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Last Updated: Tuesday, 17 July 2007, 08:28 GMT 09:28 UK
Backlog of tax returns nears 12m
HMRC office
The Revenue says processing tax returns is now improving
HM Revenue and Customs (HMRC) has yet to check the accuracy of tax payments from 11.5 million people in the "pay as you earn" tax system from 2005-06.

The figure means that 32% of people in the PAYE system have still not had their payments checked, more than 12 months after the tax year ended.

It has also been revealed that 11 million PAYE forms from employers could not be matched to workers' records.

But a Revenue spokesman said the situation was now improving.

"Most of these people - at least 75% - would still have paid the right amount of tax," he said.

More workers

The data has been obtained under the FOI Act by Matt Boyle, an independent PAYE consultant.

All forms for 2005-06 will be processed by October this year
HMRC

"The idea that HMRC is unable to carry out a review of liability for over 11.5 million individuals cannot be an acceptable state of affairs," he said.

"It is surely an unacceptable situation when HMRC have not reviewed the liability of approximately 32% of the working population," he added.

However, the Revenue explained that the growth of the economy had led to many more workers coming into the tax system, whose tax details needed to be processed.

"Many more migrant workers, a more mobile workforce and more people with multiple employments has meant that the number of records that have to be cleared each year has increased," said the spokesman.

"All forms for 2005-06 will be processed by October this year."

Computer systems

The figures help to explain why some taxpayers have not been paying the right amount of tax.

The National Audit Office reported earlier this month that 125m in income tax went uncollected in the past financial year, while 157m was also overpaid.

At the time, NAO chief Sir John Bourn blamed the Revenue's IT systems for the problem.

"HMRC's computer systems are no longer well-suited to the efficient administration of income tax especially where people have more than one job or change jobs frequently," he said.

The NAO put the number of "open cases" at the Revenue at 13 million, as of March 2007, and noted the Revenue's plan to reduce this to 10.5 million by March next year.

However it did not highlight the fact the current cases formed a backlog that was a year old.

Rising or falling?

This latest data obtained by Mr Boyle under the FOI shows that the backlog of unresolved tax files has, until very recently, been getting worse rather than better.

It is the way they are running the system that is the problem
Matt Boyle, PAYE consultant

The number of cases still open nearly 12 months after the end of the previous tax year - including cases where the employers' P14 PAYE return had not been matched to an employee - had risen sharply from 7.2 million in April 2005 to 13.73 million by April 2006 and nearly 13.8 million by April this year.

HMRC now says that as of June this year that figure had fallen to 11.5 million and that processing returns for 2006-07 was going well.

"In April 2007 we began to upgrade our IT so that it now more readily brings together pay and tax details for all of an individual's employments into a single total," said the spokesman.

But Mr Boyle said there still seemed to be serious deficiencies in how HMRC was handling PAYE.

"The computer system has not changed in the past 10 years but the number of open cases has increased," he said.

"It is the way they are running the system that is the problem."

Other figures gleaned under the FOI Act also reveal that of the employers' P14 PAYE forms that had not been dealt with by April 2007, 365,000 involved tax payers who earned 40,000 a year or more.




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