Exclusions have arisen due to the previous introduction of additional allowances and bands for certain types of income, making 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 that 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 and 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 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 2021/22
Should paper filing be required, to print your tax return with a Reasonable Excuse form attached:
There are some exclusions which we have not included within the software. This is due to either outstanding queries with HMRC on the specific criteria to capture the relevant scenarios or the circumstances in which the issue arises is considered to be rare. A paper return, along with a reasonable excuse form should be filed for returns affected by the following scenarios:
HMRC Reference |
Key factors |
Description |
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. |
129 |
|
In this scenario, the overlap relief is subtracted from the total combined loss across the two schedules in order to identify the amount of loss subject to the £50,000 cap. This will then increase the amount not subject to the cap thus allowing too much relief. |
135 |
|
When partial relief from UK tax is being claimed on either savings and/or dividends and relief for residential finance costs is also being claimed, the finance costs relief may be too high. This is due to the savings and dividend income being included as non-savings income within the calculation of adjusted net income. |
137 |
|
The 10% tax credit available against the dividends should be restricted to 10% of the amount of dividend after the deduction of the personal allowance. Currently the tax credit is not restricted by deductions. |
138 |
|
The pre-incorporation losses will be included in amounts to be restricted by the £50,000 whereas they should be excluded from the cap. As well as restricted relief, this will impact the calculation of net adjusted income so could affect other allowances. |
139 |
|
Additional rate tax will be charged if the total taxable income is within £500 of being within the additional rate band. This is due to the amount of higher rate band available being reduced by £500 due to an incorrect calculation involving the personal savings allowance. |
140 |
|
HMRC have reviewed the TSR calculation and accept that the personal savings allowance and starting rate for savings amount should be recalculated in the TSR computation, based on the annualised gain. The current calculation does not allow for this, despite allowing for a change to the personal allowance. |
141 |
|
The HICBC is currently being included within the non-UK resident tax liability. The non-UK resident tax liability should only include income tax that would otherwise be charged on disregarded income. |
142 |
|
The personal allowance is not allocated in the most beneficial way. It will be allocated wholly to the non-savings income when it would be more beneficial to allocate some to the dividends (the excess over the dividend nil rate). |
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