HMRC chaos as taxpayers sent wrong statements

The original mistakes affected employees who pay tax through the PAYE system. Some 5.5 million people were billed an average of £300 too much or too little. In the wake of the error, most of these individuals were sent statements or repayments. Now it turns out that thousands of these have been miscalculated.

The Telegraph says it has seen an email sent to accountancy bodies and senior HMRC staff, which has stated that thousands of mistakes had been made, and that taxpayers who questioned their statements should be told "not to repay any underpayment" of tax. Those who have received a cheque should not cash it yet.
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Not unusual

To put this into context, the blunders HMRC uncovered in June were not out of the ordinary. At the end of every tax year it works out whether everyone in the PAYE system has paid the right tax. Every year millions of mistakes are found - usually among people who moved jobs, took a second job, or were given a pay rise and their tax code wasn't updated. The previous tax year, for example, 5.2 million mistakes were made.

Every year, those people who are affected receive statements showing the mistake, and then either a cheque repaying the overpaid tax, or their tax codes are altered to make up the difference the following year. It's these statements which have been miscalculated.

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New system

What's particularly embarrassing is that this problem was meant to have been solved by a new £270 million system called Real Time Information, which requires details to be updated more by employers often, so that tax codes can be altered quickly.

The Daily Mail quotes a spokesperson who said that most of the errors had arisen because employers had not updated the system fast enough, but the mistake exposes flaws in this system too. The Telegraph claimed one flaw currently duplicates the entries for some workers.

HMRC said in a statement: "We are sorry that some taxpayers may have recently received an incorrect 2013/14 tax year calculation. We are going to send out updated calculations in the next 6 to 8 weeks."

Concerns

It's yet another shocker for an organisation that has had more than its fair share of blunders. It's particularly worrying given that from April the cap will be lifted on the amount of tax HMRC can claw back by changing someone's tax code.

And it rings alarm bells for those who are already concerned by the government's proposals to give powers to allow HMRC to take money directly from the bank accounts of people who have not paid tax that is due.

There are experts who are asking whether the systems are up to it, or whether these new powers will simply provide a new and potentially even more damaging way for HMRC to get things wrong.

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