Computer bungle over tax payments

Thousands of people may have paid too much tax because of an Inland Revenue computer error.

More than 100,000 basic-rate taxpayers are thought to have overpaid by about £150 because basic checks were not carried out.

A report by the House of Commons public accounts committee found that the Revenue made a mistake in closing the 1997-98 records of over a million taxpayers without carrying out the normal end-of-year checks.

The decision showed "a cavalier disregard" for the interests of taxpayers, the committee's chairman said.

The report said the mistake could have led to a gain of £18 million for the Exchequer at the expense of taxpayers who together may have overpaid by as much as £22 million.

The committee said that initial samples suggested that of the 1.04 million taxpayers involved, 87 per cent have paid the correct amount.

But that still leaves 134,000 people who may have paid too much or too little. The committee said: "A typical average overpayment might be £148."

The decision to abandon the usual checks was made because of problems with the interface between a new national insurance computer system operated for the Revenue by Accenture (formerly Andersen Consulting) and the PAYE computer system.

The report said: "In reality many thousands of people have been affected, paying on average around £150 too much tax - a significant sum for most people."

MPs acknowledged in the report that the Revenue and Accenture had revised their working agreement since the problem.

The Revenue had also tried to contact those who might have overpaid so they could be refunded.

Committee chairman Edward Leigh said: "Although it would not be reasonable to expect the Inland Revenue to make extensive administrative effort in order to find every last penny of possible tax overpayment, in this case it was a mistake to take this action without knowing the impact on individuals.

"I am pleased that Inland Revenue has now, albeit belatedly, contacted the taxpayers who might have lost out, and hope that taxpayers' interests will not be disregarded in such a cavalier fashion in future."

It was initially thought that the Exchequer would lose £2 million because of the mistake.