By Claire West
The UK200Group of independent accountancy and lawyer firms has commented on weekend reports that up to six million people have paid the wrong amount of tax through the PAYE system over the last two years, with some people facing demands for extra payments of up to £5,000:
David Whiscombe, partner, BKLTax, and member of UK200Group tax panel
“While it’s always popular to knock HMRC for getting it wrong, this isn’t what’s happened in this case. The simple fact is that the PAYE scheme was never designed to cope with the complexity of today’s tax system. It’s been failing to do so for years and the systematic errors reported over the weekend aren’t new, it’s just that the introduction of a more sophisticated computer system has brought them to light for the first time.
“The question to ask is not ‘why does HMRC keep getting it wrong?’ but ‘how can we simplify a tax system which is collapsing under the weight of its own complexity?’. The first step has been taken with the creation of the Office of Tax Simplification, to whose deliberations the UK200Group is delighted to be contributing. The opportunity it offers to give us back a tax system which works must not be wasted.”
Anthony Harris, director, Critchleys
“Let’s take a positive look at this. HMRC have identified the issue themselves, albeit after an internal review. Normally in the past these issues have had to be discovered by the odd million tax payers who individually query their codings and are individually dealt with by Revenue officers.
“I do not condone the errors, but I am really pleased to hear that HMRC’s own systems have brought these to light and they are getting on and rectifying the issue in bulk without days and days of individual review of so many accounts being needed. In fact this is progress and should save HMRC costs in the year ahead.”
Will Abbot, Partner, Randall and Payne:
“The PAYE system was only ever designed to give an estimated tax deduction, which in most cases is fairly accurate, with the under or overpayments being corrected in later periods.
“In recent years HMRC has tried to remove people from the self assessment system by making more use of the PAYE system than it was ever intended for. So, for example, estimated amounts of private pension income, or savings income have been included in the codes. Finally, HMRC has been using the coding system to collect estimates of tax due on income such as property rent on a monthly basis, rather than collecting through the self assessment system.
"Of course interest rates have changed significantly over the past couple of years, so it is perhaps no surprise that these estimates are wrong. If you then add into the mix the changes in people’s circumstances, the deficiencies of the system are highlighted.
"However, I think the current furore over the system is what the Coalition wants to hear. It will strengthen their case for reforming the system, and I believe we are heading towards employers submitting monthly PAYE returns online, as already happens with the Construction Industry Scheme. This may lead to improved cashflow for the Treasury, as it is currently possible for employers to defer payment of some of the PAYE deductions until after the tax year. Would the Coalition go a step further and amalgamate national insurance and income tax into a single rate, in the name of simplification?
"It goes without saying that if individuals are concerned about their tax position, they should seek advice from a qualified accountant."
Jonathan Russell, partner, ReesRussell and vice-president UK200Group:
“Whilst not being surprised as mistakes do happen it does seem to be one rule for the tax payer and another for HMRC. If HMRC had been provided with the correct information at the right time and in the right manner should it not be expected that they would handle it correctly?
“Under self assessment there is a general rule that the taxpayer should be aware and pay the correct amount of tax regardless of what is requested but for people who are on PAYE there is the presumption that if the correct information has been supplied the tax collected will be correct. It will be interesting if HMRC try to collect penalties under the new regime — after all, they would under the current rules be entitled to do so.”