Accountants are expressing concern over how efficiently HM Revenue & Customs is processing last year’s tax returns after a number of clients have received reminders in spite of filing their forms several weeks before.

There are fears that the HMRC, which has recently made significant job cuts, is struggling to process the quantity of returns that has arrived in recent weeks. The deadline for filing tax returns for 2005/2006 is January 31.

Mike Warburton, senior tax partner at Grant Thornton, says: “We have had a spate of cases where clients have received reminders even though returns were submitted weeks ago. It seems the backlog in Revenue offices is now so bad that post is sitting in sacks for up to three months and returns are not being processed.”

With threats of a civil service strike at the end of the month and more staff cuts on the way, the situation seems unlikely to improve.

“The Revenue is reducing staff numbers as the methods of processing are becoming more complicated. There is now twice as much tax legislation as there was 10 years ago,” adds Warburton.

John Whiting, tax partner at PricewaterhouseCoopers, has also seen signs that the Revenue is taking longer to process returns. He says that in past years people who filed their returns by October would generally have received details of what tax was due by now – but this has not always been the case this year.

The Revenue guarantees that anyone who files by the end of September will have their tax calculation done for them by the end of this month – rather than having to work it out themselves. But in the past people who have missed this deadline by a matter of weeks have often still received the same treatment.

Whiting says the real worry would be if there was a delay in logging tax returns – risking the possibility of penalty notices being sent out to people who had filed on time.

The Revenue says that every tax return is being logged on arrival and says there is no serious backlog. It says some reminder letters may be received by people who have already filed as it can take weeks for the letters to be processed and sent out.

The Revenue says it will have staff working on January 31 even if the strike goes ahead, and it confirms that any returns received that day will be accounted for. But it strongly recommends that you do not leave filing until the last minute. This is especially the case if you are planning to file online for the first time as you need to apply for a registration number and this can take up to five days to come through.

Filing online is generally the easiest and quickest way to file your tax return as you will receive instant confirmation of receipt and the tax calculation soon afterwards.

The Revenue says the number of people filing their tax return online has already exceeded last year’s total.

The online systems do tend to be very busy in the run-up to the end of the month – last year taxpayers experienced slowness and system crashes – so you would be wise to do this as soon as possible.

If you have yet to file your tax form, it is also worth noting a couple of changes this time. The main one concerns pre-owned assets tax (POAT). This affects anyone who has given away an asset – such as a property – but has continued to use it in a way that sidesteps inheritance tax rules. It could also catch anyone who has given someone cash with which they have then bought an asset that the donor has benefited from.

The POAT charge is basically an income tax charge on benefits received by the former owners of the asset – such as the assumed market rent of a property. This charge is avoided if you actually pay rent for your use of the asset. If you do not want to pay this charge, you can elect to bring the asset back into your estate for inheritance tax purposes.

Mike Harrison, partner in the landed estates group at Saffery Champness, the accountants, says: “If you would like a pre-owned asset to be included in your estate for inheritance tax purposes, January 31 is your last chance to inform HMRC. If no election is made, a POAT charge may be due, which must be reported on your tax return and filed by the same date. Failing to include the POAT charge could lead to penalties and interest charges in the future.”

The matter is further complicated because the 2005/6 tax return does not contain a separate box or questions regarding this new charge, so taxpayers may not realise that the charge needs to be entered at all.

In addition to this, the calculations needed to work this out can be complex – you will need full details of the asset and professional valuations for the annual rental values.

Warburton says: “This is an inheritance tax anti-avoidance measure dressed as an income tax liability. The vast majority of people who have transferred cash or other assets do not know if they are caught by this or not.”

Warburton also reminds taxpayers that last year was the final chance for personal pension holders to backdate contributions to the previous tax year. This “carry-back” facility no longer exists for personal pensions.