Taxpayers paying the penalty for Inland Revenue error

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TENS OF THOUSANDS of taxpayers have been wrongly fined pounds 100 each because of failures by the Inland Revenue in processing a rush of last- minute tax returns, it emerged yesterday.

The Adjudicator's Office, which handles complaints against the Inland Revenue and Customs & Excise, said it had received calls from taxpayers, disgruntled that they had been fined despite returning forms on time.

Mike Savage, a spokesman for the Adjudicator's Office, said: "There is evidence that the penalty notices have been sent out saying 'You have to pay a pounds 100 penalty' when in fact that return had been submitted.

"People have been worried about the penalty notices which have been wrongly sent to tax agents. We think there are going to be some difficulties with the penalties being charged."

Those with a "reasonable excuse" - a definition which should include delays in the Revenue's computer system - should succeed in having the fine removed because forms had been date-stamped on receipt.

The finding was backed by leading networks of tax agents. Gerry Hart, head of Tax Team and a former chairman of the Chartered Institute of Taxation, said many agents had received penalty notices when clients had submitted forms on time.

The Revenue's computer system is thought to have sent out the penalties automatically simply because forms had not been logged on to the system before fines were issued. The Revenue has slapped fines on more than 670,000 taxpayers.

Returns compiled using the Revenue's software - rather than a paper form - have lacked the barcodes which allow them to be scanned directly into the Revenue's computer system, designed by the US computer giant EDS. Instead, all forms have to be input manually.

The Revenue yesterday admitted that some taxpayers had been sent penalties despite returning forms by the deadline of 31 January. But a spokeswoman said taxpayers could have the fines revoked if they appealed to the Revenue within 30 days of receiving a penalty notice.

The country's leading taxation professionals yesterday urged the Revenue to show leniency with taxpayers in the light of its own mistakes.

Frank Collingwood, president of the Association of Taxation Technicians said the Revenue's system "got very close to breakdown" last December and January over self-assessment. The Chartered Institute of Taxation said it would be keeping a close eye on the Revenue's working definition of a "reasonable excuse".

Taxpayers can contact The Adjudicator's Office on 0171 930 2292.