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Advice for those affected by the HMRC tax fiasco

by Kobus Van den Bergh | Sep 08, 2010
  • A treasury department audit of HMRC has in the past few days revealed what is arguably the biggest administrative blunder ever.

    What happened

    Massive tax coding errors have resulted in around 4.3 million people being due refunds amounting to £1.8 billion, while an estimated £2 billion is owed to Inland Revenue by around 1.4 million workers.

    ...massive tax coding errors have resulted in around 4.3 million people being due refunds amounting to £1.8 billion...

    How it happened

    HMRC last year completed the integration of a new PAYE computer system to help solve the problem of erroneous overpayment by millions of UK workers in preceding years. The system, which has so far cost more than £400 million, issued 23 million tax codes in January of this year, with a huge percentage of them being just plain wrong or wrongly issued. In fact, there should have been around 13 million codes issued, but a glitch in the system meant that people who had had more than one job during the period in question were issued one tax code per job, instead of just the right code, which led to many workers receiving more than one different tax code.

    In addition to these 4.3 million cases, there is evidence that between 6 and 9 million people overpaid tax in the 2 years before the new system was installed, bringing the total number of people affected by the series of blunders at HMRC in the past few years to somewhere between 10 and 15 million.

    What to do if you suspect you have overpaid

    Start the process of applying for your refund! With so many affected, there are bound to be even more delays than usual at the Inland Revenue office. A 1st Contact Tax Refund consultant can make the process as quick and painless as possible by helping you prepare the correct documents and lodging the claim at HMRC on your behalf. Because they work on a ‘no refund – no fee’ policy, you have nothing to lose.

    What to do if you receive a letter of demand

    If you happen to be one of the unlucky 1.4 million citizens who receive a P800 letter from Inland Revenue between now and Christmas, you could contest the matter if you think HMRC had the information they needed to correctly calculate your tax, or if you think your employer or pension provider did not use the right code or made any mistake that would make them liable for the shortfall, or if you believe HMRC do not have full and complete records for you and are essentially guessing.

    In any of these cases, you could appeal directly to HMRC or you could go via the adjudicator, Judy Clements OBE, who acts as a free and unbiased referee. You can contact her through 

    You can also seek help at, or use their template to write a letter back to HMRC in response to the letter you received.

    If you would like to apply for a tax refund, contact the 1st Contact Tax Refund office on 0808 1411 649 or visit the website at and request a call back. With so many millions affected, you are better off paying the small fee to a qualified 1st Contact Tax Refund consultant who will track the progress of your claim on your behalf than spending your valuable time waiting in long queues at HMRC.

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