Report slams £1.4bn HMRC system failures

Software problems with the tax system have led to billions of pounds in under and overpaid taxes.

HM Revenue and Customs’ pay-as-you-earn (PAYE) system has failed to clear a backlog of cases dating back more than six years, according to a damning report from the Public Account Committee.

The official bean-counters said software failures contributed to a backlog of 18 million PAYE cases affecting 15 million people that could mean the UK fails to recover an estimated £1.4 billion of underpaid tax.

At the heart of the problems is the National Insurance and PAYE Service (NPS), a system intended to streamline the PAYE process.

The HMRC re-employed its Acting Chief Information Officer on a three months contract, equivalent to £600,000 per annum, around four times his previous salary – after he had been unsuccessful in the competition for the permanent post

“The flawed implementation of the NPS in 2009-10 has resulted in lasting and costly losses for the HMRC and caused unacceptable uncertainty and inconvenience to the taxpayer,” the PAC report said, noting the implementation was deferred twice. “We do not yet know the full cost of the problems with NPS implementation.”

The PAC found that the HMRC failed to understand the risks of poor quality data, which it said undermined the effective operation of the NPS.

“A key risk is the 10 million cases still outstanding where there are issues with data quality that require technical or manual intervention,” the report said of the supposedly automated system.

The PAC called on the department to sort out the issue by the end of this year.

Staff succession

While taxpayers lost out, the HMRC’s Acting Chief information Officer Deepak Singh landed on his feet – despite the problems with the NPS.

Singh was initially employed on a temporary contract, and was turned down for the permanent role. Because of poor handover planning, he was then re-employed on a vastly inflated temporary contract.

“The HMRC re-employed its Acting Chief Information Officer on a three months contract, equivalent to £600,000 per annum, around four times his previous salary,” the report said. “This was after he had been unsuccessful in the competition for the permanent post.”

“The Department should make succession plans for the replacement of senior staff well in advance of their departure dates,” it added.

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