MPs condemn PAYE computer system

MPs have severely criticised the tax department's installation of a Pay-As-You-Earn computer system, saying that it has led to costly mistakes.

HMRC has been severely criticised over its installation of a PAYE computer system. Photo credit: jam_90s on Flickr

The National Insurance and PAYE Service (NPS), which is run by Accenture and Capgemini for HM Revenue and Customs (HMRC), has resulted in £1.4bn underpaid tax and £3bn overpaid tax, the House of Commons Public Accounts Committee (PAC) said in a report (PDF) on Tuesday.

"The chief problem was the computer system," committee chair Margaret Hodge, the Labour MP for Barking, told the BBC. "It took too long to put in, it cost double the amount that they had estimated, and when they switched it on, it spewed out a lot of errors in terms of people's PAYE."

In its report, the committee said that the tax department's failure to process PAYE contributions on time had caused "uncertainty and worry for millions of people".

"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's authors said. "Software problems delayed the processing of 2008-2009 PAYE returns until September 2010 — a year late — and data-quality issues have further disrupted the issue of tax codes for 2010-11."

HMRC has failed to tackle a backlog of 18 million PAYE cases dating to 2007-2008 and earlier, according to the report. In addition, the NPS, which was launched in June 2009, has problems with data quality. There are 10 million cases outstanding that have issues with data quality and require manual or technical intervention, the committee said.

'Atrocious' systems

In September, an employee at the tax department described the computer systems used by HMRC as "atrocious". The employee told the BBC that the NPS software and systems, which began to be phased in during June 2009 and were completed in July 2010, did not work properly even after four updates. The problem was made worse by a lack of staff and other resources, according to the employee.

The computer system took too long to put in, it cost double the amount that they had estimated, and when they switched it on, it spewed out a lot of errors in terms of people's PAYE.

– Margaret Hodge MP

An HMRC spokeswoman said that the department is in the process of formally responding to the report, but declined to comment further on Tuesday.

"HMRC will consider the PAC's report in detail and respond in due course," the department said in a statement. "We recognise the uncertainty and concern caused to people by unexpected tax bills. The new computer system is now allowing us to bring taxpayers' records up to date, improving the accuracy and fairness of the tax system for the future."

Furthermore, the parliamentary committee said that HMRC failed to take into account the Finance Act 2008, which changed deadlines for collecting tax. As a result, it lost the opportunity to collect £650m in unpaid tax from 2006-2007 and earlier.

In addition, the department employed its acting chief information officer Deepak Singh on a salary of £150,000 for three months' work, the report noted. Singh was unsuccessful in his application for the full CIO role. The committee said that succession plans for senior staff should be made "well in advance of their departure dates".