1 February 2011
The Public Accounts Committee has slammed Revenue & Customs for failing to process payroll income tax deductions accurately and on time.
R&C was embarrassed last year when it emerged that as many as 10 million people might have paid an incorrect amount of income tax, with many in line for a rebate or facing a further tax bill.
Following an inquiry into the issue, the PAC published its findings today. The report found that the department knew that 7 million people had overpaid or underpaid tax through the pay-as-you-earn system back in 2008/09. Despite this, it decided not to take action until September 2010 because of problems implementing the new National Insurance and PAYE Service computer system.
Software problems meant that the processing of 2008/09 PAYE returns could not be processed until September 2010, a year later than they should have been.
The problem was exacerbated by the department’s failure to tackle a backlog of PAYE cases from 2007/08, which affected 15 million taxpayers, the MPs said.
PAC chair Margaret Hodge said: ‘HMRC’s mismanagement has caused uncertainty and worry to taxpayers and inequity in the system. We now look to the department to be able to demonstrate clearly by the end of 2011 that NPS can process PAYE promptly, accurately and efficiently. Taxpayer confidence must be restored.’
The report said that, in future, the department should process everyone’s PAYE within 12 months of the end of the tax year.
An R&C spokesman said the department would consider the PAC’s report in detail and respond in due course. ‘We recognise the uncertainty and concern caused to people by unexpected tax bills,’ he said. ‘The new computer system is now allowing us to bring taxpayers’ records up to date, improving the accuracy and fairness of the tax system.’
