Tax refunds for up to 3.5m people

MoneyUp to 3.5 million people are set to receive a tax refund from next week, but as many as 1.6 million face a bill for underpaid tax, HM Revenue and Customs (HMRC) has said.

Those who are due a rebate will get an average windfall of £379, while the typical shortfall for those who have not paid enough is £537, under Pay As You Earn (PAYE) adjustments for the tax year 2011/12.
The tax bills and refunds, which are a normal part of the PAYE process, are being handed out two months earlier than last year, meaning people will get their money back more quickly as well as knowing exactly what they owe, HMRC said.

Under PAYE, a tax code is allocated to taxpayers to ensure that the right amount of tax is deducted at source, but people can end up paying too much or too little when their circumstances change and HMRC is not told.

Around 85% of people generally pay the correct amount of tax during the year, but end-of-year adjustments are made for the 15% who do not, because they may have moved jobs or had gaps between periods of work, for example.

HMRC said it expects between 2.1 million and 3.5 million people overpaid tax in 2011/12, while between 1.2 million to 1.6 million taxpayers paid too little.

Stephen Banyard, acting director general for personal tax, said: "We are pleased that we are able to start this process more quickly than in previous years, giving money back to those we owe and delivering certainty to those with something to pay.

"We are improving the PAYE system further through the introduction of Real Time Information (RTI), which will make it easier for employers and pension providers to administer as they will tell HMRC about PAYE payments at the time they are made - as opposed to only at the end of the year - reducing the need for corrective actions at a later stage."

TaxPayers' Alliance campaign manager Robert Oxley said: "While some of us might get a bit of good news from HMRC, over a million taxpayers will soon see an unexpected bill land on their doormats.

"The taxman is giving with one hand and taking with the other because of an overly complex and burdensome tax system that can't keep up with people's changing circumstances. We urgently need a simpler, fairer system that leaves everyone with more cash in their own pockets to spend as they choose."

Five biggest taxpayer stings
See Gallery
Tax refunds for up to 3.5m people

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.


More stories

Read Full Story