Self-assessment - Tax error could hit partners
A serious error in the new self-assessment system could lead to many partners paying too much tax this year.
Up to two million partners – including those in accountancy, legal and surveying practices – paying annuities to former colleagues, covenanted donations to charity or Gift Aid donations – will be hit by the Revenue’s struggle to find a ‘work-around’ for the mistake.
Under self-assessment, partners are liable to pay their own tax, but for 1996/97 the debt can be settled through the partnership. Partners who do not have enough outside income to cover charges paid by the partnership could face a one-off double tax bill.
Tax experts claim the multimillion-pound problem even affects the Revenue’s computer system. The Revenue admitted it had a ‘big problem’ which it will solve manually.
The latest complication comes after Accountancy Age revealed last week that up to 60% of the 450,000 self-assessment returns completed so far are wrong.
Price Waterhouse’s head of direct tax, John Whiting, said: ‘There’s little point going to the Revenue for clarification as it seems its system cannot cope. With self-assessment you are supposed to be a box-filling automaton.’
A Revenue spokesman admitted its system could not detect the problem.
‘We do now have a work-around and have alerted staff in local offices to ensure the error is picked up manually,’ he said.
