Taxman hid truth about code chaos

Published 17th Feb 2010

Money Mail today exposes the full, shocking extent of the tax code fiasco - and reveals that HM Revenue & Customs knew about the looming shambles for months but failed to stop it.

Our investigation discovered:

• MINUTES of two meetings in September 2009 showing that HMRC knew of problems with the £140 million computer system. Despite this, it pressed ahead with issuing Coding Notices and, crucially, failed to warn taxpayers or employers' payroll departments;

• HMRC has made at least 15 key mistakes in Coding Notices caused by human and computer errors;

• STUDENT loans are also entangled in the monumental mess. Graduates who have paid off their loans could find money being deducted from their wages again because the Revenue's computer is telling employers to take it a second time;

• SOME employees have had hundreds of pounds wrongly docked from their pay, wreaking havoc on already tight budgets.

And in other unresolved problems dating from before the introduction of the new system:

• THERE are 116 million instances of National Insurance payments not credited to the people who paid them over several years;

• TEN million P14 records of tax payments sent from employers to HMRC have not been matched to the correct employee;

• 420,000 pensioners are not paying tax who should be.

On September 24 last year, minutes of HMRC's Employment Consultation Forum refer to 'defects in the live system that were not apparent during testing'. The Payroll

Consultation meeting five days later talks of 'teething problems'. It adds: 'The main issues have been around Coding Notices, age allowances for agent authorisation and work.'

HMRC sends out 25 million Coding Notices each year, which dictate how much tax employers and pension firms deduct.

And mistakes are already hitting pay packets. One woman lost more than £1,000 from her monthly pay and went overdrawn when HMRC took away all her tax allowances without warning.

Many more could be charged hundreds or even thousands of pounds too much or too little tax if their codes are not corrected by the time the new tax year begins in less than seven weeks.

There is mounting fury that HMRC is insisting that taxpayers - many of them elderly and vulnerable - should check and calculate their own code, in effect cleaning up its mistake.

Liberal Democrat Treasury spokesman Vince Cable says:

'It seems utter chaos reigns at HMRC, which is causing untold distress and confusion to thousands of people up and down the country.

'At a time when many are already struggling to manage their finances in straitened circumstances, having to deal with bureaucratic ineptitude is the last thing they need.'

Philip Whiteley, editor of Payroll Magazine, says employers' computer systems are automatically updated with the new codes, so the first they know of mistakes is when an employee complains. 'HMRC is saying this is just a technical issue, but it is not. People are getting the wrong pay,' says Mr Whiteley.

Pensioners, whose tax can be mind-bogglingly complex, are at particular risk.

Carol Pavely, operations manager of charity Tax Help For Older People, says: 'Pensioners are calling the tax office to be told the figure must be right because the computer says it is right. There is no comprehension by the Revenue that people do not understand how to work out their tax code. They should recheck them all.'

In a statement, HMRC told Money Mail: 'HMRC acknowledges a significant number of coding notices are incorrect because the data carried forward from the previous PAYE system does not match the data received from employers.

'We are undertaking a review of those cases which are at most risk of error and will issue revised notices of coding to the individuals as soon as possible. This work is being prioritised so that we deal first with those individuals who are most vulnerable to the changes in their code numbers.

'We won't send anything to employers or pension providers until we have done this review and if no P9 is received, employers will continue to operate the existing PAYE code from the current year into next year, so there should be no tax effect on customers.'

ABIGAIL HAMILTON, 18 , was shocked to learn she is paying too much tax because HMRC sent her tax code to the wrong company. Details of her tax code have been sent to an employer she left two years ago, leaving her current employer in the dark and unable to tax her properly.

She worked part-time at a garden centre when she was 16 but, because she earned less than £5,000 a year, did not have to pay tax. When she started her new job in retail in April she became a taxpayer. Her current employer says it can only put her tax right when it has a proper tax code from HMRC. It has warned that she is having too much tax deducted from her monthly pay.

Like many people, Abigail, from St Albans, Hertfordshire, is baffled by the tax coding system.

She says: 'I'm told I am paying too much tax and don't know how to go about getting it back. I have phoned HMRC, but they were not at all helpful.'

Source: ' Daily Mail '

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