HMRC's money-saving plan 'crass stupidity'

THE tax office has been accused of arrogance and stupidity after it was revealed that advisers and accountants will no longer be sent vital information concerning their clients.

• Coding notices are among the information that will no longer be sent to tax agents

HM Revenue & Customs (HMRC) is to stop copying tax agents in on the coding notices, tax calculations and several of the self assessment notices sent to clients in a move experts claim will result in more mistakes being made by the tax office.

The news comes as HMRC reveals that a record 42 billion in tax went uncollected in the year to April 2009, up from 38bn in the previous 12 months. The widening of the tax gap was due partly to increased tax avoidance and evasion, with the amount of unpaid VAT up by nearly 4bn over the year. Another 6bn was lost in income tax as a result of incorrect self-assessment returns.

The Association of Revenue & Customs, which represents staff at HMRC, said the gap was an inevitable result of staff shortages and would continue rising as staff numbers continue to fall.

HMRC's decision to cut agents out of the tax correspondence sent to their clients is also part of its drive to cut costs. Until now copies of PAYE coding notices or tax calculations were sent to taxpayers' nominated agents. HMRC claimed the change would save it 1.25 million, but experts believe it could ultimately cost more money than it saves.

Anthony Thomas, deputy president of the Chartered Institute of Taxation, described the move as short-sighted. He said HMRC had failed to factor in the cost of a likely increase in enquiries from agents and the expense of handling the increased incorrect tax returns that would result.

"It is particularly disappointing that this change is being sprung on taxpayers and their agents with more or less immediate effect and without consultation," said Thomas.

Liam McKenna, a partner at Glasgow accountants Martin Aitken & Co, concurred: "The consequences of this measure are entirely predictable. Without the involvement of agents, more HMRC errors will go undetected for longer and the extent of underpayments and overpayments will escalate," said McKenna. "In the circumstances, the announcement smacks of crass stupidity and arrogance."

HMRC was already under fire after it emerged that six million people had paid the wrong tax through the PAYE system. Some 1.4 million people have to repay an average of 1,380 after paying too little tax, while another 4.3 million taxpayers are in line for refunds averaging 419 after paying too much through PAYE, where income tax is deducted straight from wages.

New research suggests that almost half of Britons believe HMRC has no right to reclaim incorrect payments made as result of its own mistakes.Another 10 per cent of those polled by moneysupermarket.com supported not paying back the money because of the impact it will have on individual budgets and finances. However a fifth said that because taxpayers expect refunds when they are owed money, they have no right to withhold funds owed to HMRC.