
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125 |
Individuals who receive both savings income and gains from a chargeable event (such as a life policy) usually benefit from having reliefs and allowances allocated against savings rather than non-savings or dividend income. In certain scenarios when the savings starter rate band is reduced, it will be more beneficial to offset allowances against non-savings and/or dividend income instead. |
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126 |
When individuals claim Foreign Tax Credit relief (FTCR) on foreign income and they have claimed gift aid when there is insufficient tax due, the calculation of FTCR will be incorrect. The FTCR calculation is not being restricted by the gift aid charge when it should and should not be used to ‘offset’ the charge. |
If your tax calculation has been affected by one of the Exclusions not identified within TaxCalc, HMRC advise to submit a paper return.