2 Reducing errors made by the Department
16. HM Revenue and Customs processed 95% of returns
accurately in 2004-05, in line with its target. Nearly 500,000
returns were processed with some errors, leading to incorrect
charging of tax - £65 million in undercharges and £30
million in overcharges.[43]
In 2003-04 12% of over charging errors found exceeded £500.[44]
Undercharges may be written-off.[45]
A survey by Association of Chartered Certified Accounts of its
members in 2004 found that 80% had to spend extra time on their
clients' Self Assessment returns due to Departmental errors.[46]
Unrepresented taxpayers are less likely to identify the Department's
errors or to know how to get these corrected.[47]
The Department is seeking to minimise the mistakes it makes in
processing of returns. It considers it corrects about two-thirds
of the errors it makes and seeks to identify the main causes of
error. It plans to improve its quality management systems in local
offices to identify and correct errors earlier.[48]
17. The Department achieved an accuracy rate of 71%
in 2003-04 and 73% in 2004-05 in setting taxpayer PAYE codes.
It made around two million errors which led to errors in the tax
codes of 1.4 million people.[49]
Setting the tax code correctly is important in ensuring the right
amount of tax is deducted at source for employed and pensioner
taxpayers, especially when they are not required to make a return.
With more taxpayers not needing to file a return, it is even more
important to get tax codes right.[50]
The Department depends on taxpayers to check that their tax code
is right.[51]
18. Around one third of the Department's errors were
due to a failure to update the taxpayer's code with information
provided by the taxpayer. Taxpayers with income from more than
one source were more likely to experience coding errors.[52]
The Department expects to remove a third of tax coding errors
by improving the management of its processes and by developing
better IT and an automated tax coding system.[53]
[54]
19. Errors by the Department in logging tax returns
and updating taxpayer records have also resulted in late filing
penalties being imposed on people who have actually filed their
returns on time. The Department estimates that it imposed incorrect
penalties on some 30,000 taxpayers in 2004 — 3% of the 950,000
taxpayers with penalties imposed.[55]
The Department recognises the need to improve this aspect of its
work and it had reduced the proportion of wrongful penalties to
an estimated 1% in 2005. It was correcting its databases to remove
duplicate records and details of taxpayers who were no longer
self employed and it was improving its systems for logging tax
returns.[56]
20. The Department is unable to identify individual
taxpayers who have been penalised incorrectly and therefore relies
on taxpayers to spot its errors. Nor does it know what compensation
it has paid to people as a result of its errors.[57]
Taxpayers without professional advisers may be less well placed
to identify or respond to these or other mistakes in calculating
their tax and or in setting their tax codes.[58]
43 Ev 13 Back
44
C&AG's Report, Executive Summary, para 16 Back
45
Q 107 Back
46
C&AG's Report, para 3.22 Back
47
ibid, para 3.12, 3.14, 3.18 Back
48
Qq 52-53 Back
49
Ev 13 Back
50
C&AG's Report, para 3.13 Back
51
Qq 91-92 Back
52
C&AG's Report, para 3.14 Back
53
Q 49 Back
54
Q 54 Back
55
C&AG's Report, para 3.16 Back
56
Q 39 Back
57
Qq 92-105 Back
58
C&AG's Report, paras 3.12, 3.14, 3.18 Back
| 
