Millions in line for tax rebates

19 October 2011 Last updated at 00:48 ET

HMRC is grappling with a backlog of Pay As Earn cases dating back to 2004

About six million people are set to receive tax rebates averaging £400, while another million will learn they have underpaid by about £600.

Her Majesty’s Revenue and Customs (HMRC) said letters would begin going out in the next few months, with those owing money able to pay in stages.

It is the second year tax and National Insurance discrepancies have been identified by a new computer system.

HMRC said the number of cases would reduce “as the new system beds in”.

Those who will be told they have underpaid tax are expected to owe between £500 and £600 on average.

“In a similar exercise last year, Revenue and Customs were criticised for being insensitive over their treatment of underpayers,” said BBC news correspondent John Andrew.

“This time it’s being stressed that they can spread what they owe over time by having their tax code adjusted.”

‘Inaccurate’

The rebates, which relate to overpayments in 2007-08 or earlier and will include interest, are due to be settled by December 2012.

It is estimated these will cost the government more than £2bn.

“Money that is owed going back many years is now going to be automatically paid back as we get the tax system up to scratch,” said an HMRC spokesman.

“We are getting cases that were left unreconciled up to date as quickly as possible. Anyone owed money will be paid back with interest without the need to contact us.

“The fact is there will always be some cases at the end of every tax year that require an under or overpayment to balance but these cases will reduce as the new system beds in.”

Earlier this year, the House of Commons Public Accounts Committee criticised HMRC’s management of the income tax system.

The MPs said up to 22 million people had not been taxed accurately since 2004-05 causing “unacceptable uncertainty and inconvenience”.

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