Millions more will face tax demands or rebates


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The Independent Online

As seven million people begin receiving tax rebates or further tax demands this weekend, tax expert Alex Henderson warns that Revenue cock-ups will increase.

From today, the HMRC is sending out tax rebates totalling £2.5bn to about six million people, while a further one million will receive demands for more tax in the coming months. The Revenue blamed the under and overpayments on the PAYE system. It carries out an annual check on records which throws up the anomalies.

But the system's problems will mean millions more people experiencing tax difficulties in the future, warns Henderson, tax partner at accountants PricewaterhouseCoopers. "PAYE was introduced during the Second World War and has not been substantially updated since – and it shows," he says.

"The blunt instrument worked fine when people spent their careers in one firm, but does not suit the needs of today's workers. Until HMRC has modernised the system these glitches will continue and could even get worse."

The over/underpayment problems should be dealt with once the Revenue has real time information on workers, rather than having to play catch-up with old records, as it is having to do now.

"We're moving in the right direction but modernising the system to cope with 21st-century ways of working is going to take time," warns Alex Henderson.

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