Letter from Dame Lesley Strathie DCB,
Chief Executive, HM Revenue and Customs, to the Chairman of the
Committee
END OF
YEAR RECONCILIATION
2008-09 AND 2009-10
Following my recent appearance at the Treasury
Select Committee on 15 September I am writing to let you know
about our work to reconcile PAYE cases for the years 2008-09 and
2009-10. This is a normal part of the PAYE process, but this is
the first time we are doing the reconciliation using the new National
Insurance and PAYE Service (NPS) IT system, and we are doing two
years at once as we were unable to do it last year. The overwhelming
majority of PAYE customers have paid the right amount of tax,
so their accounts will reconcile as balanced when we run this
process. But for a minority there will be an over or underpayment
which we must now put right.
At the start of September, we tested the process
using 475,000 customer records which produced underpayment notices
for some 11,000 customers, and overpayments for around 42,000.
The objective of this exercise was two-fold: to act as a final
test of the IT in the live environment, and to assess our operational
readiness to deal with the customer response.
You will be aware that there was a huge response
in the media to our decision to send out these notices, much of
it focussing on the underpayments, and suggesting that it was
all down to HMRC error. This is not the case—underpayments
and overpayments arise for a variety of reasons, often linked
to a change in a customer's circumstances during the year (for
example, changing jobs, receiving a new benefit in kind—such
as a car—receiving a new source of income). As a result
a minority of customers will find that they have paid too much
or too little tax at the end of the year.
I am pleased to report that the test was successful.
We are confident that the system is in as good a shape as it can
be. Our analysis indicates that we have a 95% confidence of an
error rate of 2% or less. Contact volumes have been within our
forecast range, and many customers have been able to get the information
they needed (especially those chasing refunds) by listening to
our recorded message service.
As a result I am satisfied that we are now in
a position to move to full live running of the EOYR process, and
I have agreed it should start from 1 October. We expect to issue
around 90,000 notices a day and hope to have completed the bulk
of this exercise before Christmas.
Our forecast is that, in total, around 4.3 million
taxpayers will receive repayments, while an estimated 1.4 million
will be sent letters telling them that they have underpaid along
with an explanation of the calculation and how it can be reviewed.
The total underpayments are worth about £2 billion while
the overpayments are worth about £1.8 billion.
We have put in place a number of measures to
ensure that we maintain effective levels of customer service during
what will be a very busy time. These include improvements to the
explanatory notes accompanying the notices, and new guidance on
the internet. You will also recall that the Commissioners took
the decision not to collect smaller underpayments of tax and increased
the tolerance level for underpayments to £300.
1 October 2010
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