Spin and mistakes by HM Revenue and Customs - comment

If the US military accidentally destroyed some small buildings in Nevada it would be illogical if it countered critics by saying that its explosive experts successfully left thousands of other buildings in America untouched.

If Her Majesty’s Treasury managed to flush £300m in cash into London’s sewers it would be illogical if its defence for public relations purposes was that the money represented less than 0.1% of the government’s annual spend.

The HM Revenue and Customs [HMRC] is using the same peculiar logic – spin – to trivialise its mistake in issuing up to 14,000 incorrect penalty notices, of £400 a time, to companies that have filed annual returns on time. This is the third year running that HMRC has accidentally and automatically issued incorrect penalty notices.

In defence of its latest mistake HMRC said in a statement to Computer Weekly:

“For 2006-07, more than 1.4m UK employers filed their PAYE End of Year return online.

“On 24 September, HMRC issued 202,000 interim PAYE penalty notices to employers where it is believed a return is outstanding. 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 (i.e. a human element) rather than an unknown IT systems fault.

“There is no fixed time limit for when HMRC has to issue these interim penalties, and this is in fact the quickest employers have been told that there is an outstanding return against their account for the last few years.”

It’s a pity that HMRC so belittles mistakes that cause unnecessary work, expense and unproductive remedial work for thousands of organisations and individuals.

A payroll company that has to contact some of its biggest customers and apologise annually for unjustified late-filing penalties risks losing its credibility. HMRC will continue to antagonise those affected by its mistakes if it makes a habit of telling them they’re in the minority.

If passengers on a cruise liner were swept overboard during a storm, they would not welcome a nonchalant captain calling at them from the undulating deck: “Don’t worry you’re only 10 among 2,300 passengers.”

We sympathise with managers at HM Revenue and Customs who are running an unimaginably complex set of businesses. We also sympathise with the IT people. They’re usually blamed when things go wrong. But blame should reside with HMRC’s poor communications.

Those running HMRC will win the sympathy of taxpayers and companies only if they own up to problems without having the truth wrung from them each time, if they publish the lessons from IT-related difficulties, if they show how they are learning from the lessons, and if they don’t repeat them. They should show that they care about avoiding mistakes.

Only after being contacted repeatedly by Computer Weekly and by accountants and payroll agents, did HMRC admit it had issued some penalties incorrectly. This is the wrong way round.


HMRC slow to admit its systems issued incorrect penalties – for third year running

HMRC – we’re cancelling notices centrally [9 October 2007]

Accounting Web – comments on incorrect penalties

HMRC announces new era of openness

Concern over HMRC attempts to constrain directors’ public speeches

Watchdog raps harsh tax credits

Revenue red-faced as IT system wrongly fines 10,000 companies

Revenue makes 500,000 mistakes in tax codes