Almost six million people are embroiled in the biggest tax blunder for years.
About 1.4million will have to fork out an average of £1,500 after underpaying through no fault of their own.
Some will face far higher bills, though the Treasury insists no immediate repayment will be required if the sum is more than £2,000.
For 4.3million, the news is better. They will be told they are owed money by the taxman after having too much deducted from their earnings.
The total in overpayments is £1.8billion, meaning an average rebate of £418.
Refunds will be sent by cheque, officials say. However, the National Audit Office
warned earlier this year that households already owed large sums in overpayments might not get their money for four years because of chaos in the system.
Between now and Christmas, the 5.7million affected will receive letters informing them of what they owe or are due.
Replies (42)
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Journalists as Amateurs
I've often noticed this - when the TV or print media cover a subject I actually know something about, they do talk the most over-dramatised load of horse-manure. I'm sure the paper will be able to find the odd person whose tax affairs are such a mess that it will take years to sort out but the tone of the article implying that this will apply to millions is just rubbish.
The pulling together of threads that was the computerisation of the PAYE system was something that was planned and executed under the previous administration and has nothing to do with the coalition. It has unearthed [***]-ups where someone had, for instance, two separate 647L codings. It's spat out a whole load of crazy codings and has started to automatically generate PAYE recalculations leading to repayments/underpayments for 2009/10, a good few months earlier than previously.
The Mail doesn't seem to have got its head round the idea that the problems it over-dramatises are the result of bringing the system into a coherent whole instead of a rickety set of badly linked or unlinked files. It compounds it by talking to "a source" instead of the Revenue or an accountant who understands what's going on for fear that it will ruin a good negative story. You can't make an omelette without breaking eggs and the Mail is complaining about the damage to eggshells whilst the omelette is still warm.
Lets have the full story and explanation and then
sleep on it and digest the contents. That for me, always seems the best way forward.
Then, if an extra statutory concession can be considered, HM Revenue & Customs have a duty of care (presumably) to explain that situation, to any affected taxpayers.
I have to agree, the outcome may be interesting.
Sorry - but ths is old news
The whole point about the rationalization of the PAYE system was to move from several separate databases to one and reduce the number of duplicated entries for people with more than one job, multiple pensions, etc. This has for the most part been achieved, however as per usual with any government IT projects, they failed to plan for the inevitable problems.
Due to multiple codings being in various systems, these needed to be reconciled. Rather than have an automated process for dealing with this, what HMRC seem to have done is to send out various coding notices (often dozens at a time) and deal with it through the Contact Centres.
Net result = Chaos.
As most of us have noticed, for that last 9-12 months the Contact Centres have been largely uncontactable (which surely defeats the purpose of having them) and HMRC management has been back-peddling ever since. It is quite obvious that 'der managemunt' have been utterly clueless as usual and made no contingency arrangements. Possibly the reason for this that any contingency arrangement for sorting out the coding problems of 1-2% of PAYE taxpayers would cost millions and probably nullify the savings and error reductions of introducing the system in the first place.
It would have made more sense to cutover to a central system on a region by region basis and then they would have only had to fight one fire at a time. However, this would have taken longer and probably cost more (but still less than the costs to government, taxpayers and agents suffering the current chaos). Given how much we're paying towards HMRC and the size of salaries there, we deserve a much better organized and efficient system than we've got. Time to scrap it and start all over again.
No copies to agents
A lady from the ICAEW mentioned on the Today programme this morning that HMRC would not be sending copies of these 2008/09 and 2009/10 tax calculations to agents.
Well! That is rather obvious. Those affected are not self-assessment cases and hence, would be most unlikely to have a tax agent.
The presenter also commented that the "victims" might have to go to an accountant and pay fees of £1,500. If only!
Speaking personally (and not for my employer)
"Firstly of course this is down to the general bungling and incompetence personified by the last government. The current lot havent had time to foul things up - yet !
A simple fact - well over a million taxpayers are to be hit with demands for an average of about £1.400 each. HMRC has already stated that it will NOT give them time to pay."
Posted by cymraeg_draig on Sat, 04/09/2010 - 08:16
Whatever your opinions on the cause of the problem (the previous government, HMRC management, etc) surely one thing the "current lot" are in control of, is whether or not the affected taxpayers are given extra time to pay.
Twaddle
You are almost as bad as the papers that run this nonsense. Do you have any fact to support your contention that 99% will be due to official error, apart from your obvious disdain for the current incumbents running the system.
When I worked in the old IR in the seventies and eighties we manually reconciled all the PAYE records. A million underpayments does not seem like a particularly high figure when you consider the number of people whose circumstances change regularly throughout the year. Its not all about tax codes being wrong .. it's also forms P11D and other notifications being brought into account.
There is no getting over the fact that the tax office is a shambles. But this is simply not news. It happens every year.
.
I have always belived in people paying the amount of tax they actually owe, so I am very glad they have started to reconcile the PAYE again properly as its been a shambles for years, especially as far as higher rate tax payers go who are asked NOT to fill in a tax return despite clearly need to due to having investments, BIK's changes in employment etc and yet not 'fulfilling the criteria' for SA.
However its a bit of a bungled announcement. PR disaster for what is a good thing.
Think of all those small rebates people are due for example that they never knew about, for example stopping work part way through a tax year.
Hmm...
"That is a decision taken by the wonderful management of HMRC."
Posted by cymraeg_draig on Sat, 04/09/2010 - 13:24
I suspect that a decision of that magnitude will always be a political one, rather than an administrative one. Junior Treasury Minster David Gauke's interview with the BBC suggests to me that it was clearly a political decision. He could have washed his hands of the whole affair, by saying it was merely an administrative issue and the responsibility of HMRC.
Of course a lot depends on whether you believe that the new system is the cause of the problem, or that the new system merely highlights an existing problem and makes it easier to identify the discrepancies. David Gauke seems to think it's the latter. I note that even he didn't blame the previous administration for the problem, but the fact that PAYE was designed in a different era when people's working patterns and reward packages were very different.
Your Clients
If you do not know how much tax your clients ought to have paid, and are sitting in trepidation of HMRC's reconciliation, then I think that after 40 years you ought to retire. No matter where my head might be, I can see that very clearly.
Never let a scary headline get in the way of facts, eh?
What in the "complex PAYE system" has caused this? Or is it just that theHMRC systems have at long last been updated so that one bit talks to another?
No doubt with a story like this in the media the backlog will only get worse as the world and its mother decide they must be caught and clog the lines further.
Presumably it is at last linking together multiple sources & flagging up these problems - something caused by the incompetent last lot introducing the new computer system in 2009?
We all have horror stories of dealing with HMRC, but surely the introduction of this new system will have highlighted things that would never have come to light in the halcyon days when all was right with the world and HMRC had sufficient & trained staff, but no computer system to link together multiple sources.
The BBC seem to have a slightly less shrieky take on matters - http://www.bbc.co.uk/news/uk-11186397 - though they were going on about it on Breakfast TV this morning, but I only caught the headline not the full report before leaving the house.
I think Cymraeg Draig has hit the nail on the head
Ultimatly the most despicable part of this whole PAYE saga is that in the main it will affect unrepresented taxpayers. Regardless of the blame that is rightly or wrongly placed upon HMRC, it will affect those for whom PAYE was originally setup to extract tax with the minimum of fuss (i.e. before it went into their pockets so that they could complain about it).
The impact of these outstanding claims is about 2bn pounds, in this regard HMRC and more rightly HM Treasury should suck it up and take the hit. If I was Cameron I would say "HMRC error, therefore HMRC pays", however in reality it will always be Mr and Mrs Taxpayer that pays, regardless of which books this is charged to. The only question is whether the individual taxpayer who has had the benefit of underpaid tax should pay specifically or it is written off and all taxpayers pay it through increased taxation or loss of services.
A better solution would be a to have a "Time to pay" option where the PAYE tax code has an additional item added to it whereby an agreed amount of the tax underpayment is paid through the PAYE code each month. Rather than being 100 pounds per month, which might be more than some people on low-to-middle incomes could handle it should be in the order of 20-30 pounds per month.
Equally, for pensioners and those on low fixed incomes, even this might be too much. In these cases this should be written off - pure and simple as lost tax through HMRC incompetence. At the very least these losses should be added to the project costs of the new PAYE Computer system so that next time they think of doing this they see the not just the software, time and material costs, but the cost of poor implementation as well.
On the position of HMRC generally, it should be broken into a thousand peices and scattered to the four winds as it is unfit for purpose - just like the Child Support Agency. A new organisation with a much more focussed role based upon getting as much tax in as required as simply and painlessly as required. However, this would require a new tax code - so the OTS better get a move on (http://www.hm-treasury.gov.uk/ots.htm)
Typical media coverage of tax issues
Has there ever been an example of a newspaper running a tax story and not totally exaggerating and sensationalising it beyond all recongnition? The Mail is not alone in this but it does seem to be consistently one of the worst culprits. Maybe their contact list doesn't include anyone who actually knows anything about the day to day working of tax and PAYE.
PAYE admin was totally out of date and something had to be done. This is the result of something being done. So some people will have to pay some tax back, but that situation used to arise under the old system too. At least now (hopefully) these errors will happen less. Only time will tell on that one though!
Two final points, I have to disagree with C_D that the decision not to allow time to pay came from HMRC. There is absolutely no way on earth that the government was not involved in that decision. I doubt that HMRC management would have put up much of a fight though!
And I have to agree with PennyC about the 64-8 story. Sorry C_D, but any time I see you mention 64-8's in any context in your postings, my eyes glaze over and I take absolutely no notice. A bit like when I see Bob Harper post anything in a marketing-based thread!
I'm beginning to spot a trend
One thing which is consistent is the fact that a government department implements a new IT system (CSA, HMRC PAYE, Inland Revenue NIRS2 project, etc., etc.) and almost without exception this is done without apparent consideration of those it will impact or the knock-on effects of problems such as manual files for all of the information that can't be entered into the system.
Remember - we're paying for this chaos.
There should be some review process which stops IT projects proceeding through the various stages without having a reappraisal of the Cost / Benefit (including cost to the unlucky "Customers" of these systems). I agree that some change and some disruption is inevitable - as was the merger of the various PAYE systems, however the government seems to replicate the same mistakes time-and-again.
I'm really getting sick of these over-hyped press releases (agreed - mostly from the Daily Mail). Perhaps it is time we had a moratorium on Government IT projects until they can clearly and demonstrably get it right.
I'm with "Frustrated" & Marion on this one
I heard Anita Monteith on Radio 4 on Saturday morning and rushed around for a while in case I'd missed a big scoop.
On closer inspection the news was based around some adjustments to the estimated amounts of PAYE over- and underpayments, and the fact that 45,000 taxpayers are going to get letters about their cases this week.
I felt the new facts needed to be reported, but didn't see much that moved it forward from the HMRC annual accounts & NAO report that detailed all the problems. While I used to work with one of the Guardian journalists who wrote the story and respect his work, both that paper and the Telegraph are programmed to make the most of issues that they feel matter to their users.
Having covered the internal IT issues confronting HMRC for many years, I'll agree that the episode exposes a worrying level of incompetence within the systems development and management function, but would put it down more to long-term [***]-ups than conspiracy.
C-D please stop reading the Daily Mail
Its September now, you should be reading Rugby in the Western Mail and working out how you are going to win the Autumn Internationals
I don't think this irs the place to 'Speak out'
Pester your MP
Email the cabinet minister responsible for HMRC (who is it now anyway?)
Go to "Working together" meetings
We all know wht it's like. I have friends on the inside who are depressed, meiserable and frustrated.
Page 2 at last!
Yet more hot air on yet another ancient topic, but was good to read John's summary (linked above).
Having cut my teeth on thousands of incorrect notices of coding 20-30 years ago I don't see anything new in that area to bother the ward nurse about. As "frustrated" has identified however the real news is HMRC's poor attempts to do something about it.
Ultimately it still makes sense to try to get technology to join up all the dots, eg the fact that X is employed or receiving pension from several sources, but even in a perfect IT environment, HMRC still have to rely on information provided by employees & employers and, in many cases, this information is out of date or not guaranteed to remain constant throughout the tax year.
Consequently, unless they throw it all up in the air and start again, (say with Self Coding), if collecting tax on a "best guess" basis" is to remain, then more emphasis should be given to educating and encouraging employees and pensioners to get more involved in their own tax affairs, after all who wants a nanny state?
The reasons why taxpayers don't currently get involved are complex, being a mix of confusion, fear of the unknown, "not my job" and deliberate head burying. Removing these obstacles to clarity will be difficult in the case of the elderly and disadvantaged however there are agencies, voluntary organisations and charities (eg CAB) who currently work wonders with benefit and financial advice and so resources could be directed there rather than HMRC helpdesks.
What has surprised me however is how ill prepared young adults are to deal with tax & NI or, in general, how the state pays its way. You only have to wait for the look of horror on the face of a 18-22 year old when they get their first payslip and see what they haven't ended up with. This is where education should start, it would be great to think of my 20something year old kids helping my Mum with her tax.
Maybe we should switch over to the American style system...
It seems to me that one of the biggest problems here is that unrepresented taxpayers have no real knowledge of the tax system (and therefore how much the government is taking from them each day / week / month / year), because PAYE acts as a barrier of ignorance of the amount of tax they are actually paying.
If they had to fill in a tax form each year which clearly showed how much the government was taking away from them including PAYE Income Tax, Employees NI and (for that matter) Employers NI then they would soon begin to take more interest in the tax affairs of this country. It might even allow them to understand their boss.
BOSS: "I'd like you to really stretch yourself next year" (Thinks "Since you cost me £27,467.84 this year")
WORKER: "Sure boss" (Thinks "Miserable old goat, he's only paying me £19,174.20 after tax this year")
Maybe I'm living in cloud cuckoo land?
OMG
"Being an accountant, or indeed a lawyer, a doctor, or whatever, is not a 9-5 job, it's a vocation, a way of life, and something that you dont "switch off" when you close the office door."
Now ive read some absolute drivel from CD over the years but this just takes the biscuit!! A doctor ill give you, but a lawyer and an accountant? A vocation? You really are having a giraffe!
Foster Carers, Social Workers, Priests/Vicars, now they are and example of some of the people who have a vocation, but to include yourself and lawyers in that bracket really does highlight how wrapped up in your own self importance you are. You really need to have a long hard look at yourself after making comments like that and while you are at it, you maybe should stop using this forum for spouting your poisonous bile. Maybe you should team up with Ken to help him out on his website, afterall, thats what it is designed for.
On the contrary my Welsh friend
"Your comments say more about your own attitude. Clearly you are clueless about the wider aspects of a profession".
As an accountant myself and the child of a senior barrister, I would never class either of our proffessions as a "vocation". Its a career!!
However noble you may wish to paint your voluntary activities and crusades against injustice, it's still just a job!
A wise man once said (and no im not quoting you here CD) but if the cap fits and all that...
"There are not a few among the disciples of charity who require, in their vocation, scarcely less excitement than the votaries of pleasure in theirs".
"As for your reference to "poisonous bile" - produce an example - the only poisonous drivel I see is YOURS. Perhaps you should stick to making the tea at the local tax office".
Well, as the local office tea monkey, i probably wouldnt have the skills to search the AWeb for one of your attacks on our cousins in HMRC, but im sure the wider community on here wont have any difficulty relating to what i said.
Anyway, thats after 5pm now so i really must dash and put away my counting beans.
Ah, Penny
You are reminding me of the tragedy of human relationships!
Women think they can change men but they can't.
Men think that women won't change but they do.
Love him or loathe him, C_D isn't going to change for you, the moderators or anyone. It took me a long while to work that one out, but accepting it has made me a better person ;)
-- Kind regards Andy
PS. A very long time ago I thought AWeb's technical experts were going to revert to having the most recent post at the top of the list, not the bottom. This way is a real pain, expecially when there is a good argument to keep abreast of.
CD
"I think most of the community will wonder what YOUR motives were in resurecting an old thread to post a peronal attack upon another, particularly given your infrequent posting record.
As for "attacks on our cousins in HMRC". That is a very telling phrase. If you are attempting to defend or excuse the gross incompetence demonstrated by HMRC, then you are defending the indefensible and your views are clearly not worth my time considering".
I very much doubt the community will even give my motives a second thought, I read a 3 day old post for the 1st time today and was frankly angered by what i was reading, (for reasons i wont bother to repeat).
As for my infrequent posting record, i have no desire to have my opinion constantly rammed down the throats of other users of this forum. That obviously makes me a lesser person than yourself, why else would you examine my posting record? I dont get the relevance?
Im glad my views are not worth your consideration, i'd hate to think i was on any kind of level with you. I look forward to you NOT wasting any more of your free time on me and my irrelevant little opinions.
Moderator here
@Dubda - Your comments above could be construed as 'flaming'. Can you please refrain from deliberately winding people up?
@cymraeg_draig - Don't rise to it! You should not have qualified the 'poisonous bile' jibe with a response; it was a deliberate attempt to wind you up.
We are, as ever, watching closely folks. Please try and remember what it is I have to harp on about every few months and save me from doing the stuck record thing this time.
Cheers
Twaddle - and it is.
<...When I worked in the old IR in the seventies and eighties we manually reconciled all the PAYE records. A million underpayments does not seem like a particularly high figure when you consider the number of people whose circumstances change regularly throughout the year. ....>
I did my PAYE training in the early 90s - oh for the benefit of doing things manually. What a dream. Once the records are on an unremitting computer system working them manually flies out of the window. Then grade comes into it - an RO has to wait for an RE to OK any major changes - luckily I came in from another Department and was already the grade . There was a major PAYE coding error in the early 90s and the telephones were red hot for weeks. There were only two of us out of six or seven and we took around 48 calls each a day from very angry taxpayers. Where were the rest of the team? Kids holidays x 2, TA duties x 1, sick leave x 1, holidays the remainder. IR was in meltdown even then.
TheAncientOne
C-D
Andy Partridge says <Love him or loathe him, C_D isn't going to change for you, the moderators or anyone. It took me a long while to work that one out, but accepting it has made me a better person ;)..>
I have always found C-D to be a kind and helpful contributor and I do like someone who calls a spade a spade and tells it like it is. HMRC is a shambles and this country relies on them so we professionals should be having these conversations. I only hope that someone is reading and taking note - someone who matters and who can change things. I complain to the Revenue when they are incompetent, they deserve it. Usually it is something simple like not recording my 64-8s for VAT purposes and writing gobbledegook to my client (the most recent). I received a terse reply today but they did deserve my waspish comment. and I shall continue.
Keep up the good work C-D. 40 years working - you are but a youngster (;-).
Sorry to be a bit behind with the comments but I have been on holiday to lovely Northumberland and then to Edinburgh.
TheAncientOne.