Have you received a P800 form from HMRC saying your due a tax rebate or owe them money?
If yes you could be one of thousands of UK tax payers who HMRC have sent ‘corrected’ tax statements to – which have now been found to be incorrect!
This means tax refunds are being banked and spent which HMRC will want back in the coming months. On the other side some have got the worry of being told they actually owe tax when they don’t.
The public are again questioning the competence of HMRC to administer the UK’s tax system as thousands of taxpayer’s receive incorrect revised tax statements. This also leaves us doubting the wisdom behind proposals to give HMRC the authority to directly access taxpayers’ bank accounts as part of their already considerable powers.
As it stands, our PAYE system of tax collection involves over 5 million workers paying too much or too little tax every year. There are many reasons for the miscalculation such as having a second income or moving jobs. Every individual must then be contacted by HMRC with a new tax statement which tells them how much they are owed by HMRC due to over payment, or how much they owe to HMRC due to underpayment recouped through a change of tax code.
A recently leaked email reveals that it has sent incorrect tax statements to thousands of British taxpayers during the 2013-14 tax year. This massive mistake has only been realised by HMRC as workers queried their worrying letters. This email was sent to staff and accountants and admits, “We currently do not know the scale of the issue but some large employers are involved, so several thousands of employees may be affected.” They advised to pass on guidance “not to pay any underpayment” or to cash any cheques from HMRC for an overpayment until the situation was resolved. It also expresses that they are “very sorry” and were “urgently investigating these cases”.
What HMRC have said
An HMRC spokesperson passed the blame to employers saying, “The majority of errors have happened because an employer failed to make a final payment statement for 2013-14 tax year, meaning our records were incomplete despite reminders that these submissions had to be made.” They also said that although they did not have an exact figure, less than 100,000 people were affected and new tax statements should arrive in 6-8 weeks.
This finger pointing gives an interesting reference to the HMRC’s ‘all singing all dancing’, new, £270 million Real Time Information System – which was designed to eliminate mistakes of this sort! It changed the system to make employers report its staff payments more frequently than before. Moving to weekly and monthly figures going to HMRC, which should mean any changes to the employees’ circumstances were more quickly picked up by the system. But experts are citing this most recent debacle as evidence that the system is still not fully operational because there has been neither adequate planning nor time for its successful implementation.
Problems with the PAYE system
Jason Piper of the Association of Chartered Certified Accountants comments, “Yet again we are seeing errors in the operation of PAYE. Public patience is wearing thin with government IT failures and one like this, which hits so close to home for taxpayers, is bad news for a department trying to extend the reach of its powers into every aspect of our collective financial lives based on the power of its computer systems.”
Here Mr Piper is referring to the latest proposals from the government to reduce tax avoidance. These include a rather Sherriff of Nottingham style recommendation to let HMRC have direct access to the bank or building society accounts of people who owe tax without seeking court approval. This is unassumingly named ‘direct recovery of debt’ and would mean that the taxman could get his hands on money belonging to people who owe at least £1,000 and have been contacted at least 4 times for the payment. Thankfully, they are obliged to leave people with at least £5,000 in their accounts.
There is legitimate, heightened concern when this idea is combined with HMRC’s enormous failings using their currently available powers. As Stuart Philips, Chief Executive of The Private Office, summarises, “This is bad timing for HMRC. They should only be given more powers if they can prove they can confidently deliver accurate information. This clearly calls into question their ability to do so and their faith in the Real Time System.”
