Up to five million British citizens have been incorrectly taxed by the IT system at HM Revenue and Customs, the National Audit Office has warned.
HMRC’s pay as you earn IT systems were “not well suited to the efficient administration of income tax where people have more than one job or change jobs on a regular basis,” the NAO said. The warnings came in the report ‘Financial Reporting and Financial Management: General Report of the Comptroller and Auditor General 2007’.
The problem with the systems, the NAO wrote, is that they structure tax records around jobs rather than taxpayers, and make it difficult to identify all the sources of income that taxpayers have.
In a damning comment on work practices at HMRC, the NAO added: “These difficulties have been compounded by inconsistent working practices within the Department as a consequence of staff not being aware of or failing to follow Departmental procedures.”
Up to £880 million in tax due had not been pursued each year, and taxpayers had overpaid by £340 million, the NAO said. HMRC collected £125 billion income tax and £85 billion National Insurance during the 2006-7 financial year.
HMRC is overhauling IT to reduce running costs by 10 percent by 2010-11, under the £8.5bn Aspire contract with supplier Capgemini.