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HMRC PAYE fiasco - Estimated £1.6bn in overpaid tax

HMRC PAYE fiasco - Estimated £1.6bn in overpaid tax
Thursday, 19 August 2010 11:28

As reported on a number of occasions HMRC has had significant difficulties in introducing the new system to manage PAYE. However, the scale has only now become apparent via the HMRC 2009-10 accounts.

The report from the Controller and Auditor General that is attached to the annual HMRC accounts estimates that if 18.2m unresolved open cases are taken into account UK employees could be due repayments of £3bn (recoveries due of £1.4bn) from unreconciled cases from 2007-08 and preceding tax years.

The new National Insurance and PAYE Service (NPS) went live in a phased implementation that started in June 2009. This itself was two years' behind schedule. The reasons stated for the delay were to protect the integrity of the PAYE system. However, the delays resulted in a huge backlog of PAYE returns in 2007-08 and 08-09.

Despite the delays to ensure integrity the department discovered that going live with a high volume computer system that wasn't adequately scoped or tested was a sure way to foul things up even more. In 2009/10 PAYE processing errors increased amounting to £132m in underpayments (a 15.7% increase) and £238m in overpayments (a 148% increase).

For a more detailed review of the errors see the AccountingWeb website


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