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HMRC's new IT system brings greater accuracy to tax payments

Rebecca Thomson

A new IT system at HM Revenue & Customs (HMRC) is leading to greater accuracy in income tax payment by highlighting more errors and ensuring people are repaid any overcharged tax.

The system flags up any rebates due to individuals who have overpaid their tax, and has led to the discovery of more overpayments than in previous years.

The Daily Telegraph reported that 10 million people are due a rebate, but the department said it does not recognise this figure, saying the vast majority of the 40 million people who pay through Pay As You Earn (PAYE) deductions are taxed correctly.

Around 4.3 million people are thought to have overpaid tax between 2008 and April this year, and the new system has reportedly found another 5.8 million "legacy" errors before March 2008.

A spokesperson said, "Ensuring that the right tax is deducted at source from salaries and pensions is a normal part of the PAYE cycle. The vast majority of the 40 million people who pay through PAYE deductions are correctly taxed but because circumstances change during the year there will always be a minority who have paid either too much or too little.

"This year and going forward the new IT system will mean more people paying exactly the right tax at the time then ever before."

The old IT system was based on a model of employment that "no longer reflects the frequency of changes in the contemporary job market." People's job circumstances often change during a tax year, but the department often does not learn of the changes until the end of a tax year, leading to under or overpayments of tax.

HMRC rolled out a new IT system last year to update the process and respond quicker to individual's employment changes. The department said, "The new system raises the bar in terms of data quality and will in the medium term significantly improve overall accuracy reducing both under and overpayments. This year and going forward the new IT system will mean more people paying exactly the right tax at the time then ever before."

HMRC is one of the departments said to have frozen IT spending this year.


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