Online filing by agents (accountants) and the new style tax return

I hear that the typical rejection rate being suffered by accountants who are filing online is up from 5% to 30% this year. Whereas in the past almost all (95%) of returns were accepted, this year almost one third are being rejected.

One has to ask whether the online filing system is fit for purpose. When Lord Carter announced that the filing deadline was being brought forward he identified what has become known as the Carter principle:

“nothing is launched until it’s been tested and proved fit for purpose.”

This year HMRC have arguably been over ambitious - by introducing new style tax returns at the same time as two other changes are impacting the system.

Firstly the new earlier filing deadline of 31 October has been introduced for paper based tax returns. To their credit HMRC are encouraging taxpayers to take note of this new deadline and accountants are reporting that many clients are supplying their tax return information earlier than in previous years. This is good news.

Secondly (and this is having a similar impact to the new filing deadline) there is a growing awareness that the enquiry deadline is now linked to the date that tax returns are filed. Thus, the sooner you file your tax return, the sooner you can be confident that your tax position is final. If HMRC want to open an enquiry they now have to do so within 12 months of the date the return is filed. Previously the deadline was 12 months after the following 31 January, so the earlier you filed your return the longer you gave HMRC to look at it.

But it is the new style 'simpler' tax return that is probably the cause of the increased filing rejections. Apparently the tax software houses are fed up with the queries that they are getting from agents. In many cases the queries relate to HMRC systems rather than the tax return software itself. This situation is not new of course. A number of professional bodies submitted a report two years ago (E-filing of personal tax returns survey) and little seems to have changed - other than the layout of the tax returns. Whilst this may make it easier for unrepresented taxpayers to compete the form, one wanders as to the sufficiency of the testing undertaken as regards online filing of the new form - both using HMRC and proprietary software.

Any readers care to share their views and experiences?