There has been commentary in the accounting press this week about a tribunal ruling that will be bitter sweet news for accountants.
The case involved a self-assessment return that included a claim for foreign tax paid. Unfortunately, the tax software used by the advisor assumed a tax credit was available at the amounts deducted, 25% and 35%, when the double tax agreement limited relief to 15%.
During a manual check of returns, HMRC picked up the error and issued a discovery assessment for the relevant years. The advisor challenged the assessments and here’s what the judge said:
“I would expect any HMRC officer of general competence, knowledge or skill to have some understanding of double tax relief, including that there are limitations on the relief that can be claimed.” He added, “The point is not a complex one, and in my view, it did not require any ‘white space’ entry or other flagging up.”
Robert Maas, who defended the case in court, argued that the accountant was not careless, and that HMRC’s own software should have picked up the error. The judge evidently agreed.
Which is all very fine, but the case does highlight that tax software is not infallible.
Perhaps tax advisors should run the occasional complex case through a different firm’s software, or check them manually?
It is perhaps likely that these sorts of errors will become more commonplace as we place increasing reliance on technology to process data. At least practitioners have the comfort of this recent ruling that implies professionals should be entitled to rely on the output from tax software, even if 1 + 1 is said to equal 3.