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Revenue Delays

HM Revenue & Customs (HMRC) has today confirmed that up to 500,000 Self Assessment Statements will not be delivered in time for 31 July - the deadline for the second Payment on Account for the 2011/12 tax year.

Interest Postponed/Foregone

HMRC appreciates that many taxpayers will be in the habit of relying on the arrival of their July Statement of Account to prompt them to make payment, using the handy tear-off payslip at the bottom of the form, so they have now confirmed that, where the Statement is received late, interest will not be charged until 30 days after the Statement is received. (Normally, interest would be charged automatically from 1 August). For those affected by the delay, and provided the amount due is paid within 30 days of receiving the Statement, interest will not be charged.

Background

HMRC traditionally 'gears up' for the July Statement run many weeks in advance: there are normally around 2 million Statements, they are printed off and posted over several days and - usually - delivered a good few weeks before the July deadline.

This year, however, it seems they may simply have run out of the special paper (with the handy tear-off payslip section at the bottom) after having printed off the Statements for all taxpayers up to and including those whose tax reference ("UTR") ends from "00" to "69". Because HMRC admits that taxpayers whose UTRs end "70" up to "99" are still waiting.

HMRC says it has been wrong-footed by an unexpected increase in the number of SA Statements required this time: they forecast based on previous years and allow a margin to accommodate fluctuations (after having had similar problems in 2008) but the increase this year is much higher than in previous years. Some commentators have apparently suggested that there has been a four-fold increase in the total number of Statements overall but we understand this is not strictly accurate: (or feasible): the total number of Statements remains broadly around the 2 million mark; it is the extent of the increase this year,  when compared to the increase last year, which has caught HMRC on the hop.

But that does then beg the question of how HMRC managed to come up as much as 500,000 short, and they are currently struggling to find an answer.

So we pondered a while, and came up with a few possible reasons. One of which they apparently hadn't thought of.

What Caused the Increase in Statement Numbers?

Bearing in mind that the second Self Assessment Payment on Account due at the end of July should in theory be the same as the first one due at the end of January, the number of people making a Payment on Account in January (as averse to just a Balancing Payment for 2009/10) would seem to be a useful starting-off point and HMRC should have a pretty good idea of how many of those there were by now.

Whilst it is possible that there could be some taxpayers who realise mid-2011 that they should be making 2011/12 Payments on Account when they didn't think so originally, this is unlikely to affect the numbers HMRC is aware of and on which they are predicting their shortfall unless those taxpayers have already filed their 2011 tax returns. (Possible).

Is Fiscal Drag Already Beginning to Bite?

One reason why some Second Payments on Account might not be due is because a taxpayer finds that his or her income in 2010/11 will have fallen, and no tax is in fact due at all . So perhaps historically - and particularly over the last two or three years - HMRC has seen a significant drop in people actually making the second Payment on Account when compared to their earlier January payment. And perhaps they assumed the same would happen in 2011 but it didn't. This could be because the latest official figures are wrong and the economy is in fact booming. Or it could be because people are more likely to have more tax to pay, now that the Higher Rate Tax Threshold has fallen from £43,875 total income in 2010/11, to £42,475 for 2011/12 - so-called "fiscal drag", broadly where more people are caught by the tax net. Perhaps there are a few more people in 2011/12 whose  Self Assessment tax bills are now too large to be coded out through PAYE, so they have to make Payments on Account instead.

Or, perhaps it isn't Second Payments on Account that are causing the 'spike' in July Statements at all, but simply unpaid liabilities hanging over from previous tax years. This, or a combination of all three, seems plausible, given the numbers involved.

Foregoing Interest or Foregoing Hassle?

Finally, whilst many taxpayers will be relieved to find that they may avoid interest even if they pay after 31 July, this decision may actually have been taken for HMRC's benefit rather than the taxpayers'.  The total amount of interest charged might not be worth the administration - or the sanity of HMRC's call centre staff when interest demands fell on doormats a few weeks down the line.

[ There is now an update on the delayed Statements - see HMRC Delays Issuing SA Statements - Ed. ]