HMRC computer errors leave millions facing fresh tax demands

The errors were made during the past two tax years and emerged because the HMRC is implementing a new computer system to automate the process of updating PAYE records. The new  system found widespread underpayments by employers through the PAYE system, which total about £2bn, while 1.8 billion pounds was overpaid.

 

While numbers are still being assessed and reassessed, it was estimated over the weekend that around 4.3 million workers are in line for a rebate worth £1.8bn in total, an average of £413 each, because they have paid too much. The HMRC will write to those affected informing them of its mistake, with the first 45,000 letters expected to arrive on Tuesday.

 

Although the HMRC checks that the amounts deducted in tax and national insurance by employers using the PAYE system matches the information held on their records, the frequency with which workers switch jobs today overwhelmed the system, according to an HMRC spokesman. 

 

“The roots of this are in the fact that PAYE came in during the Second World War in 1944, at a time when many people stayed with the same employer during the whole of their working lives. It’s not like that anymore. We have to reflect that and have new systems,” he added. “Because circumstances change during the year there will always be a minority who have paid either too much or too little. This year, and going forward, the new IT system will mean more people paying exactly the right tax at the right time than ever before."

 

Under the Aspire initiative, Capgemini and subcontractors Fujitsu and Accenture, are putting in a transformation programme to update and standardises systems that they say will save HMRC £110m a year from 2012. 

 

Emma Boon, from the TaxPayers' Alliance, called it "completely unacceptable that a mistake of this magnitude could have happened. Taxpayers will be sick to the stomach to think that they may have to find an extra £100 a month to pay for someone else's mistake. Taxation needs to be simplified so that ordinary people aren't the victims of mistakes like this again.

 

"It's a real concern for low-income families, who face a nervous wait to see if they are affected and if they face paying back large sums of money. Taxpayers must ensure that they don't get bullied into paying back more than they can afford, and it would be unfair if low-income families are asked to repay a lump sum for someone else's mistake. This error is going to cause a lot of anxiety and could put real pressure on low-income families, who are being squeezed by the rising costs of living."