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HMRC delays leave 18.2 million unresolved tax cases

Delays in implementing the combined NI and PAYE system added more than £100 million in costs and left a huge backlog of unreconciled tax cases, the NAO has revealed.

tax return form

HM Revenue & Customs (HMRC) has come under heavy criticism from the National Audit Office (NAO) for costly delays in implementing a new system aimed at reducing the massive backlog of 18.2 million unresolved tax cases.

In its annual report on HMRC accounts for the 2009-10 financial year, the NAO reveals that delays in implementing the combined National Insurance (NI) and PAYE Service created a huge backlog of unresolved cases and added an extra 33 million in procurement costs by the time it was finally rolled out in mid-2009.

The NAO estimates that of the 18.2 million unreconciled cases involving some 15 million British taxpayers, as many as nine million are likely to involve incorrect payments. It claims HMRC could be sitting on as much as 3 billion in overpaid taxes, and be owed 1.4 billion in underpaid returns.

The new system combines NI and PAYE accounts for the first time, and is forecast to save as much as 532 million over five years.

However, HMRC's decision to twice delay its deployment not only added an extra 33 million to setup costs, but also left 55 million of that saving unrealised and saw an extra 78 million being tacked onto the bill for changes to system requirements.

While the NAO conceded that the deferments were "justified", it nonetheless leaves the total cost in implementing the system standing at 389 million not to mention the huge backlog of cases now needing to be sorted through.

It called the task lying ahead for HMRC "a very significant challenge".

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