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HMRC's (qualified) accounts: Shall we laugh or cry?

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15th Jul 2008
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Accountingweb.co.uk's tax editor, Nichola Ross Martin tries to look on the bright side...

The auditor general has again qualified his audit report on HMRC’s 2007/08 accounts. Tax credits are singled out as the main area of concern. Over £7 billion has been overpaid to date, with some £4 billion still outstanding after adjustments (such as write-offs). It is hard to know whether to laugh or cry when one learns that the tax credits computer has been unable to cope with the 2002 Tax Credits Act… This means that it will take over 3 years to manually sort through some 250,000 awards to determine whether claimant are due any repayments.

It had been hoped by the government that the introduction of a £25,000 income disregard would create a large enough “carpet” under which to sweep away some of the really damaging statistics of the tax credits system. The National Audit office found that the effect of this was that HMRC reduced its overpayments to £1.0 billion in 2006-07, compared with £1.7 billion in 2005-06. Fraud levels remain high within the system at over 7%, HMRC says that it is trying to reduce this to 5% by 2011.

Also highlighted in the audit report are the ongoing problems with the PAYE system - the planned transfer of processing of PAYE for individuals on to the National Insurance Recording System was deferred from April 2008 to October 2008 “to allow more time to assure supporting systems.” HMRC staff are following up some 16.2 million open cases flagged up with discrepancies there are doubts whether it is humanly possible for these to be resolved in the two years claimed.

Good news for pensioners is the fact that HMRC has given up (exercised its management discretion) trying to resolve coding problems which were created by a failure to apply the PAYE regulations properly since 1983. It has decided to waive the tax due for 2007-08 because it could not now give the taxpayers concerned reasonable notice of the tax payable. It will therefore not collect the estimated £135 million of tax due for 2007-08 as it originally planned. It will start to tax these pensions from 2008-09.

An interesting statistic for accountants (and also professional fee protection specialists), both who are unlikely to be short of work for the foreseeable future, are that HMRC’s latest estimates (based on the 2002-03 tax year) indicate that 34 per cent of filed returns were inaccurate. This puts between £2.9 billion to £3.7 billion tax “at risk”. This estimate is based on registered Self Assessment taxpayers and does not cover under-declared income from people working in the informal economy.

On the VAT registration delays, the auditor general did not find that last year’s backlog was the fault of any accountancy practices. Instead he blamed systems and staffing problems.

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By User deleted
21st Jul 2008 13:41

In a normal world
In a normal they company/organisation would have shut shop and the management fired. Perhaps this should be the case here in this organisation.

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By User deleted
17th Jul 2008 13:18

Or maybe
how those who resign their jobs (think "datagate"), manage to do so with a full payout and pension rights.

It makes the PCG's call to its members to boycott the tax system almost seem like a half-reasonable idea. I do wish MPs would wake up on this though (and by the way, I don't actually support a boycott).


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