HMRC Apologizes For PAYE Fiasco

by Robert Lee, Tax-News.com, London

14 September 2010

The UK's top tax man has said that he is "deeply sorry" that millions of UK taxpayers will be forced to pay extra tax as a result of flaws in HM Revenue and Customs's (HMRC) PAYE (pay-as-you-earn) system after previously insisting that the tax department had nothing to apologize for.

"I apologize if my remarks came across as insensitive," Dave Hartnett, Permanent Secretary of Tax at HMRC said in a statement after a BBC radio interview in which he dismissed claims of an HMRC blunder and said he saw "no need" to say sorry to the 1.4m taxpayers now facing an average tax bill of GBP1,428. It is thought that the Chancellor forced Hartnett into his unwilling apology.

"I am deeply sorry that people are facing an unexpected tax bill," Hartnett said. "I am working flat out with my colleagues to ensure everyone's tax is correct and the new computer system will help us do this."

Hartnett said that the discrepancies were uncovered after a routine annual reconciliation exercise with a new computer system and claimed that such a discovery is not unusual, although HMRC is facing a mounting backlash from taxpayer groups and the coalition government, with some warning that the tax department is unable to manage the UK's increasingly complex tax system with its outdated processes.

Failings in the PAYE system will leave the government paying out around GBP1.8bn to 4.3m people, an average of GBP418 each, having overcharged taxpayers from March 2008 through to April 2010. Records show that an additional 5.8m taxpayers have overpayments predating 2008, reportedly worth GBP3bn.

Almost 1m taxpayers who underpaid tax in the last two years will now not need to pay anything back after the government lifted the write-off threshold from GBP50 to GBP300. Those who owe less than GBP2,000 will have the extra tax taken from their salaries in installments over the next one to three years. Those who owe more than GBP2,000 have just three months to pay back the extra tax after they are issued with a self-assessment tax return, Hartnett's argument being that these taxpayers are likely to be wealthier. The government, however, is urging HMRC to show sympathy towards those who may have difficulty in paying back underpaid tax.

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