28 February 2011
- PAYE coding errors fuelling complaints
- Cutbacks to pile pressure on HMRC processes
Complaints against HM Revenue & Customs (HMRC) that were totally upheld have leapt 313% in just two years.
According to data we obtained from the Adjudicator’s Office, the body responsible for dealing with complaints about HMRC, 446 complaints were substantially or wholly upheld in 2010, compared to 229 in 2009 and 108 in 2008.
A far greater proportion of complaints about HMRC are now being wholly upheld. 21% of complaints about HMRC were wholly upheld in 2010, compared to just 7% in 2008.
The surge in the number of complaints being wholly upheld is a result of deteriorating levels of service at HMRC over the last few years, which has seem mistakes and delays become much more common.
HMRC has been hit by a succession of high profile administrative problems, such as incorrect PAYE codes being issued to taxpayers and lengthening delays over VAT registrations and rebates for overpaid tax.
PAYE coding errors, for example, resulted in HMRC collecting £238 million too much tax from taxpayers in 2009/10, up from £96 million in 2008/09 (a 148% increase).
Incorrect tax codes also lead to under collected tax of £132 million from other taxpayers in 2009/10 (£114 million in 2008/9)*.
The further reduction in staffing levels announced at the Spending Review will mean that service levels at HMRC are likely to deteriorate further.
Roy Maugham, tax partner in our London office, comments: “The level of service at HMRC is now a huge concern. There has been a succession of major errors in the past few years, from incorrect PAYE codes to lengthening delays in issuing tax rebates. Even getting a response to a simple letter of enquiry can now take months.”
“There have been big cuts in staffing levels since the merger between the Inland Revenue and Customs & Excise in 2005. A further 10,000 job losses at HMRC were announced in the Spending Review. HMRC is struggling for manpower as it is, so these cutbacks will put further pressure on performance levels.”
He adds: “Declining performance levels are having a damaging impact on taxpayers. If businesses have to wait months for a tax rebate or a VAT registration it can severely reduce their cashflow and ability to trade. Taxpayers who have paid too much income tax because of the wrong PAYE code have faced financial hardship as a consequence.”
We recently obtained data which showed that 56% of all VAT penalties and decisions which are appealed are subsequently found to be incorrect and are quashed.
These figures are another example of just how frequently HMRC officers make mistakes.
Roy says: “The frequency with which VAT penalties and decisions are overturned is quite shocking. Taxpayers would expect HMRC to get it right most of the time. These figures show that some HMRC officers need to have a better grasp of the technical issues and be far less cavalier about handing out fines.”
A report published by HMRC in December 2010 revealed that morale among its own staff had plummeted to a new low. Just 9% of staff surveyed believed that when changes are made at HMRC they are usually for the better. Only 11% of HMRC staff had confidence in the decisions made by senior management. Just 14% of staff felt motivated to provide the best level of customer service.
Roy says: “With morale at HMRC at rock bottom it’s hardly surprising that service levels are suffering.”
*National Audit Office, HM Revenue & Customs 2009-10 Accounts
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