HMRC's Coding Enigma IV

Despite attempts by HMRC to pass the burden of responsibility for identifying coding errors onto the hapless taxpayer, the buck cannot be so easily passed.

Accountancy Age reports that UK200Group (the foremost mutual association of quality assured independent accountants and lawyers serving the SME business sector) has delivered a scathing assessment of HMRC's incompetence and hypocrisy over this issue.

They are quoted:

"The new system has wrongly calculated how much employers should deduct from salaries, while company cars and private health insurance could be taxed twice."

Also, as noted on this site last week, more than 500,000 people who are claiming a state pension for the first time during the current tax year could have too much tax deducted from their income, and married couples and civil partners aged 76 or over could lose an allowance worth nearly £700.

David Whiscombe, a director of BKL Tax and a member of the UK200Group tax panel, really lets loose at HMRC:

"Every person and every organisation makes mistakes from time to time, but there are two things which are disquieting in this story.

The first is that HMRC say that 'the transition to the new system has brought to light some discrepancies in our existing records'.

This indicates a worrying lack of testing before data was switched over to the new system.

As it is, they don't seem to have been aware of the possibility of a problem until they started getting complaints from the public.

The second problem is HMRC's reaction, which is broadly that taxpayers should check the coding notices carefully for themselves and tell HMRC.

Actually, HMRC, just correcting your errors when they are pointed out to you isn't good enough. When a taxpayer makes a mistake, HMRC are increasingly looking to exact penalties.

So what about penalising HMRC for making errors – perhaps by providing for automatic compensation for any taxpayer affected by the mistake? Or do 'penalties for careless errors' only work one way?"

HMRC responded:

"HMRC acknowledges that 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."

I assume that this is the manual review being conducted by staff (up to management level) over the next 6 weeks, that a loyal reader mentioned in a recent comment?

Had HMRC followed good practice wrt new systems implementation (eg parallel running), this mess would not have happened.

As ever the taxpayer ends up bearing the burden of HMRC's incompetence.

Tax does have to be taxing.

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