HMRC slammed for PAYE IT system failings

HM Revenue & Customs has been heavily criticised by the influential Public Accounts Committee, after major IT failures led to up to seven million people overpaying or underpaying tax between 2008-9.

The damning HMRC 2009-10 Accounts report (PDF) points to several key failures, which mainly revolve around the department's problems in delivering the new National Insurance and PAYE Service (NPS) system, which was undertaken by the Aspire coalition of consultancies including Capgemini and Accenture.

The IT failings led to a backlog of over 10 million cases, and some estimates suggest that around £1.4bn of tax was underpaid and £3bn overpaid.

"The flawed implementation of the NPS in 2009-10 has resulted in lasting and costly losses for the department, and caused unacceptable uncertainty and inconvenience to the taxpayer," the report noted.

"Software problems delayed the processing of 2008-09 PAYE returns until September 2010 - a year late - and data quality issues have further disrupted the issue of tax codes for 2010-11."

The continued backlog also means that the HMRC has missed the deadline to collect any of an estimated £650m underpaid in 2006-07 and earlier, the report said.

"The department has launched a programme to stabilise the NPS by 2012. It is vital that it demonstrates the ability of the system to process PAYE promptly, accurately and efficiently, and restores customer confidence," the report recommended.

"In future, it should process everyone's PAYE within 12 months of the end of the tax year. It must also make sure it maximises the net revenue it collects before the deadline expires for 2007-08 underpayments of tax, and that it achieves its aim of processing 2008-09 and 2009-10 PAYE by the end of January 2011."