Sep 2010 07

Should you pay for the taxman’s mistake?13

Tens of thousands of taxpayers are today starting to find
out if they have been affected by a catastrophic blunder at HMRC. Around 6
million people have either paid too much or too little income tax and letters
will be going out to those concerned from now up until Christmas.  Around
4.3 million of these have overpaid and are due a refund, but 1.4 million have
underpaid and will have to hand over an average of £1,428 each.
Although more people have overpaid, the total amount to be refunded to
taxpayers is £1.8 billion, compared to the £2 billion that is owed due to
underpayments.

What is especially galling about this latest HMRC howler is
not just the staggering scale of it but the serious consequences it will have
on hard-pressed families in the coming months.  Many will be simply unable
to afford to pay back up to £2,000 in the next tax year; it’s a unexpected cost
that they won’t have budgeted for. Some won’t find out until they’ve done
the Christmas shopping, when the average families’ finances are already
squeezed.  So on top of a potentially huge outlay, there’s the nervous
wait to see if a letter drops on their doormat between now and Christmas.

The clean-up operation for this latest HMRC disaster is
likely to take months. If they were incompetent enough to make the mistake in
the first place then it seems unlikely they will be  sufficiently
organised to fix it quickly and effectively.  Of course, this is not the
first time we’ve seen serious mistakes at HMRC.  Who could forget the time
they ‘lost’ 25 million people’s details after they were copied onto discs?
HMRC now has to deal with tax credits and benefits, as well as a labyrinthine
tax system.  The reason that errors like this happen, and are likely to
keep happening is because the system is complicated and expensive to
administer.  Drastically simplifying tax and welfare will help people to
understand what they are entitled to and what they should be paying in tax.
Overhauling the IT system is not enough – the mistakes have occurred on a new
£390 million computer system so throwing yet more money at hugely expensive IT
failures won’t help.

There is a silver lining in this cloud though, not just for
those who have overpaid taxes and are due a refund.  A concession may
apply to some taxpayers, meaning that they won’t have to pay the money back.
Under tax rules if people provided HMRC with all the information they needed to
get their tax code right, it should have used this information within 12 months
of the end of the tax year in which it was received to claw back the extra
money.  Those who alerted HMRC to changes in their circumstances that
affected their tax code before the start of the new tax year in April 2009
should ask for an Extra Statutory Concession (ESC A19).  Sadly though, the
people to whom this applies are likely to be in the minority and it means more
bureaucracy and filling in forms. As today’s Express points
out, HMRC should remember that it is the servant of the people, not their
master.

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  • Bravehear

    If those who under paid get away with it, the corollory is that those who overpaid don’t get a rebate.
    Is that your case?

  • ms Judy Farren

    Taxman’s mistake -incompetence – This seems a very suitable case for the TPA to take on board and run campaign against

  • DezBoy

    What with their incompetence ref tax credit debacle they are now moving onto igger/better things! You cannot keep blaming computers
    does no one check anything these days. Agree overpaid heads must go at top and maybe some refund from the software muppets we probably paid millions to create and then double dipping to sort out their own crap. What is very clear with such a huge clearup mess this will guarantee a few thousand civil servant jobs going for many years… hmmmmmm!?? “the webs that we weave”.

  • Trevor Wainwright

    Far to complicated. I’ve always found that people try to make rules complicated. Is that supposed to make us think that they are clever dicks? Not clever by half!

  • Chris

    Computers do not make mistakes, they only do what they are told with the information put into them.
    Where the problems are caused by staff clerical errors then the staff concerned, and their managerial supervisors, should be warned for one mistake and sacked without appeal for a second mistake within a year.
    Where multiple mistakes are the fault of an individual then that individual should be required to contribute from his/her terminal pay or pension pot.
    Where due to a bad computer programme then the executive programmer should be required to contribute handsomely.
    If due to individuals failing to report or erroneously reporting then they must be required to reimburse the taxpayer with interest at twice the bank rate.

  • Tom

    It sounds as though the problems are due to faulty processing of PAYE-type tax returns, rather than self-assessment. In this case one’s first reaction is “Yes, people should be compensated if they have been under-assessed”. However, who would actually be doing the compensating? Answer: The rest of us.
    Also, as the first comment points out, those who over-paid will get a refund; they would be mighty p*ssed-off if they were told they had to pay a penalty at the same time because they had been over-assessed and were getting a refund. This is the corollary of those who under-paid getting some kind of compensation because they were under-assessed. So no, although having to re-pay an under-payment may cause some people hardship, they shouldn’t get any special compensation.

  • CJD

    Will anyone be sacked? Will anyone put up their hands & take the rap? Of course they won’t this will be a public sector whitewash where platitudes and verbiage abound and everyone walks away as if nothing happened. This is why the public sector is stacked with over hyped talentless people who prate on about’private sector rates’,'attracting the best people’and all the other guff that is spouted to pay huge salaries for utterly useless individuals. That is why this country is in the mess that we are!! Depressing isn’t it?

  • Disgruntled Ordinary Tax Payer

    Well if Dave Harnett,HMRC “permanent secretary for tax”, wont apologise for the PAYE mess-up perhaps he should be made to apologise for ignoring his own staff and giving away £6bn to Vodafone
    ( see http://www.private-eye.co.uk/sections.php?section_link=in_the_back&issue=1270 )?
    Why is the ordinary tax payer being made to pay whilst his old friends are getting away with apparently illegal tax avoidance schemes?
    Seems to me that we are subsidising big business. How is the country supposed to get out the mess it finds itself in when Harnett is giving away billions of pounds of tax?

  • CD

    Similar things have happened before. When I worked in government, I can remember something happening in the late 70′s or early 80′s with regard to tax changes; many people had to pay tax back. Our payroll computer was programmed in such a way that most paybacks were deducted directly—in their entirety— from the following months’ salaries.
    This was ok for the higher-paid, but it left many junior-grade staff with next to nothing to live on. I was one of them. I can recall a right stink being created and there were furious demands from junior staff for interim support-pay….some didnt have enough money to even buy food.
    With the prospect of HMRC taking over the PAYE system, you all need to be scared stiff.

  • Richard Tufnell

    I saw Emma on BBC, how many of those being asked to make these payments complete a tax return each year? If none, then they are not usually higher rate taxpayers, as those individuals usually do receive a tax return. If an individual is therefore being asked to pay more than £2,000 and he doesn’t normally fill out a tax return, that’s a big mistake by HMRC and why shouldn’t that person get longer to pay? Answer, if you owe more than £2,000 HMRC won’t code out a debt that big! Even when it’s their mistake! They are following their own rules, fair or not. Anyone surprised?

  • DC

    Well done Emma you were great on TV…. Fiesty or what !! It was great to hear words and passion freely flowing reflecting just what the public were really thinking about this total fiasco and the keyman not accepting any responsibility or making an apology for the mess his department had made. Yup in private sector he would have been shown the back door some while ago…..

  • Steven Johnson

    Why is there nothing on this site about the Tories writing off Vodafone’s £6bilion plus tax bill? I can’t find the statement about on of TPA’s directors not paying any UK tax for years either.
    Funny that.

  • http://www.steveatkinsphotography.com Steve

    I just found out about the HMRC/ Vodafone £6 billion tax write off. Madness!! …is anyone dealing with this as a serious issue??