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Taxpayers who have to complete a tax return by the end of this month could find themselves up against two extra problems in 2009: they may struggle to complete the form online, as they are now required to do, and some will not have the cash to pay any tax they owe on 31 January.
But help is at hand on both issues, as HM Revenue & Customs is well aware that hundreds of thousands of taxpayers could find themselves in difficulty.
In theory, everyone with a return outstanding at this stage has to file it online or face a penalty of up to £100 if they send in a paper return instead. Considering that HMRC's software was riddled with flaws a few months ago, this could seem rather unfair. But Tina Riches, technical director of the Chartered Institute of Taxation, believes that great progress has been made since then. "It is a huge improvement on where we were in the summer," she says.
Nevertheless, some people will still find that their tax return is rejected when they try to file.
They should print out a copy of the error message they get (as proof of their problem) and attach it to a special form on the HMRC website (http://www.hmrc.gov.uk/carter/sa-reasonableexcuse.pdf) on which they can explain the issue. So long as they have a reasonable excuse, Anita Monteith, tax manager at the Tax Faculty of the Institute of Chartered Accountants in England and Wales, thinks the fine will be waived.
"The Revenue is being quite broadminded about computer errors," she says.
HMRC is already braced to handle this year's second big issue – the inability of many people to pay their tax debts. This could reach its peak this month when the self-employed face their big January tax bill (typically more than twice the July bill). But the Revenue has set up its new Business Payment Support Service which will usually give an answer "in about 10 minutes" to a request to reschedule payments of business taxes (including income tax due from the self-employed).
"A lot of people are rearranging small amounts of tax," says Riches – who adds that sums of up to around £10,000 are routinely being rescheduled in this fast track way. There is no cap on the amount that HMRC will reschedule, so even larger sums can be rescheduled.
Many people will use this helpline (0845 302 1435) in January. Nearly half (44%) of small tax practitioners polled by the Chartered Institute of Taxation say they are now spending more time than usual helping clients who are struggling.
People who are employees have to use the normal method if they cannot pay any extra tax they owe. They need to ring the number on their HMRC statement of account, which they should be receiving about now. It is far better to deal with the issue directly than to leave HMRC in ignorance as the Revenue is then almost forced down a more intransigent route of penalties, threatening letters and even legal action.
For the first time, people can now pay their tax bills by credit card – but there is a 1.25% charge to use the service. Monteith urges taxpayers to use one of the free methods, such as paying by cheque or internet transfer. "I would be loathe to suggest that someone uses a credit card," she says.
As regards the return itself, one group of people is likely to come under particular scrutiny this year – the landlords of more than 800,000 buy-to-let properties. For the past 12 months, HMRC has been focusing on this area, a campaign that is "proving quite successful in the Revenue's terms", according to Riches. It has lists of rented properties from letting agents and will compare these to information on tax returns it receives. Not only should landlords declare their income but they should also ensure that mortgage payments set against tax cover interest payments only, not capital payments.
The sting in the tail of this year's tax return could come up to six years later, says Stephen Herring, senior tax partner at accountant BDO Stoy Hayward. In theory, the Revenue should raise all the questions it wants to ask about a return within a year (unless there are issues of negligence or deceit). But Herring says: "Even if people have made proper disclosure, they are saying it could have been a fuller disclosure."
It is always best to volunteer information – by explaining why profits have gone down, for example – rather than leaving the Revenue to ask. They sometimes decide to do that in the form of an investigation, which is an unpleasant experience, according to most people have who undergone one.
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