Tax errors backfire

The Inland Revenue could be saddled with an enormous bill for the extra tax agents’ fees caused by its mistakes in the processing of self-assessment forms.

With less than two weeks until the submissions deadline, a mounting number of taxpayers have complained they are incurring increased accountants’ fees because of Revenue mistakes.

But it emerged this week that some of those who have sought redress from the Revenue, which last week suffered a major self-assessment computer crash, have been promised a pay-out – assuming that the taxman’s error is ‘serious’.

A Revenue spokesman said: ‘It depends on the circumstances. But our code of practice indicates that conciliatory payments can take tax agents’ costs into account.’

The value of pay-outs could be substantial, according to experts. John Whiting, Price Waterhouse’s direct tax head, said: ‘There are quite a few cases where the client has received their statement, decided it is wrong, then called us up to complain. We could spend hours re-calculating the payment, make a few calls to the Revenue, maybe even exchange correspondence.

‘What happens when we bill them and they discover it costs #2,000 instead of the expected #1,000? Should we refer them to the Revenue?’

Mark Lee, tax partner at BDO Stoy Hayward, added: ‘This could place an enormous burden on the Revenue, which is already in a state of mayhem.

You can almost envisage the setting up of a refund centre, like London Transport’s.

‘Certainly it will be critical to find a way of guaranteeing consistency in the treatment of claims. It is going to be costly in terms of time and money.’

Lee also expressed concern about the payment reminders which the Revenue is sending to people whose returns have not yet been processed.

‘The reminders state that the balance of payments for 96/97 should be paid by 31 January,’ said Lee. ‘But they don’t say anything about the payment on account of half of the estimated tax for 97/98.

‘I am worried that large numbers of people will be unaware of this requirement, and will end up paying interest as a result.’