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John Andrews of the Low Incomes Tax Reform Group points out that the drive towards online filing by HM Revenue & Customs may come at a cost for certain taxpayers. 

Online filing 'push'

Many partnerships who do not have agents to represent them could get caught out by the new filing deadlines, and suffer a penalty charge.

HMRC have been driving the online filing push with Moira Stuart reminding people to file paper returns by 31 October. Really HMRC want you to file online, but they forget to tell you that their software does not support online filing for partnerships.

The new filing deadlines for the 2008 tax returns mean that paper returns must have been filed by 31 October to avoid a potential £100 late filing penalty, but returns filed online have until 31 January before any penalty will apply.

The partnership problem

Partnerships file a partnership return as well as each partner filing the partnership supplementary pages in their personal tax return.  

Partnerships who have not previously used online filling might this year be contemplating registering and filing both their partnership and personal returns online.  However the partners may not have appreciated that the free HMRC software only supports the partners’ personal returns. The partnership return cannot be filed using this software.

The only options for a partnership return are to

1. paper file by 31 October; or
2. paper file after 31 October but suffer a late filing penalty of £100 per partner; or
3. buy a commercial software package and file online by 31 January 2009.

However, partnerships are further penalised if they paper file after 31 October.  For all other self assessment tax returns, any late filing penalty may be reduced if the full amount of tax due for the year is paid over by the due date of 31 January 2009, or capped at the amount of the tax if it is less than £100.  No such rule exists for partnership tax returns as no tax liability arises from them, all partnership liabilities being paid by the individual partners personally. 

There are therefore no grounds for an appeal against the penalty or a reduction of it unless you have a ‘reasonable’ excuse for the return being submitted late, such as illness or bereavement, and not knowing you had to buy commercial software would not be accepted under current guidelines.

Fairness

As HMRC have not communicated this problem to partnerships, we are pressing them to waive any penalties provided the partners individually would not be in a penalty position.

It is unacceptable for HMRC, in their push to make everyone file online, not to provide the tools to low-income filers, thereby forcing them to buy and learn how to use commercial software.

We are supportive of the drive to file online; but not if HMRC put their low income customers out of pocket and do not give them the support they need.