News

Tax systems wrongly issue fines to up to 14,000 firms

Tony Collins

IT systems at HM Revenue & Customs have incorrectly issued up to 14,000 late-filing penalty notices to companies that submitted their ­annual tax returns before the 19 May deadline.

It is the third year running that the department's systems have issued thousands of unjustified penalty notices to companies.

The Revenue owned up to the problem on 4 October only after being contacted by Computer Weekly and by complainants, including payroll agents, which had been hit by fines of £400 each.

Penalty notices were issued automatically on 24 September to companies for which Revenue systems had not recorded the receipt of an annual Pay As You Earn (PAYE) ­return by 19 May.

A Revenue spokesman said the number of incorrect penalties was "fewer than 8%" out of the total of 202,000 penalty notices. But the department was unable to explain what had gone wrong.

A Revenue statement said, "An early investigation into the validity of the penalty has found that a small amount, and certainly no more than 8%, may be invalid. While the cause is still being investigated, early results have indicated that this seems to be IT systems management (ie. a human element) rather than an unknown IT systems fault." 

It added, "We are urgently investigating and will provide an update by Tuesday 9 October at the latest."

The problems have been particularly frustrating for accountants who file their clients' returns online - a process that is supposed to be faster and cheaper than paper submissions.

Nichola Ross Martin, tax editor at industry website Accounting Web, said the poor reliability and accuracy of the Revenue's IT systems had been a "major bugbear" to employers that file annual returns over the internet.

Many employers contract out the online filing of their annual returns to accountants and payroll software specialists. Ross Martin said that when employers receive incorrect penalties they are apt to blame their outsourcing payroll specialists for not filing returns before the May deadline.

PAYE researcher Matt Boyle said it was costing employers, payroll companies and accountants millions of pounds to deal with the incorrect penalties, in part because agents have to contact their clients to explain the penalty notices.


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