September 13, 2010

In the usual style of media pressure and turnarounds, HM Revenue and Customs (HMRC) Permanent Secretary, Dave Hartnett’s apology for tax ‘errors’ was issued on Saturday. Mr Hartnett has said he is “deeply sorry” for comments that may have appeared insensitive but who is he really apologising to and why? Public reaction and media interest may actually be misguided on this occasion…

The apology obviously wasn’t being aimed at the 4.3m people who are expected to receive tax rebates because when has anyone ever apologised for giving you money?

So he’s apologising to the 1.4m who have underpaid but, again, why? What hasn’t been stated clearly is the reason why this reconciliation has identified such a significant number of underpayments. Is it an HMRC blunder or IT error, both strongly denied, or is it ‘errors’ in business and personal accounting? The former should have warranted at least an acknowledgement, if not necessarily the extreme “deeply sorry” apology with the latter suggesting that a lot of people should be quietly ensuring they put new batteries in their calculators.

The problem seems to arise predominantly from miscalculation, by HMRC tax officials, of PAYE tax codes and while it may come as a shock to receive an additional tax demand, anyone receiving a cheque by way of a rebate will be delighted and probably not drawing attention to themselves.

The implication for those owing approx. £2bn is that due to the average underpayment of £1,428 it is assumed that these people are reasonably high earners and repayment is unlikely to affect their lifestyle to any significant degree. As a further 900,000 taxpayers have had their underpayments written-off (where less than £300), there is a focus on those that owe the greater amounts.

If Mr Hartnett failed in his public relations exercise then surely it was because he didn’t fully explain how these ‘errors’ had come about. It would appear that the new IT systems are simply more efficient in their reconciliation calculations than in previous years and it may be luck that many have underpaid in the past and have perhaps ‘got away with it’?

Sometimes public reaction and media involvement is not for the greater good of all and the taxman is not someone you really want as an enemy… HMRC have the upper hand and next year won’t want to be making the same mistakes. Maybe the general public need to check their tax codes more carefully, it may even result in a lower tax bill.

Last updated: September 13, 2010 at 11:14 am