Taxman sent out thousands more inaccurate bills

17 October 2014

By Louise Eccles - Business Correspondent
Daily Mail, 10 October, 2014

The taxman is facing fresh embarrassment after it emerged that it had sent thousands more workers tax statements that were in fact incorrect.

The blunder comes at a time when HM Revenue and Customs is requesting new powers to take unpaid taxes directly from taxpayers' bank accounts.

Every year, around five million workers are found to have under or overpaid through the Pay As You Earn system.

This can be for a variety of reasons, including because they have moved jobs or taken a second income.

The Government must contact each one with a new tax statement telling them how much they must either claw back, by changing their tax code, or how much they must reimburse them.

Now HMRC, which has a history of blunders, has admitted thousands of these were miscalculated - an error they were alerted to after being contacted by concerned workers.

It said 'thousands' of statements sent out to customers showed 'an incorrect overpayment or underpayment' during 2013-14.

In an email sent to accountants and staff, it added: 'We currently do not know the scale of the issue, but some large employers are involved, so several thousands of employees may be affected.'

HMRC advised recipients of the email to tell taxpayers who questioned their bills ‘not to repay any underpayment' - and not to cash any cheques reimbursing them until the error had finally been rectified.

The leaked letter said they were 'very sorry’ about the incorrect calculations and they were 'urgently investigating these cases’.

The miscalculations are believed to have been caused by incomplete information from employers - something the Government had hoped to limit through its new £270million 'Real Time Information' (RTI) programme.

The system forces employers to report the amount of money paid to staff on a more frequent weekly or monthly basis, in a bid to ensure changes to employees' status are quickly updated. But experts said the latest mishap showed there were still major flaws with the system.

Stuart Phillips, chief executive of financial advice firm The Private Office, said: 'This is very bad timing for HMRC.

'They should only be given more powers if they can prove they can confidently deliver accurate information. This clearly calls into question their ability to do so and their faith in the real-time system.’

Jason Piper, of the Association of Chartered Certified Accountants, said it was further evidence that the 'real-time' system had been implemented too quickly without sufficient planning or resources. He added: 'Yet again, we are seeing errors in the operation of PAYE. Public patience is wearing thin with government IT failures and one like this which hits so close to home for taxpayers is bad news for a department trying to extend the reach of its powers into every aspect of our collective financial lives based on the power of its computer systems.’

The Treasury has outlined a string of new powers for HMRC in recent months in a bid to clamp down on tax avoidance.

This includes a controversial proposal to allow the taxman to raid people's bank accounts for money owed without gaining permission from a court first.

The 'direct recovery of debt' would enable HMRC to confiscate unpaid tax direct from bank and building society from debtors who owe at least £1,000 and who have been contacted at least four times by HMRC to pay.

The taxman would leave at least £5,000 in debtors' bank accounts. A spokesman for HMRC said: 'The majority of the errors have happened because an employer failed to make a final payment statement for the 2013/14 tax year, meaning our records were incomplete despite reminders that these submissions had to be made.

'We are sorry this has happened and we aim to issue corrected calculations in the next few weeks.’ · He said no one had been asked 'for a penny’ as a result of the error and they would receive a new statement within six to eight weeks.

While HMRC did not yet know how many people had been affected, it would be fewer than 100,000, the spokesman added.

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