The Inland Revenue has accidentally deleted an unknown number of taxpayers’ records as part of a routine database administration process.
Despite a year-long investigation, the Revenue has yet to give an indication of how many records were deleted or who might have owed money at the time or might have been due repayments before their files were removed.
It said the number of taxpayers whose records were deleted might have been small but it accepted that, equally, it could have been many hundreds of thousands. "We don’t know," said a spokesman for the Revenue.
He added that of the 35 million taxpayer records on the Computerisation of pay-as-you-earn
system, "the overwhelming majority are not affected by this problem".
The deletion of records highlights flaws in the Inland Revenue’s procedures, controls and policies, which should have prevented the removal of core data.
The files were removed before the Revenue carried out its usual final review to check whether any tax remained over- or underpaid for the relevant year.
The problem was caused by a "well established and accepted" housekeeping system which was supposed to remove only redundant files where the taxpayer had left employment three years earlier and had not re-entered employment since.
"We have to perform this sort of housekeeping exercise to stop our databases becoming overloaded," said a spokesman.
The deletions were made on the PAYE database, which runs on Fujitsu mainframes. It may affect PAYE taxpayers and also those employees who receive income without tax being deducted.
The PCS union, which represents staff at the Inland Revenue, said restoring each taxpayer record after it has been accidentally deleted is a "complicated and expensive process". The Revenue is unlikely to know that a record has been deleted unless the taxpayer contacts the department, according to the union.
The Inland Revenue said the accidental deletions had occurred over a number of years. It became aware of the problem last autumn but details emerged only two weeks ago, in a report on the Revenue’s annual accounts.
A paragraph in the National Audit Office’s report by comptroller and auditor general John Bourn said the deletion of records meant that "some customers will not have received the repayment to which they may have been entitled and others may owe tax which has not been collected".
He added, "As the records have been deleted there is no way
of identifying whose records were open when the process was run. This routine has been corrected. The department is carrying out further work to establish the full effect, including a statistically valid sample exercise to determine the average level of repayment due. It will then decide how best to deal with the problem."
The Revenue told ComputerWeekly that it was able to reinstate files that relate to the current year but "aspects of our analysis continue and it would be wrong to speculate on the outcome".
In 2002, the minister responsible for Inland Revenue, Dawn Primarolo, made clear that the department was doing extensive work to clean up its PAYE database. It was moving towards a national database while "keeping all the information we have on the regional database as well".
"The Revenue has developed databases that were the best that could be done at that time and, as we move on in terms of the demands from our customers, they do not always provide the information our customers want or, indeed, that we might want to give our customers," she said.
John Whiting, a tax partner at accountancy firm PricewaterhouseCoopers, said records on clients sometimes go missing but "this sounds more of a fundamental problem".
He said people may have wrong tax codes and may be owed money, or owe money but will not know about it.
A PCS spokesman said the work to reinstate records which are identified as deleted, if ever that happens, will add to the workload of tax staff who are under increasing pressure because those who leave are not being replaced.
A Gateway review on a tax credits project at the Inland Revenue last year questioned whether the department had the ability to act as an intelligent customer because its skills were stretched too thinly to provide an appropriate challenge and assurance on some IT work.
The Revenue spokesman insisted that the problem had nothing to do with the department’s IT suppliers, which raises questions about whether the specifications for systems had a loophole which allowed files to be accidentally deleted.