Contractors may want to ask an accountant to check their tax position after HMRC admitted that as many as 16% of people could have paid an incorrect amount of tax in 2010-11.
Nine months ago, the Revenue admitted that 5.8 million had been affected by its tax blunders, but assured us that was a one-off.
In the latest fiasco, 164,000 pensioners and over a million workers who believed they had paid the correct amount of tax could be in for a shock bill averaging £600. At the same time, as many as 3.5 million people will receive an average £340 rebate after paying too much tax.
Last year, HMRC blamed a new computer system for the problem and thousands of people appealed against the demand letters they received. The new system is supposed to make sure records are up to date but it can’t seem to cope with people who have various streams of income.
The Revenue is due to start sending out tax rebates about now and once that has been done, about 1.2 million people will be sent demand notices. This money will be recouped from next year’s pay cheques. Furthermore, in previous years, the government wrote off debts if they totalled less than £300, but this year amounts as low as £50 will be pursued.
Meanwhile, HMRC has appointed ten debt collection agencies to pursue debts totalling around £1 billion. These agencies will focus on small, old debts freeing up HMRC staff to chase larger liabilities.
Alec Pillmoor from Baker Tilly has warned that businesses could be forced into closure if the DCAs try to collect old debts. However, HMRC must send a letter giving the firm a last chance to agree a repayment plan before the debt can be passed over to a DCA.
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Image: Warning! by Jon Curnow
