HM Revenue & Customs (HMRC) has come under fire from MPs and tax and accounting bodies, after news emerged that almost one million innocent taxpayers had been wrongly pursued over late tax returns – with many even being hit with unnecessary penalties.
The news follows a serious data processing error, which wrongly categorised as many as 963,000 people as self-assessment (SA) taxpayers – a figure representative of around one in every 11 taxpayers registered under SA.
According to reports, many of the people wrongly placed in the tax authority’s database had not actually been required to file SA tax returns for three years or more.
Since the news came to light, HMRC has issued a statement insisting that the wrongly-categorised taxpayers have now been “removed from the SA regime” and are “no longer liable for SA” or any associated late-filing penalties.
The tax authority is now facing mounting pressure to reform its existing SA system – which sees taxpayers penalised for failing to submit SA returns on time.
Frank Askew, of the Institute of Chartered Accountants, said that the blunder made it clear that there are “systemic problems with taxpayer records that need to be addressed.”
He said: “It is right that penalties should be levied on those who do not pay their taxes, but the system needs to be flexible and proportionate and not applied where penalties are not appropriate.”
Meanwhile, MP and Chairman of the House of Commons Treasury Select Committee, Nicky Morgan, said: “I appreciate HMRC have to deal with millions of taxpayers but they need to focus on those who really are trying to evade the tax system, not those who shouldn’t be filling in forms at all.”
She added that the Treasury Select Committee would consider launching an investigation into HMRC’s errors.