Her Majesty’s Customs and Revenue is making errors in
calculating at least a quarter of taxpayers’ PAYE codes so
employers then deduct the wrong amount of tax, according to the
House of Commons Public Accounts Committee.
The department is now developing “better IT” to cut the number
of PAYE coding errors, which affected at least a quarter of self
assessment tax returns in 2004-2005, it noted.
“The Department is developing better IT which it expects to
remove a third of its coding errors; improving the management of
its processes to reduce its error rate; improving systems to log in
returns; and clearing taxpayers from its database who are no longer
self employed” the report said.
“However, the Department does not know how much compensation it
has paid to those affected by its errors and cannot provide any
estimate of this figure.”
The report, Filing of income tax self assessment returns, also
says the department is also struggling with 1.6 million
self-assessment forms filed online in 2004-05. “The service did not
operate properly in January 2005 when a large number of people
tried to file online. Although the Department has improved the
capacity of its e-service, it may still not be sufficient at peak
times,” it said.
The HMRC needs a system that can track errors in processing,
coding, the imposition of penalties and their enforcement, as “a
minimum,” the MPs said..
The report also called for improvements in telephone helplines,
online forms and for improved training for call centre staff and to
extend the hours of service at peak periods throughout the
year.
Tax payers made mistakes in filing which could amount to £2.8bn,
the MPs said.
Overall, HMRC made errors in processing nearly 500,000 returns,
resulting in £65m in undercharges and £30m in overcharges of
taxpayers. It also made 2m Pay as You Earn coding errors.
PAC Chairman Edward Leigh called on HMRC to deal with its
mistakes.
"HMRC is responsible for errors in processing returns in 5
percent of cases. And some 30,000 taxpayers received incorrect
penalty notices even though they had actually filed on time. The
department must improve its performance in this area."
The committee heard that HMRC made errors in processing 500,000
returns, leading to 65 million pounds of undercharges of taxpayers
and 30 million pounds of overcharges.