HMRC begins issuing revised SA302s for 2017/18

By Sean Deverell, Tax Product Manager

HMRC recently announced it carried out a recovery exercise on 21 October to identify inaccurate SA302 calculations that were issued for 2017/18.

A similar exercise was undertaken last year for 2016/17 returns. But, unlike last year, HMRC will be communicating with agents directly where a 64-8 is in place for any of their affected clients.

The errors in their calculation resulted in 15 different exclusions, as detailed below. That’s 15 different reasons why a client’s tax return could not be submitted online because the HMRC system had the wrong tax calculation that would cause the return to be rejected, or worse still, it was accepted but with the wrong tax liability calculated.

The varying exclusions are supplied by HMRC throughout the year . The tax team at IRIS works hard to help identify and resolve these issues as quickly as possible. Where possible, our calculations have been updated and warnings messages put in place.

However, you may find that some of your clients were still affected, either because the return was completed and filed before the correction was made, or due to a complicated and rare scenario that was not uncovered until extremely late in the process. Therefore, we want to make you aware of HMRC’s plan, so that you are prepared in case you do have any clients that receive a revised SA302 from them.

Any customers affected will receive a new SA302 calculation and information on what steps they need to take, with copies of this information also being provided to agents. HMRC has advised that no penalties will be applied, and no interest charged on new amounts payable; provided they are settled within 28 days of the date of the new calculation.

Exclusions affected:
Top Slicing Relief – Exclusion ID 81
HMRCs top slicing relief calculation is not taking into consideration the savings starting rate band or Personal Savings allowance when calculating the top slicing relief due. HMRC estimates approximately 6,000 taxpayers will be affected.

Beneficial ordering – Exclusion IDs 82, 83, 85, 88, 90
HMRC’s calculation does not always use allowances and deductions in the most beneficial way.

82/83 – Both only affect additional rate taxpayers with large amounts of income tax relief. HMRC estimates 100 taxpayers will be affected, and they would receive a warning message that would prevent them from filing online.

85 – Customers with lump sum payments and non-savings income greater than £16,500. HMRC estimates less than 2,000 taxpayers will be affected. Affected users would receive a warning message before filing online.

88 – Higher rate taxpayers with non-savings and savings income. HMRC have not disclosed the number of taxpayers affected. Affected users would receive a warning message before filing online.

90 - A customer with total income of more than £33,500 (consisting of non-savings income of less than their reliefs and allowances (usually £11,500), savings income of more than the amount of savings starting rate and savings nil rate available (£1,000 to £6,000) and dividends of more than £5,000) who after deducting reliefs and allowances, has taxable income of less than £33,500. HMRC has not disclosed the number of taxpayers affected, affected users would receive a warning message before filing online.

Property income allowance – Exclusion ID 84
HMRC's validations are not including income from Reverse premiums, or premiums for the grant of a lease when calculating eligibility for property income allowance. HMRC estimates 20 taxpayers will be affected, affected users would receive a warning message that would prevent them from filing online.

Scottish Taxpayers – Exclusion IDs 86 and 95
HMRC's calculation is not using the Scottish tax bands correctly in all scenarios.

86 - Scottish Additional Rate customers are not being allocated the full amount of the higher rate band where they have non-savings income of more than the Scottish basic rate band and savings or dividend income in the higher and additional rate bands. HMRC has not disclosed the number of taxpayers affected, the IRIS calculation has been updated to give the correct calculation and warning message put in place to suggest the filing of a paper return.

95 - have taxable savings income of up to £500 in the higher rate band 40% where there are allowances set against dividends at higher rate 32.5% will be charged more tax. HMRC estimates approximately 5,000 taxpayers will be affected, affected users would receive a warning message before filing online.

Pension Lump Sums – Exclusion ID 87
HMRC’s calculation for pension lump sums is incorrectly taking account of the savings starting rate band, dividend allowance and savings allowance. HMRC estimates approximately 250 taxpayers will be affected, the IRIS calculation has been updated to give the correct calculation and warning message put in place to suggest the filing of a paper return.

Residency – Exclusion IDs 89 and 94
89 – Taxpayers deemed to be domicile can’t claim the remittance basis. HMRC has not disclosed the number of taxpayers affected. Affected users would receive a warning message that would prevent them from filing online.
94 - Scottish taxpayers claiming remittance basis will be taxed as UK taxpayers on all income. HMRC estimates approximately 650 taxpayers will be affected. The IRIS calculation has been updated to give the correct calculation and a warning message put in place to suggest the filing of a paper return.

Lloyds Underwriters – Exclusion ID 91
HMRC is incorrectly calculating dividend tax credits on Lloyds Dividends. HMRC estimates approximately 650 taxpayers will be affected. The IRIS calculation has been updated to give the correct calculation and warning message put in place to suggest the filing of a paper return.

Relief for finance costs – Exclusion IDs 92 and 93
92 – HMRC’s income calculation for relief for finance cost purposes is not taking into account marriage allowance. HMRC has not disclosed the number of taxpayers affected. The IRIS calculation has been updated to give the correct calculation and a warning message put in place to suggest the filing of a paper return.
93 – HMRC’s relief for finance costs is incorrect, where a taxpayer is foreign property losses brought forward. HMRC estimates approximately 2,800 taxpayers will be affected. The IRIS calculation has been updated to give the correct calculation and a warning message put in place to suggest the filing of a paper return.