How much can you trust what HMRC says?

It’s easy to feel sorry for HM Revenue and Customs. For many years its back-office has been attractive only to curators of the Bletchley Park IT museum. 

In the last two years, though, there have been some important improvements at HMRC: Pay As You Earn [PAYE] tax records have moved off the ancient Computerised Operation of PAYE mainframes to the slightly newer National Insurance Recording systems – but the organisation’s culture of defensiveness and secretiveness is stuck in the past..

In November HMRC brought down its systems for an upgrade, and refused to give details. Why?

And what it does say you cannot always trust.

Last week the Public Accounts Committee published a report which said that HMRC cannot begin to clear its backlog of 17 million open cases until April 2010.

An open case is an open taxpayer record which cannot be closed offautomatically at the year-end because of a discrepancy: the tax paid byan employee is outside of the amounts the system is expecting. It’slikely that the tax paid has been too much, too little or nothing atall. The case needs manual intervention. 

This is the history of HMRC (formerly Inland Revenue) open cases:

1998:  2.5 million

1999:  4.8 million

2001:  8.5 million (at which point 1,250 extra clerical staff were hired toreduce the backlog)

2007:  11.5 million

2008:  30 million

2009:  17 million.

Things are going in the rightdirection, after many years of sharp rises. At one point in 2008/9there were as many open cases as PAYE taxpayers. Which meant there were30 million files showing that taxpayers might have paid the wrongamounts.

In 2007 Computer Weekly asked HMRC for a comment onthe number of open cases which at that time stood at 11.5 million. Thisis the email it sent in reply, in July 2007:

“The good news is that we aim to have reduced the number of open casesto 10.5 million by April 2008. The problem is really to do with thechanging nature of employment patterns, [with people] moving jobs moreoften. That makes it much harder for our systems to reconcile at theend of the year.”

In fact, in 2008/9, the number of open cases, far from reducing to 10.5 million, rose to 30 million.

It’s just as well the Treasury doesn’t rely on HMRC to do its financial forecasting.

It does?


What is an HMRC open case?

Thank you to Payrollchat for this explanation:

“At the year end HMRC’s computer system checks whether the tax anemployee has paid in the year is consistent with the year end pay andtax information received from employers. 

“The computer identifiesdiscrepancies or fails to match information to a taxpayer’s record inapproximately 30% of cases, which are known as open cases, and must bechecked manually. 

“Open cases are a normal part of the PAYE process andthe Department has an annual programme of work to ensure that all ofthese cases are reviewed and cleared.”


20 million unresolved HMRC open cases – IT Projects blog

Public Accounts Committee report on HMRC 2009 – House of Commons website

IT delays at HMRC lead to lost tax revenue –

Sensitive tax work may go abroad for processing – IT Projects blog

Outdated HMRC IT – ZDnet

The tax gap – Richard Murphy