Tax IT systems fail to assess UK employee liabilities

The Revenue and Customs (HMRC) department has admitted that it cannot assess the tax liability of UK employees for last year because a new online processing system is not working fully yet.

The department has put tens of millions of tax records from UK firms into temporary electronic storage systems and enacted contingency plans after delays going live with the External Routing Interface Component (Eric) system.

The department and its supplier Capgemini told Personnel Today sister publication Computer Weekly they had delayed going live with the system because they wanted to put the equipment through further tests.

This could avoid a repetition of the tax credit fiasco which returned to haunt the government last week. Testing on the tax credit system was curtailed only for problems to emerge after the system went live.

Some companies have been told by the Revenue that their returns have been correctly validated. But the department has said it may have to contact them later in the year with queries, although employers will have already closed their files for 2004-05.

The Revenue has also admitted that it may have to contact some companies with queries even later than it would have done when online filing was not mandatory. Without the system, many tax staff have been unable to see whether employers have filed their annual returns on time, or should face penalties.

Some employers have been falsely accused of failing to meet statutory deadlines and warned incorrectly that they face penalties.

An internal HMRC e-mail, dated 17 June, leaked to Computer Weekly, told tax staff to stop approaching employers for their tax returns.

“We have become aware that employers are being approached for their return and/or being warned of penalties for filing late. Until further notice staff must not approach employers for their return,” it said.

Mandatory online filing of employee tax records for companies with more than 250 employees came into force in May. Companies were threatened with penalties of up to £3,000 if they failed to file their employee records by 19 May.

The deadline was extended to 26 May. But having filed online in time, companies found that the Revenue could not process their returns on the Eric system.

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