This week PAYE has been in the spotlight but it has transpired that there have been concerns around the system for some time now. Back in July a report was published by the National Audit Office in which they criticised HMRC for the extent of their backlog in dealing with cases where people had either over paid or underpaid taxes. They believed this situation affected a total of 18.2 million.

The Controller and Auditor General at the National Audit Office, Amyas Morse, stated: “The Department has not made enough progress in reducing the backlog of 18.2 million income tax cases where there is potentially overpaid or underpaid tax. It also needs to improve its collection rate for tax credits debt, which is substantially lower than that for tax debts.”

The figures surrounding these errors relate to approximately £3 billion owed to the taxman and a further £1.4 billion owed to taxpayers. Of course, the question on everyone’s lips is how this could actually happen.

It is the PAYE system that is the issue. It was introduced was back in 1944 and the business processes have not been altered since. HMRC have admitted these processes have to change and have, therefore, launched a consultation, which they are hoping will lead to the introduction of Real Time Information. This would mean that they received instantaneous information from employers instead of collating information once per year. Effectively this would save the taxpayer, the employer and HMRC valuable time and money. It should also reduce errors and could possibly lead to the abolition of the P45/46 system.

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