HM Revenue and Customs: Improving the Processing and Collection of Tax: Income Tax, Corporation Tax, Stamp Duty Land Tax and Tax Credits - Public Accounts Committee Contents

2  Backlogs in Tax Processing


6. In March 2009, we expressed concern that the delays in transferring PAYE processing to the National Insurance Recording System would add to the backlog of PAYE cases that require manual working. The Department's systems identify these cases when the automated processing of employers' annual returns of pay and tax deductions from individuals raises doubts about whether the right amount of tax has been paid or there are difficulties matching information to a taxpayer's record. We recommended that the Department establish a strategy and a timetable to deal with, and eliminate, the backlog in PAYE cases awaiting checking.[17] The Department made the transfer to the National Insurance Recording System in June 2009. This has brought all the information on an individual's income together for the first time. This helps to ensure they are paying the correct amount of tax.[18]

7. During 2008-09, in preparation for this transfer, the Department reduced the number of cases requiring clerical intervention from 30 million to just under 17 million.[19] The Department will start clearing the backlog in April 2010, once the modernised PAYE system is fully functional. In some cases people will owe tax and in others people may be entitled to a refund of tax. The Department is working to identify these cases, and those which are cost effective to work manually and in what order.[20]


8. The Department also faces a build up of Corporation Tax 'postponements'. The calculation of a Corporation Tax liability can be postponed when a company appeals against the Department's view of its tax liability, or when the Department believes that a company's tax assessment will be reduced.[21] The value of postponements at the end of March 2009 was over £10 billion. £4.6 billion of postponements are over 10 years old, in some cases over 16 years old.[22] The Department has not actively monitored the high volume of low value cases and so these cases have built up over time.[23]

9. Postponements can be complex and difficult to resolve.[24] It is important that the Department puts in place effective case management, oversight and accounting processes to ensure that cases are settled, and companies given certainty about their tax affairs, on a timely basis. The Department has stated that, since early 2008, it has been reviewing its treatment of postponements and is developing a long term response but, over a year and a half later, this response remains unclear.[25]

17   Committee of Public Accounts Fourteenth Report of Session 2008-09, HM Revenue and Customs: Tax Credits and Income Tax, HC 311 Back

18   C&AG's Report, para 1.20 Back

19   Q 5 Back

20   Q 6 Back

21   C&AG's Report, paras 3.11 and 3.12 Back

22   Q 10 Back

23   C&AG's Report, para 3.30 Back

24   Q 9 Back

25   C&AG's Report, para 3.30 Back

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Prepared 10 December 2009