Mainstream media have been delving into HMRC’s accounts for 2009-10 to highlight the scale of tax calculation errors during the past few years.
Both The Guardian and The Telegraph have given extensive coverage to the 18.5m open cases highlighted in the annual accounts. At the time the accounts were published, the NAO estimated that the backlog could result in tax repayments of £3.0bn and underpayments that would need to be collected from tax payers amounting to £1.4bn. According to weekend reports, the figures are closer to £2bn for underpayments from employers and £1.8bn in overpayments.
The NAO report on the department’s accounts provide a detailed commentary of how the PAYE system broke down, and the extra backlog that resulted when HMRC introduced its new NPS system to handle PAYE processing.
In a comment on PublicTechnology.net, an HMRC official explained, “The roots of this are in the fact that PAYE came in during the Second World War in 1944, at a time when many people stayed with the same employer during the whole of their working lives. It’s not like that anymore.
“We have to reflect that and have new systems. Because circumstances change during the year there will always be a minority who have paid either too much or too little. This year, and going forward, the new IT system will mean more people paying exactly the right tax at the right time than ever before.”
Speaking to The Guardian, ICAEW Tax Faculty manager Anita Monteith said that those taxpayers whose underpayments were the result of HMRC errors when calculating their tax codes manually would not have to pay up.
“HMRC can agree to give up collecting an underpayment if they had the right information to calculate tax deductions and did not use it when they should have done,” she said.
The discretionary exemption is available under HMRC's Extra Statutory Concession A19, under which the department can give up claims to income tax arrears if they result from its "failure to make proper and timely use of information".
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Any Answers: Another scandalous example of gross incompetence
More PAYE coverage on AccountingWEB.co.uk