Tax News

It has been reported that by March 2008 over 16 million PAYE cases were awaiting manual tax review by HMRC staff. The question is: how can this happen in today's technologically advanced world? The main problem is the delay to the new National Insurance Reporting System (NIRS). NIRS was to be introduced in October 2008, but its launch was delayed. The reason - it could not cope efficiently with individuals with more than one job or who changed job regularly. The system should roll out this spring. On its own this would be a damning indictment of the way the computerisation of our tax system is being handled. Unfortunately, it's only a small part of the more general malaise in the government's information technology. Following high-profile data losses by the Revenue, the Poynter Review reported back on the general security and safety of the tax system. Among other points, it highlighted a fundamental problem with the inter-departmental record keeping software. It found upwards of 650 separate computer systems being used, covering areas such as self assessment, National Insurance, PAYE and Tax Credits. Many millions have been spent over the past decade trying to bring the Revenue's computer systems up to date. In this respect, the Poynter Review merely served to reinforce the fact that this has not been entirely successful. In one high-profile case, following grave mistakes with the implementation of the Tax Credits system, the services company charged with creating the system, EDS, were forced to pay compensation. By the end of 2008 this had risen to over £70 million. Not a good result if an efficient system was the aim. The crux of the problem is that everyone has multiple records. These are spread widely across departments, performing different functions. But they all need to interact. As the tax and credits system has become more complex, with new credits being introduced, integration has become more of an issue. Merging tax and national insurance departments also contributed to the difficulties. Insider information At TWD Accountants we have a number of ex-Inland Revenue staff. A straw poll amongst them found they all used the old 1980s green-screen technology, even quite recently, to clear outstanding PAYE cases. There were also tales of mountainous piles of computer printouts being manually checked by clerical staff on overtime, most cases "cleared Z" in the Revenue parlance, some passed for further inspection and other simply noted for a refund of tax. When self assessment was introduced in 1996, it was given its own system, to run alongside the already well out of date PAYE system. As far as we know, this is still the case. PAYE and Self Assessment are still dealt with by completely separate, albeit connected systems. Simple logic says this is not ideal. Solution Despite the massive investment in new technology, the system is still creaking under the weight of complications. It should be straightforward. Each person's tax records should be held centrally and updated as necessary. This should include all information regarding tax, tax credits, national insurance and self assessment. Of course the different aspects would necessarily need to have different functionality and purpose, but even so it would allow the most complicated situation to be analysed easily by computer. Real discrepancies would still arise, but the numbers should be drastically reduced and more easily handled as a result. In this day and age, with the technology available to us, it should not be beyond the wit of major companies being paid hundreds of millions to create an integrated system. Even if this takes a few years, then it should be done. By Julian Shaw. March 27, 2009.