Tax code errors could cost taxpayers dear

There is no doubt that computers make our lives easier. But any office worker will tell you that with any new IT system comes a whole world of trouble. Unfortunately HM Revenue & Customs may not have worked out the bugs following the introduction of a new computer system – and that could cost the taxpayers hundreds of pounds more in tax.

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According to the Chartered Institute of Taxation, wrong information may have been sent to "huge numbers of people" and, unless corrected, they could find themselves out of pocket. In the worst cases, it could mean as much as £108 a month, or £1,295 a year too much.

Most likely to be affected are those with more than one job, or several sources of income, many of whose "coding notices" could be wrong. And if the error is not corrected by the time the new codes are used in April, companies using the Pay As You Earn (PAYE) scheme could end up deducting too much tax from employees.

The new computer system, aimed at simplifying the tax collection system, has meant that twice as many coding notices have been sent out this year than last. A spokesman for HMRC told The Telegraph that "with the best will in the world, there might be some incorrect codes" but that taxpayers had two months to check and to inform the tax office if an error had occurred.

But as Andrew Hubbard, president of the Chartered Institute of Taxation, said: "Most people on PAYE are used to assuming that what the taxman sends them is correct. Many file away coding notices without even bothering to check them."

The question is, should it be the taxpayer that checks that the codes are correct and should they be liable if the error is that of HM Revenue & Customs?