Rebates spark taxation change calls
Calls have been made for a simpler tax system after it emerged that six million people are due a rebate of around £300.
HM Revenue and Customs (HMRC) is preparing to send out tax rebates totalling £2.5 billion between now and the end of next year, as it clears its backlog of pay as you earn (PAYE) open cases for the tax years 2003 to 2008.
Meanwhile, one million people will receive letters in the next few months notifying them that they have paid too little tax for the year 2010/11, with the average amount owed expected to be between £500 and £600.
Matthew Elliott, chief executive of pressure group the TaxPayers' Alliance, which campaigns for lower taxes, said: "Clearly the tax system is too taxing, even for the taxman. Until simplification happens, overly-complicated taxes will continue to be an administrative nightmare for HMRC and a confusing and overwhelming beast for taxpayers."
HMRC has carried out an annual check to make sure that the amount of tax and National Insurance deducted by employers matches its records. A new IT system was brought in last year which made it easier to spot discrepancies and therefore more cases where people have over or underpaid came to light.
HMRC said there would always be under and overpayments in tax at the end of the year which are "part the PAYE system". It said people may have changed their circumstances, and added: "This is not a 'blunder' and HMRC's IT systems are working as they should."
An HMRC spokesman said: "The fact is there will always be some cases at the end of every tax year that require an under or overpayment to balance, but these cases will reduce as the new system beds in."
The revenue's routine "reconciliation" sparked outrage last year when nearly six million people paid the wrong amount of income tax. In March this year, the head of HMRC admitted the department needed to improve its customer service but said it was unlikely to be in a "good place" before 2013.
Patrick Stevens, deputy president of the Chartered Institute of Taxation (CIOT) said: "This is HMRC clearing up the huge backlog which has built up over recent years. They deserve credit for finally getting to grips with it, though it should never have been allowed to build up for so long.
"While PAYE exists in its current form, there will always be a need for a reconciliation process, as there will always be some people with unpredictable other income or reliefs, more than one job, or who receive benefits like company cars where the value might not be known until after the end of the tax year. PAYE was just not designed to cope with these circumstances."