TaxAdministrationRevenue faces £2.25bn car tax headache

Revenue faces £2.25bn car tax headache

A problem with the Inland Revenue's computer system is suspected to be the cause of incorrect coding for company car drivers that could result in over £2bn in uncollected taxes.

City-based accounting firm Moore Stephens highlighted the problem that emerged with new tax codes for company car drivers that take into account CO2 emissions.

The firm told sister website vnunet.com it first noticed a problem when the Revenue returned incorrect PAYE codes for its clients to apply to employees with cars.

‘When the Revenue has applied that emissions data to the system that applies the PAYE coding it seems to be understating the tax,’ said Stephen Durman, associate in the employer support group at Moore Stephens.

According to Durman the average understatement is £750, which if applied to the UK’s three million company car drivers would lead to a tax shortfall of £2.25bn.

The Revenue admitted it did not know the cause of the problem but said it only affected a small number of cases and would be fixed within a month.

‘We are still looking into it but it is not a widespread problem. It is only a small minority of cases and we will get a correct code out within a month,’ said a Revenue spokeswoman.

She said other cases of incorrect codes being sent out were because employers had not submitted emissions data for their car fleets and an estimate had been made.

A notice has been sent with these estimates asking companies to check the data, she added.

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