Summary
'Accuracy
in Processing Income Tax' (HC 605) examines the accuracy of HM Revenue and
Customs (HMRC) in processing Self Assessment Tax forms and the 'Pay As You
Earn' (PAYE) scheme for Income Tax.
In 2006-07, HMRC collected £149
billion in Income Tax, dealing with the tax affairs of some 36 million
taxpayers. In total, £125 billion was collected via employers through the PAYE
scheme, and £24 billion from self-employed people and others with additional
income through the Tax Self Assessment. The HMRC needs to spend about £1.7
billion per year in administering Income Tax, with the processing taking place
across 300 offices.
This Report concludes that correct tax
assessment occurs in 95.4% of cases. It also finds that there is 96.5% accuracy
in processing Self Assessment, whilst PAYE cases were 95.1% accurate (but 25%
of PAYE cases are more complex, with more processing needed, and so a lower
accuracy rate of 82.1% is found in these instances). HMRC itself estimates
inaccurate processing has led to 3.6 million errors in Self Assessment and 2.8
million errors on PAYE in 2006-07.
Taking all the various processing
errors together, just over one million taxpayers in this period had received
£125 million in underpayments of tax and £157 million in overpayments. The
most frequent type of error is in the Department's calculation of tax codes,
which are used by employers to calculate deductions of income tax from
employees' pay, with 63% of the PAYE error rate relating to tax codes.
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How does it affect
me?
If you contribute to taxation in the UK, either via PAYE or Self
Assessment, this affects you.
The Report recommends that HM Customs
& Revenue should:
- Continue with the quality monitoring,
identifying specific types of error
- Facilitate the sharing of good
practice across the tax offices
- Further develop an early warning
system, through the analysis of trends in monthly data
- Separate out
more complex cases to be processed by specialised teams
- Develop a
customer-focused approach by tracking the effect of error rates on the
different taxpayer groups.
Read more on
UK taxation on the HMRC website.
Find out more about
money, tax
and benefits on Direct.gov.
See more on the
work of the NAO.