Bungling taxman apologises after wrongly fining thousands of firms

HM Revenue & Customs (HMRC) has apologised to 10,000 employers after it fined them at least £400 each by mistake because of a basic flaw in the design of IT systems that issue tax penalty notices.

An internal memo was sent out to various offices with details of the errors. It told staff to review each relevant case, discharge the penalty and “issue a letter of apology to the employer in all cases”.

Once the fine has been cancelled, HMRC’s compliance system will issue amended notices to all employers and, if necessary, their agents. It will also take steps to ensure that the fine is not followed up as a debt.

The memo, leaked to Personnel Today’s sister title Computer Weekly, said that a “fix” was being made to the compliance system to prevent further incorrect fines being issued at the next penalty run, which is due to take place in March.

In a statement to employers, HMRC said: “We would like to apologise to employers and affected agents for the inconvenience undoubtedly caused by an error in our systems.

“We recently discovered that approximately 10,000 employers received penalty notices for 2004-05, although no penalty is due. This came to light because of the welcome increase in online filing.”

In a separate blunder, the department has instructed some staff to stop processing specific end-of-year tax returns relating to the building industry after the amounts of tax due were mistakenly doubled.

“We are urgently investigating this problem,” said a leaked internal memo, dated 30 December 2005, which also revealed the problem may have occurred before.

No-one from HMRC was available for comment.

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