Page last updated at 14:50 GMT, Saturday, 6 February 2010

IT problems at the Revenue cause more tax code errors

By Paul Lewis
Presenter, Radio 4's Money Box

A computer
HMRC is trying to sort out the problems caused by its new IT system by April.

Millions of people could pay more tax than they should from April, unless HM Revenue & Customs fixes its new computer system.

Revenue employees have told the BBC that in some cases it is double-taxing the value of benefits such as company cars.

Married couples and civil partners aged 75 or more could lose an allowance worth nearly £700.

The Revenue says it is working to resolve the problems before April.

Frustrations

But frontline Revenue staff who use the new system have told BBC Radio 4's Money Box programme how bad the problems are.

Silhouette of a woman
We're waiting to see if things are put right in April. But none of us believe that they will be because we've heard it all before
Anonymous Revenue employee

They said that the computer cannot be relied upon to generate the correct tax codes in numerous cases.

One employee - who spoke on condition of anonymity - said the situation is getting worse

"When it first started, we were all getting terribly frustrated with the new system, and we didn't know if it was us or it that was the problem," she said.

"But as it's gone on and on it's evident it's the system.

"We're waiting to see if things are put right in April.

"But none of us believe that they will be, because we've heard it all before."

Pensioners could over-pay

Another Revenue worker who deals with customer problems said more than half a million people who started claiming their state pension this tax year could automatically have too much tax deducted from their income, next tax year.

The system assumes the pension was paid for a whole tax year, rather than for part of one.

It then concludes that not enough tax has been taken, and collects it by reducing the tax code in 2010/11.

The Revenue said it has now fixed this problem and corrected affected records. However many people will have already received an incorrect tax code.

Marriage allowance at risk

The employee also said that married couples and civil partners aged 75 or more - who can still get a married couple's allowance - may find it dropped from their tax code.

If you are under 65, you should get your basic allowance of £6,475, and normally a tax code of 647L. If it isn't that and you don't understand why, ring the Revenue
John Whiting

Chartered Institute of Taxation

"If our computer doesn't have their partner's name or national insurance number, as soon as it recodes for next year, it's taking the marriage allowance out.

"We've then got to write to these people to ask for their partner's name and national insurance number."

In a statement, the Revenue said: "We are aware of the issue and have sidelined all these cases so that the code number will not be issued.

"We will be taking corrective action on all cases that will ensure the code issued is correct."

Testing times

The employee also said that testing the new system was inadequate - it stopped short of issuing new tax codes, which is the point at which the system has gone wrong.

But the Revenue denied testing was inadequate. It said:

"Annual coding was subjected to rigorous testing, with approximately 10,000 cases, covering in excess of 500-plus different scenarios.

"The data was tested as live and showed the system was working correctly.

"HMRC did not issue tax codes but checked the data and ensured that the correct code would have been issued to customers."

But there are problems and everyone should check their tax code, according to John Whiting, tax policy director at the Chartered Institute of Taxation:

"If you are under 65, you should get your basic allowance of £6,475, and normally a tax code of 647L," he said.

"If it isn't that and you don't understand why, ring the Revenue. And if you are getting two three or four tax codes, ring the Revenue."

A spokeswoman for HMRC said: "We fully accept our responsibility to get notices of coding right and we will be systematically reviewing all those we believe to be at risk to ensure accurate coding notices."


BBC Radio 4's Money Box is broadcast on Saturdays at 12 noon, and repeated on Sundays at 2100h. Download the podcast.



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SEE ALSO
Revenue warns on tax code errors
04 Feb 10 |  Business
The tax system explained
17 Aug 09 |  Business

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