HMRC makes second tax bill blunder

Leaked email reveals HMRC has got "hundreds of thousands" of 2013/2014 tax bills wrong again.

HM Revenue & Customs appears to have admitted it has sent out incorrect tax bills for the second time this year.

Back in June HMRC revealed 5.5 million had paid the wrong tax in 2013/2014.

At that time it estimated three and a half million people had paid too much tax and would be able to claim a refund, while two million had paid too little tax and faced clawbacks averaging £300.

In the four months since most have been sent new bills or rebates, but a leaked email to the Daily Telegraph revealed many of these are still wrong and would have to be recalculated a third time.

The email, sent to accountancy bodies and senior HMRC staff, said "thousands" of mistakes had been made and were urgently being investigated. It advises HMRC staff to tell people that questioned their bills "not to repay any underpayment" of tax, while anyone who had overpaid should not cash any cheques received.

In the communication HMRC estimates that less than 100,000 would be affected by the fresh mistake, but admitted it did not know the extent of the problem.

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New system failures

At the end of each tax year in April, HMRC works out whether people in the Pay As You Earn (PAYE) system have paid the correct amount of tax.

Taxpayers are likely to end up paying the wrong amount if their circumstances change, for example if they move jobs or receive a pay rise, and their tax code isn't updated.

Millions of people are over- or undercharged each year. HMRC reclaims underpaid tax by altering workers' tax codes for the following year. If it owes money, it often issues taxpayers with a rebate cheque.

Last year HMRC launched a £270 million Real Time Information (RTI) tax system, for its PAYE tax calculations to limit these errors.

It allows employers to update workers' tax records on a weekly or monthly basis rather than waiting to report changes at the end of the financial tax year.

However, it is thought the huge amount of information being processed by HMRC could be behind the new problems.

The whistleblowers that leaked the email said: “HMRC refuses to admit the system doesn't work, and it's scandalous that there is no politician holding them to account as the whole programme of welfare reform could be put at risk because of this.

“The system is not fit for purpose, it's inherently flawed and routinely produces errors that cause a huge mess for families and employers.”

A spokesperson for HMRC said: "The majority of the errors have happened because an employer failed to make a final payment statement for the 2013/14 tax year, meaning our records were incomplete despite reminders that these submissions had to be made.

"We are sorry this has happened and we aim to issue corrected calculations in the next few weeks."

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