HMRC denies widespread PAYE tax errors

Her Majesty’s Revenue and Customs, the government department responsible for collecting taxes, has dismissed media reports that many millions more people could be affected by errors in the pay as you earn (PAYE) tax system.

HMRC has told Channel 4 News that it “does not recognise” press reports that 10 million people may be in line for tax rebates.

Over the weekend, it emerged that almost six million people will receive letters telling them they may have either under- or over-paid tax collected through the PAYE system, with more than four million people expected to get a tax rebate.

But it is claimed that many millions more people could be affected by so-called “legacy” errors from previous years which are still to be dealt with by the Revenue.

Referring to the 10 million figure, a spokesman from HMRC told Channel 4 News: “We are confident that 5.7 million people will receive either a tax repayment or owe a payment of tax.

“We don’t recognise the (10 million) number being quoted.

“The vast majority of the 40 million people who pay through PAYE deductions are correctly taxed but because circumstances change during the year there will always be a minority who have paid either too much or too little.

However, the spokesman went on to say that he could not confirm reports that there are no “open”, or ongoing, cases but pointed out that: “Just because a case is open certainly doesn’t mean a repayment or payment is due.

“It would be wrong to suggest that an open case automatically means a change in the tax position.”

But according to a National Audit Office report using figures from March 2010, 18.2 million cases from previous years were still to be dealt with by the inland revenue.

This number does not reflect the number of people who may have paid the wrong amount of tax but the amount of work which was outstanding at the end of the last tax year.

The report stated: “HMRC has not made significant progress in reducing the backlog of cases of potentially overpaid or underpaid tax from 2007-08 and earlier.

“At 31 March 2010, 18.2 million cases were awaiting action.

“The department’s early analysis suggests that around half of these cases are likely to involve an over or underpayment of tax and these may lead to repayments and recoveries of the order of £3bn and £1.4bn respectively.

“The exact amounts of tax over and underpaid and the number of individuals affected cannot be determined until these cases are resolved. Reducing this backlog of cases remains a very significant challenge.”

HMRC was unable to answer a Channel 4 News question as to whether that backlog has now been cleared.