HMRC has discovered income tax discrepancies and now has a cache of £2.5 billion to reimburse to taxpayers.
7 million people have been paying the wrong amount of tax since 2001.
Earlier this year HMRC disclosed that it had been aware for nearly a year that 5.7 million of the 7 million people had paid the wrong amount, but failed to inform the public.
An MPs committee later concluded that HMRC had worried millions of taxpayers through “mismanagement” of the tax system.
Those due a repayment will receive a cheque, but more than 1.2million people will receive a bill for £600 in the next few weeks, as HMRC also needs to claw back around £720 million in unpaid tax.
Relevant cheques and bills could arrive as early as 22 October 2011, with HMRC aiming to have resolved all payments by December 2012.
Those receiving a bill can pay by cheque or adjust their tax code to cover the cost little by little
The discrepancies in the PAYE system were uncovered by a new computer system installed by HMRC in 2010. Whether this is HMRC merely clearing their backlog or is a tax gaffe remains to be seen.
Small business owners should be aware that if they are registered as self-employed then they will need to complete a tax return every year, and paying too little income tax or paying it late may incur interest.
Perhaps by way of explanation for the ongoing tax problems facing the UK government, Commons Treasury committee member Jesse Norman MP says:
“The Revenue is still having to deal with the legacy of ill-judged reorganisations and change under the last government.”
