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Thread: Six million people affected by tax computer errors

  1. #1
    Midas Guest

    Six million people affected by tax computer errors

    A loophole in the way tax is collected could stymie HM Revenue and Customs' attempts to claw back 2bn of unpaid tax, it emerged yesterday.

    Almost 1.5 million workers will face demands to pay back an average of 1,400 in tax after contributions were miscalculated over the past two years. But if anyone affected can prove that they thought their tax affairs were in order they might escape without paying, accountants said.

    Nearly six million people in the UK have paid the wrong amount of tax through the pay as you earn system, with around 4.3 million workers in line for a rebate worth 1.8bn in total, an average of 413 each, because they have paid too much. The HMRC will write to those affected informing them of its mistake, with the first 45,000 letters expected to arrive on Tuesday.

    Paul Aplin, who chairs the tax technical committee at the Institute of Chartered Accountants in England and Wales, urged everyone to read their letters "very carefully". He added: "Have a look to see how they have calculated the tax. Have they put any benefits in there like a company car or medical benefits that you didn't actually have?" There is a tax calculator on the HMRC's website.

    However, taxpayers could still avoid paying any additional money if they can demonstrate they provided all the information necessary to calculate their tax correctly and the Revenue failed to use that information for 12 months. "You could use a concession to get them to write off some or all of the tax," Mr Aplin added.

    The errors were made during the past two tax years and emerged because the HMRC is implementing a new computer system to automate the process of updating PAYE records. PAYE was introduced in the 1940s when the vast majority of workers kept their jobs for the length of their lifetimes. The frequency with which workers switch jobs today has overwhelmed the system, an HMRC spokesman said.

    The full story available from here : Six million people affected by tax computer errors - Home News, UK - The Independent

    Yet again it seems that a mixture of large scale government and computer systems just don't seem to mix. This is just the latest in a long line of other major IT failures which end up cosing the taxpayer billions; when will those in charge learn that large scale doesn't necessarily mean better or more efficient - one only has to look at the hugely expensive NHS IT fiasco to see that!

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    Re: Six million people affected by tax computer errors

    Interesting post Midas.

    Since we are frequently told computers don't make mistakes only humans do, - who are we to blame?

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    Re: Six million people affected by tax computer errors

    Seems better than the ATO. They don't even have a system, it's literally 'keep increasing their tax till we get threatened with litigation, then keep it at that level'.

  4. #4
    Midas Guest

    Re: Six million people affected by tax computer errors

    Quote Originally Posted by manrow View Post
    Interesting post Midas.

    Since we are frequently told computers don't make mistakes only humans do, - who are we to blame?
    Unrealistic objectives by people in government perhaps, often despite professional advice that something won't work as they want?

    A good friend runs a fairly substantial IT consultancy business which has done a fair amount of work for various government departments and local authorities over the years, and he's said on more than one occasion that whilst those same departments are often his best customers in terms of profitability (at the taxpayer's expense of course), they're often the worst in terms of no-one really knowing what it is they're trying to do and even less knowledge about how to go about it. He now takes the view, as I'm sure pretty much every other IT consultancy and vendor employed by government does, that he'll happily provide them with what they think they want, and will do his best to get it up and running for them, but will take no responsibility if they still go ahead after being told that what they want to achieve is unrealistic.

  5. #5
    Midas Guest

    Re: Six million people affected by tax computer errors

    As an update, if anyone here is affected by this problem, this article in today's money section of the Daily Mail might be of help:

    Tax chaos: How to fight taxman's demands

    We explain how you can find out whether you have oevrpaid or underpaid income tax to HMRC and how fight the taxman's demands for more money.

    What is the problem?

    Almosty six million people have been paying the wrong amount of income tax through Pay As You Earn for the past two years. Some 1.4m will be asked to repay an average 1,428. Another 4.3m will get an average refund of 419.

    Who is affected?

    Most likely those whose personal circumstances have changed in the last two years. This includes pensioners with several sources of income, anyone who has changed jobs, or employees who have begun to receive benefits such as a company car. Those with one income that has not changed in the last two years, or who fill out their own self-assessment, should not be hit.

    How will I know if this includes me?

    HMRC will write to tell you. The first 45,000 letters will arrive this week. The rest will be sent out before Christmas.

    What will happen next?

    If you are due a rebate then a cheque should be sent to you within seven to ten days of receiving the first letter. It will include a small amount of interest, at 0.5%. If you owe less than 2,000 then you will be sent a new tax code between January and March next year. The tax you owe will then be deducted over 12 months from next April. If you owe more than 2,000 you will have until January 31, 2012, to pay in one lump sum.

    Can I fight it?

    You can object using a little-used tax rule called A19 Extra-Statutory Concession. But you must act quickly. If you owe money, your employer will take it through your pay cheque. Once HMRC has got it, you will face a battle to get it back.

    What is this concession?

    Buried on Page 14,317 of one major tax guide, it states clearly that a demand for under-paid tax must be abandoned by tax collectors in certain circumstances.

    These include if they fail 'to make proper and timely use of information supplied by a taxpayer about his or her own income, gains or personal circumstances'. It goes on to say that a tax demand will 'normally' be written off if the taxpayer 'could reasonably have believed that his or her tax affairs were in order'.

    Under normal circumstances, the money will only be written off if it was requested more than 12 months after the end of the tax year when information was submitted. But the 12-month rule may be waived if HMRC 'failed more than once to make proper use of the facts they had been given about one source of income'.

    Who do I contact?

    Call your local tax office. Alternatively, HMRC's taxes helpline is 0845 300 0627, or its website www.hmrc.gov.uk.

    Guidance about what to include in the letter will be available from this afternoon on the Low Incomes Tax Reform Group website, Low Incomes Tax Reform Group - Home, under the 'Latest News' section.

    -------------------

    I have to say I love this bit - "Buried on Page 14,317 of one major tax guide..." That's some indication of the complexity of the British tax system!!

  6. #6
    soloman Guest

    Re: Six million people affected by tax computer errors

    Is this just a one-off event or could this have gone unnoticed for years?

  7. #7
    Midas Guest

    Re: Six million people affected by tax computer errors

    Quote Originally Posted by soloman View Post
    Is this just a one-off event or could this have gone unnoticed for years?
    Your guess is as good as mine on this one, but it wouldn't surprise me if there have been some significant ongoing problems which no-one has picked up on. I can only speak for my own tax affairs, which are far more complex than most because of a combination of dual citizenship, my non-resident status when I sold my business and the sale proceeds from that went directly into an offshore company and trust structure, and the fact that I use several different tax mitigation strategies in order to keep the tax man's hands off as much as possible of what is in the UK. But allowing for that complexity, in the several dealings I've had with HMRC, including one court case they lost, there have been both factual and procedural errors on their part, which doesn't give me a great deal of confidence that they know what they're doing. If they can make some significant mistakes in a situation where they know they're being challenged over a 6-figure claim in court by a very able tax barrister, what sort of mistakes go on and go unnoticed where people who haven't a clue about their tax affairs are concerned?

  8. #8
    Yeti Guest

    Re: Six million people affected by tax computer errors

    I had better not get home a find a brown envolope demanding more money, I pay more than enough tax already!

  9. #9
    Midas Guest

    Re: Six million people affected by tax computer errors

    Quote Originally Posted by Yeti View Post
    I had better not get home a find a brown envolope demanding more money, I pay more than enough tax already!
    At least you'll know what to do if that does happen!

  10. #10
    suffolklass Guest

    The taxman cometh!

    I expect everyone is by now aware of the errors made by HMRC as detailed here and we are all awaiting an official letter and hoping that it's a rebate and not a demand, but why is it that any IT system commissioned by the government never works properly? Probably because you get what you pay for and they always accept the lowest priced tender.
    Last edited by Midas; 08-09-2010 at 01:17 PM. Reason: Moved this post from its own thread to this one...

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