1 million tax bills contain errors
Around one million taxpayers paid the wrong amount of income tax because of errors at HM Revenue and Customs (HMRC).
The National Audit Office (NAO) found HMRC miscalculates around five per cent of income tax cases, blamed on the complexity of some cases and the need to process some claims manually.
Department errors meant £125 million of income tax went uncollected in 2006-07, NAO found, while £157 million was wrongly claimed from taxpayers.
Sir John Bourn, the head of the NAO, said: “HMRC has improved its processing of income tax returns but there are still substantial numbers of taxpayers who are affected by processing errors.
“Vulnerable groups such as pensioners are likely to be disproportionately affected. The recommendations in my report will help the department build on the work already underway to improve the processing of tax returns.”
In total, around one million people were affected during the last tax year. The average individual underpayment was £250 and average overpayment around £290.
Although HMRC corrects errors brought to its attention, the NAO warned such miscalculations causes taxpayers unnecessary anxiety and can be time consuming to correct, increasing administration costs for the department.
Mistakes were most frequent when the claimant had changed jobs frequently, affecting low earners and pensioners.
The NAO also found “significant variation” in accuracy between local offices.
The best offices had improved performance by targeting workloads at staff skills, focusing on the importance of accuracy and sharing examples of good practice, the NAO observed.
Edward Leigh, chairman of the committee of public accounts committee, said: “People are entitled to expect HMRC to process income tax correctly. For many people that is the case, and the department is seeking to improve its performance.
“However, a million taxpayers are still paying the wrong amount of tax because of HMRC’s mistakes. My advice is to always check your tax because for those affected by processing errors, over and underpayments average around £250 to £300.
“And errors don’t only cause financial problems, they also result in anxiety and wasted time and effort in putting matters right. Many of the people who are affected are vulnerable members of society and deserve better.”
The finding comes as HMRC appeals for more powers to retrieve money directly from taxpayers’ bank accounts.
