5.5m PAYE errors made by HMRC

Errors made by HM Revenue and Customs have resulted in 5.5 million people being charged incorrectly according to the Daily Telegraph.

They estimate that 3.5 million people paid too little and face demands to pay off the excess whilst 2 million are thought to have overpaid. 

The mistakes are thought to have arisen through the pay as you earn (PAYE) scheme in the 2013-14 tax year with the average discrepancy amount of around £300.

The PAYE system checks tax paid against tax owed at the end of each year.  However, discrepancies such as under or overpayments can arise if an individual’s circumstances change part way through the year.

The number of errors increased from 5.2 million in the previous year, despite the introduction of the government’s flagship Real Time Information (RTI) scheme at a cost of approximately £270m.

RTI was introduced to increase accuracy in the PAYE system by enabling employers to register an individual’s change in circumstances on a weekly or monthly basis.  However, accountants have said the increase in errors demonstrates that the scheme hasn’t been working as planned.

David Heaton of Baker Tilley said;

“RTI was supposed to make PAYE more accurate, not less.  So why are there more errors this year, with RTI in full flow, than last year when RTI was only a pilot?  The number of PAYE differences has risen, not fallen.  Something in RTI is not working.”

In their defence, HMRC said that some employers had not used RTI for the full tax year and that early indications were in line with their expectations. A spokesperson said;

“The effect of Real Time Information is not reflected yet as it has not bedded in, but over time RTI will help to reduce the number of cases that have to be reconciled.”

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