Member News
A Treasury minister has said that the 'pay as you earn' tax system is not fit for purpose and will be replaced.
David Gauke answered an urgent question from Stewart Hosie (SNP, Dundee East) about problems with the PAYE system.
He said 4.3 million taxpayers had paid too much and 1.4 million had underpaid and will be asked to make additional payments starting next year.
The errors were discovered when HMRC undertook a reconciliation process covering the last two years.
Gauke said the current system was designed at a time when most people only worked for one employer and stayed there for life.
Now many people have multiple sources of income.
The government is owed around £2bn and cannot afford to write off the over-payments, but HMRC would be sympathetic to changed circumstances and will not pursue cases where less than £300 is owed.
Hosie said it was "disappointing" that he had to ask for a statement rather than Treasury ministers coming to the House to explain the situation in their own initiative.
He asked how long these errors have been occuring and when people who overpaid could expect to be repaid.
Gauke said the problems with PAYE are long-standing and well-known. He criticised the previous administration for a lack of progress on the problems with PAYE.
Cheques would be sent to taxpayers "over the course of the rest of this year".
He reminded MPs that HMRC will be contacting people by letter and not email and taxpayers should be wary of fraudsters.
HMRC will initially be contacting around 50,000 taxpayers who owe money and people should not try to contact the revenue unless they have been sent a letter.
Shadow Treasury minister Stephen Timms complained that tax experts were briefed on the situation before MPs and said there could be extra demand on HMRC call centres as millions of people are affected.
Gauke said it was unfortunate that Timms did not offer any apology for the system he presided over as a Treasury minister.
He said great efforts have been made to keep the public informed and more staff and resources would be allocated to call centres to cope with increased demand.
Dods Parliamentary Communications Ltd