UK 200 Group slams HMRC system errors

The UK 200 Group has aimed a broadside at the taxman for errors in a new computer system reportedly causing tax overpayments.

HMRC has recently introduced the hardware but the UK 200 Group has said the system is flawed.

P9 forms containing a code informing an employer how much tax is due from workers' salaries have been sent out with errors, the UK 200 Group said.

"The new system has wrongly calculated how much employers should deduct from salaries, while company cars and private health insurance could be taxed twice, " the UK 200 Group said.

In addition more than 500,000 people who are claiming a state pension for the first time during the current tax year could have too much tax deducted from their income, while married couples and civil partners aged 76 or over could lose an allowance worth nearly £700, the group said.

David Whiscombe, a director at Londontax consultants BKL Tax and a member
of the UK200Group tax panel, said: "Every person and every organisation
makes mistakes from time to time, but there are two things which are
disquieting in this story.

"The first is that HMRC say that ‘the transition to the new system has
brought to light some discrepancies in our existing records.'"

"This indicates a worrying lack of testing before data was switched over to the
new system."

As it is, they don’t seem to have been aware of the possibility of a problem until they started getting complaints from the public.

"The second problem is HMRC’s reaction, which is broadly that taxpayers
should check the coding notices carefully for themselves and tell HMRC.

Actually, HMRC, just correcting your errors when they are pointed out to
you isn’t good enough. When a taxpayer makes a mistake, HMRC are
increasingly looking to exact penalties.

So what about penalising HMRC for making errors – perhaps by providing for automatic compensation for any taxpayer affected by the mistake? Or do 'penalties for careless errors' only work one way?"

HMRC responded: "HMRC acknowledges that a significant number of coding notices are incorrect because the data carried forward from the previous PAYE system does not match the data received from employers.

"We are undertaking a review of those cases which are at most risk of error and will issue revised notices of coding to the individuals as soon as possible. This work is being prioritised so that we deal first with those individuals who are most vulnerable to the changes in their code numbers."

The taxman said it will not send any documentation to employers or pension providers until the review is complete.

"If no P9 form is received employers will continue to operate the existing PAYE code from the current year into next year so there should be no tax effect on customers," HMRC said.

On the company car and health insurance benefits issues HMRC said the problems were now fixed so the correct amount will be included on the P9 sent to employers.

On the married couples allowances HMRC said it had "identified the individuals involved and is taking corrective action. Again the P9 issued to employers will be correct so there will be no tax effect on customers.

"This is a known issue and HMRC is taking targeted action to ensure that pensioners are on a correct code for 2010/11. We have advised that if anyone is unsure their code is correct they can contact us and we will check it for them. "