A millennium bug related problem has caused the Inland Revenue's (IR's) computer system to fail - causing delays and uncertainties for around 900,000 self-assessment taxpayers.

Embarrassed IR officials confirmed this week that the computers would not be up and running again until mid-June at the earliest.

The confession emerged as the IR admitted it was unable to guarantee its e-filing software against errors, leaving the taxpayer ultimately responsible for their own tax affairs.

Technical glitches relating to the IR's recently installed millennium compliant software, means it is unable to process 1999/2000 self-assessment tax returns.

IR offices are set to be flooded with taxpayers sending back their returns before the 30 September deadline, a submission date which taxpayers have to meet if the IR is to calculate the tax they owe.

An IR spokeswoman said only self-assessment returns would be affected, and added: "Every year we upgrade our systems with new software packages. But because of Year 2000 implications, the upgrade has taken us longer to finish due to technical difficulties."

"We will have a backlog, but network offices can carry out other work, and tax payers will not notice any problems," she said. Despite the backlog, the IR insisted that urgent repayment claims would continue to be processed.

The faulty software was developed by US computer giant EDS, and employees from the company are attempting to solve the problems.

Peter Horsman, national tax partner at Saffery Champness, said: "This means that taxpayers have no guarantee that they will not be subject to additional demands for tax, interest, surcharges and penalties as a result of using the IR's e-filing system."

An IR spokesman said this week that the department would not assume responsibility for errors caused by the new e-filing scheme, set to start in the new year.

But he said the IR was planning to undertake testing of commercial products to ensure data could be accepted in a suitable format.

But Saffery's Horsman added that in his experience of using tax software, errors and glitches do occur. "Computers and software are far from error-free and responsibility has to be taken," he said.

The IR spokesman added that no one would be penalised for making honest mistakes.

First appeared in Accountancy Age