Seventeen million pay as you earn tax cases are awaiting processing, and £11.2 billion tax debt is unlikely to be collected, MPs have said, as a result of highly problematic IT systems at HM Revenue & Customs.
The lack of a single view of any taxpayer, across different tax accounts, left HMRC with holes in its vision and effectively “trying to catch rainwater in a colander”, Richard Bacon MP said today as a damning committee report was published.
Other areas experiencing severe difficulty include the collection of corporation tax and the administration of stamp duty.
HMRC has shied away from investing in a £250 million single tax records system, after deciding the project was not affordable. But in a report today, the powerful Committee of Public Accounts said the money needed to upgrade systems “would be well spent” and that with £11.2 billion to be recovered, the benefits could “easily outweigh” the spending needed.
The effort to recover the debt from tax processing errors was being “hampered” by outdated systems that “do not provide essential information such as a profile of debt across taxes”, the committee said. The comments come as it released its report, ‘Improving the processing and collection of tax’.
HMRC plans to set new PAYE systems live in April 2010, just as the tax year ends. The backlog of 17 million PAYE tax cases “will not start to be cleared” until after this point, the report noted.
Last month, HMRC switched off 19 online tax systems, the majority over the whole weekend, in order to thoroughly test an upgrade. It declined to disclose the details of the upgrade.
Meanwhile, delays to introducing a new system to help with Stamp Duty Land Tax also meant compliance issues were being raised, and staff were being diverted from their usual tasks in order to help deal with processing.
And communications systems, which automatically generate letters to claimants, struggled to create letters for any unusual circumstances. Scanning systems were also ineffective, particularly when additions had been made to forms, the committee said.
The committee urged HMRC to resolve the problems quickly in order that taxpayers “know where they stand and what their liabilities are”.
“In the age of internet banking, it is hard to see why the tax collector cannot see the total sum owed by any taxpayer at the click of a mouse,” said an exasperated Richard Bacon.
HMRC's systems are provided by Capgemini and subcontractor Fujitsu under the £8.5 billion Aspire programme. In July, the department was rebuked by the committee for signing a confidential compensation agreement with former supplier EDS over the failed tax credits system. The agreement guaranteed EDS future contracts, and HMRC said it would sign a similar agreement again, provided it could continue to report to parliamentary auditors and committees.