Latest HMRC blunder hits 12,000

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HMRC should be working hard to rebuilt trust in the taxman after numerous shameful disasters have left honest tax-payers confused and struggling with massive unexpected bills.

However, its actions this week reveal that learning from mistakes isn't its strong suit, embroiling another 12,000 people in a new tax headache.

The incident

They say that tax doesn't need to be taxing, but given the spectacular mess the taxman has made of his own systems, you'd have to wonder whether it's just too tricky for civil servants to get their heads around.

This time the taxpayers caught up in the errors are people who have previously self-assessed, but were part of a project to remove people from the self-assessment system. HMRC asked people to contact them if they previously went through the self-assessment rigmarole, but were now working full time for just one company and paying tax through PAYE.

As a result of this project, 130,000 received letters saying they had been taken out of the system and didn't need to complete a tax return last time around.

Unfortunately a systems glitch means that 12,000 of them have now had letters saying that because they failed to submit a tax return, they needed to pay their £100 fine, and that from 1 May they would be charged an additional £10 a day until their fine reached £900.

For those who thought they were rid of the complications and annoyances of the self-assessment system, this is a bitter blow, which has raised a great deal of concern.

What does it mean?

HMRC has apologised, and emphasised that these fines will not be due. An HMRC spokesman said:"We are very sorry and can reassure these customers that we know who they are and that this letter is incorrect - they do not owe a penalty. We are writing to all of them to apologise and to explain this error."

It seems that not even by opting out of self-assessment can you escape HMRC's reach in their all-powerful drive to bring chaos and confusion to people's tax affairs.

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Latest HMRC blunder hits 12,000

Most recently HM Revenue & Customs let Vodafone off the hook - for quite a sum. Vodafone paid out just £1.25 billion despite an original tax bill being closer to £8 billion (HMRC has always refused to reveal how much it thought the Vodafone final bill was). The episode was made even more shaming and painful because Vodafone was given several years to come good with the cash owed - even though it was sitting on a substantial cash pile at the time.

The Exchequer is estimated to have lost around £10 million to Goldman Sachs recently through an 'error' made by HMRC. The episode relates to an employee benefit trust run by Goldman allowing employees to take non-repayable loans that had no National Insurance contributions tied to them. HMRC did claw back the full amount from more than 20 businesses - but not Goldman. HMRC remains cagey about the details of the deal. Little HMRC accountability or transparency.

Huge problems with QinetiQ, the former Defence Evaluation and Research Agency, or DERA. A lack of clarity on contractual arrangements at the outset didn't help, allowing private equity company Carlyle to hammer the price down (why would you start negotiations when you didn't know the company's true value?). The Ministry of Defence behaved, it was said, like "an innocent at a table of card-sharps". Estimated cost to the taxpayer - £90 million. Huge sums were later made by QinetiQ management when the company listed.

The TaxPayers' Alliances estimates £2.7bn worth of taxpayer cash was wasted with a super-expensive 'National Programme for IT in the NHS'. The Department of Health, in the end, had very little to show for it as a consequence. Another example of poor management and a seemingly ingrained inability to provide taxpayers' with value for money.

"BT is paid £9 million to implement systems at each NHS site, even though the same systems have been purchased for under £2 million by NHS organisations outside the Programme", the Commons Public Accounts Committee noted.

Contentious. The Office for National Statistics estimated this has declined 3.4% since 1997, "with inputs increasing by 38%." The Centre for Economics and Business Research estimate that this inefficiency costs the taxpayer £58.4 billion a year.

Given the above record, are there any deals that the taxpayer has actually won out on? Not many, but the one successful project was the roll out of new Jobcentre Plus offices. It came in £314 million under budget, claims the Taxpayers' Alliance. A small cheer.


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