Press Release - Accuracy in processing Income Tax
6 July 2007
Income tax is processed accurately in the majority of cases by
HM Revenue & Customs, but errors in processing lead to the
wrong amount of tax being paid by around 1 million taxpayers, the
NAO says today.
In a new report to Parliament, the spending watchdog points out
that HMRC accurately calculates the right amount of tax in 95 per
cent of income tax cases. The total level of processing error is
higher than this, but some errors are mistakes in taxpayer records
which do not affect the tax payable.
The Department subsequently corrects errors it finds or which
are brought to its attention by the taxpayer. Consequently, the
remaining errors resulted in an estimated £125 million of tax
underpayments and £157 million in overpayments affecting around 1
million taxpayers during 2006-07. Processing errors have a much
wider impact as they result in anxiety, time and effort for
taxpayers in putting matters right, and additional costs for the
Department in reworking cases.
Taxpayers with complicated tax affairs, such as people on
pensions and those with several jobs and sources of income, are
more likely to suffer from processing errors which can lead to both
underpayments and overpayments of tax, according to the NAO. The
average underpayment during 2006-07 was around £250 and the average
overpayment around £290, although some errors can lead to
unexpected demands for repayment of much larger sums.
Major causes of error are the increased complexity of processing
work as people change jobs more frequently and the need to process
certain cases manually. Accuracy rates vary significantly
across local offices and some offices have achieved improvements by
better targeting of workloads to staff skills; better management
focus on accuracy; and more sharing of good practice.
Today’s report also found that HMRC’s projects to automate
clerical processes have been successful in reducing levels of
error, and it is managing its performance more effectively.
Processing work is at the forefront of major changes in the
Department such as modernising IT systems and re-engineering of
processing work through ‘Lean’ working which aims to increase
accuracy rates and productivity, as well as to reduce costs.
Recommendations in the report include: HMRC developing an early
warning system for emerging processing problems; separating out
more complex cases for processing; developing staff training; and
strengthening the help available for taxpayers affected by
errors.
Sir John Bourn, Head of the NAO, said
today:
"HMRC has improved its processing of income tax returns
but there are still substantial numbers of taxpayers who are
affected by processing errors. Vulnerable groups such as pensioners
are likely to be disproportionately affected. The recommendations
in my report will help the Department build on the work already
underway to improve the processing of tax returns."
Notes for Editors:
- Press notices and reports are available from the date of
publication on the NAO website, which is at www.nao.org.uk.
Hard copies can be obtained from The Stationery Office on 0845 702
3474.
- The Comptroller and Auditor General, Sir John Bourn, is the
head of the National Audit Office which employs some 850
staff. He and the NAO are totally independent of
Government. He certifies the accounts of all Government
departments and a wide range of other public sector bodies; and he
has statutory authority to report to Parliament on the economy,
efficiency and effectiveness with which departments and other
bodies have used their resources.
Press Notice 31/07
All enquiries to Neil Gadhok,
NAO Press Office: Tel: 020 7798 7020
Mobile: 07796 940746