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Law: Revenue to probe 13 million ‘wrong’ tax returns

Tax staff at the Revenue & Customs are probing 13 million tax returns.

The National Audit Office (NAO), which has been reviewing Revenue performance, has revealed that 13 million computerised returns contain errors and must be assessed manually.

The tax authority said in its 2006-7 business plan that it had allocated resources to deal with six million annual manual inquiries. This was later revised to 10.6 million.

The NAO has reported that there are 13 million open cases. This represents a rise of six million from five years ago. Then 1000 officials were deployed nationally to handle seven million open cases.

Open cases arise when the tax an employee should have paid for the year is not consistent with year-end pay and tax data received by employers, which is subsequently sent to the Revenue & Customs.

The tax authority’s computer system confirms an open case when it identifies discrepancies or fails to match information to a taxpayer’s records, meaning staff must examine each case manually.

The NAO said: ‘The Revenue’s PAYE computer systems are not well suited to the efficient administration of income tax where people have more than one job or change jobs on a regular basis.

‘This is because the systems structure tax records around jobs rather than individual taxpayers. As a result, the Revenue can have difficulty identifying all relevant sources of income when calculating tax that should be paid.

‘These difficulties have been compounded by inconsistent working practices within the authority as a consequence of staff not being aware of or failing to follow departmental procedures, for example when adjusting tax codes for benefits in kind.’

Taxpayers are likely to have overpaid around £340m, resulting in potentially five million taxpayers not paying the right amount of tax.

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