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IT error means 420,000 Scottish taxpayers not informed of new rates

National Audit Office report reveals how error in HMRC system led to thousands of taxpayers not receiving notification letters for Scottish Rate of Income Tax

Hundreds of thousands of Scottish taxpayers were not sent their tax rate for the new Scottish Rate of Income Tax (SRIT) because of a computer error, according to a National Audit report.

The report said that 420,000 of the 2.4 million people who live in Scotland and fall within the SRIT rules were not informed of their new rate.

“As a result of an error in the design of HMRC’s taxpayer identification exercise in December 2015, 420,000 potential Scottish taxpayers did not receive a notification letter,” said the NAO report.

HM Revenue and Customs (HMRC) and its IT supplier investigated the issue in January 2016, and confirmed the total number of affected individuals in April 2016.

The NAO report said: “HMRC faces significant challenges in administering SRIT, particularly when tax rates and thresholds differ between Scotland and the rest of the UK. It is crucial that it maintains accurate address information for Scottish taxpayers, and ensures that the potential for tax avoidance and evasion is mitigated.

“HMRC also needs to be able to report the actual amount of SRIT collected to the Scottish government, and provide an IT solution that allows private pension providers to claim relief at source.”

The NAO said that by not issuing the same level of information as the other taxpayers originally identified in December 2015, HMRC may have created a less informed group.

In response to the report, the Scottish government said: “We have made it clear to HMRC that the identification of Scottish taxpayers must be robust and accurate. Our officials regularly meet with HMRC to receive assurances that the identification process is carried out in a satisfactory manner, that the integrity of Scotland’s income tax base will be maintained and to ensure where any issues are identified, that they are addressed quickly.”

The HMRC put in an interim fix by June 2016 to issue notices for the 2016-17 tax year to the 420,000 taxpayers omitted. A permanent IT system was completed in October 2016 to bring these taxpayers within HMRC’s automated process for the future.

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