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UK On-Line Tax Filing Error-Prone, Say Advisers

by Robert Lee,, London

21 February 2007

According to accountants and advisers PKF, a series of errors in HM Revenue and Customs’ online filing systems have cast doubt over the credibility of on-line filing of tax returns.

PKF's Tax Partner Peter Penneycard says that in the latest failure, HMRC’s regional offices appear not to have received confirmation that returns were received on time and have issued demands to taxpayers. In one instance, bailiffs visited one client to demand payment of tens of thousands of pounds of tax that a return, filed on-line before the 31 January deadline, showed was not owed.

PKF has advised its clients not to panic but to contact the firm if they receive letters from HMRC implying returns were received late. PKF is concerned that taxpayers who have filed their own returns on-line will not know how to respond.

Previously, HMRC forgot to turn off the box that allows users of the software to opt for any tax they owe for 2005/06, up to a maximum of GBP2,000, to be collected in instalments from their pay during the 2007/08 tax year. As a result, thousands of taxpayers could still receive demands for up to GBP2,000 and a 5% surcharge if the tax is not paid by 28 February.

HMRC also announced on its website in January that it planned to claw back incentives of up to GBP500 from thousands of small companies that have filed their PAYE returns on line but quickly withdrew the notice from its website. It has yet to clarify the position to SMEs or their advisers.

“This year’s on-line filing has done nothing to inspire confidence in HMRC’s systems”, Peter Penneycard said. “There is a growing sense that Revenue and Customs is constantly firefighting and that they don’t have full control over their IT systems and procedures. Its failures are causing unnecessary work for taxpayers and accountancy firms alike when it should be HMRC’s responsibility to get these things right.”

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