£22m overcharge from tax glitch

The Inland Revenue is sitting on £22m of overpaid taxes as a result of its inability to reconcile data between its national...

The Inland Revenue is sitting on £22m of overpaid taxes as a result of its inability to reconcile data between its national insurance PAYE computer systems.

Mike Simons

According to the National Audit Office (NAO), the Revenue has effectively closed more than one million tax files without checking them because it would not be cost-effective to do so. This prompted the NAO to attack the Revenue for not making any effort to inform taxpayers that they may be owed rebates.

A Revenue spokesman told Computer Weekly, "In the summer we will write to anyone affected and tell them the position."

The NAO's report into the Inland Revenue appropriation accounts casts light on the problem of missing and incomplete records (Computer Weekly, 20 July 2000; 31 August 2000).

The Revenue estimated that, had it been able to process the cases in the normal way, it would have identified underpaid tax of £4m and overpaid tax of £22m, the NAO said.

Instead, the Revenue commissioned EDS, its IT outsourcer, to write software to automatically check 1.4m 1997-1998 tax records with missing data and close 1.04m of them.

Problems reconciling information on the two systems continued in the 1998-1999 tax year. In May 2000 the revenue had 5.2 million cases on its Cop PAYEsystem without pay and tax details for the year 1998-1999. By November this figure had fallen to 2.1m. The Revenue admitted to Computer Weekly that there were still 1.7m outstanding cases from 1998-1999.

An internal Revenue report into the problem of data transfer from the Nirs2 national insurance system to Cop found that EDS had been "unable to test fully the new interface between the systems before it went live".

The failure to pass details of the Nirs2 database, run by Accenture, to the PAYE system meant, "EDS could do no more than satisfy itself that the resulting input files looked reasonable," said the NAO.

Inland Revenue Appropriation Accounts 1999-2000, National Audit Office HC25-XVI

Data transfer difficulties 1997-1999

  • A late start to processing of tax returns

  • The Nirs2 data validation process rejected more records than expected, which delayed the transfer of information to Cop

  • Tapes found to contain data that was incorrectly labelled, incomplete or unreadable

  • An omission in the design of Nirs2, since corrected, meant that data could not be matched automatically to Cop records where there had been a change in national insurance number.

    Source: NAO

    Putting it right

    Significant administrative effort was needed to identify, quantify and resolve the difficulties associated with transferring the data so that tax records could be closed. This work included:

  • Development of special programs to detect and delete erroneous data from the Cop database, as Nirs2 initially produced invalid data

  • Matching open cases on Cop with Nirs2 to identify cases where pay and tax details were on Nirs2 but not on Cop

  • Submission of fresh computer tapes from Nirs2

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