A report by the National Audit Office (NAO) has revealed that an IT error resulted in thousands of taxpayers in Scotland not receiving their tax rate for the new Scottish Rate of Income Tax (SRIT).
A statement from the NAO said that, as a result of an error in the design of HMRC’s taxpayer identification exercise in December 2015, 420,000 potential Scottish taxpayers did not receive a notification letter.
After being notified by other stakeholders, such as the Scottish Government, employers and taxpayers, HMRC engaged its IT supplier to investigate the issue in January 2016, and confirmed the total number of affected individuals in April 2016.
An interim solution was put in place by June 2016 to issue coding notices for the 2016-17 tax year to the 420,000 taxpayers omitted from the initial identification scan. A permanent IT solution was implemented in October 2016 to bring these taxpayers within HMRC’s automated process for future years, and to ensure that all in-year changes of Scottish taxpayer status for these customers were correctly reflected in 2016-17 codes. We will assess the effectiveness of this approach in our next report, which will focus on 2016-17 activity.
HMRC has undertaken specific analysis into high-risk areas within the taxpayer population. It has individually assessed all taxpayers with postcodes spanning the Scotland-England border; contacted all taxpayers with a Scottish correspondence address directly; and is in the process of cleansing incomplete Scottish addresses. This work has enabled HMRC to continue to refine their Scottish taxpayer population, following work undertaken in previous years to assure its initial accuracy.
The NAO added that the ability to provide an IT solution allowing personal pension providers to claim relief at source continues to be a significant risk for the future. If tax rates between Scotland and the rest of the UK diverge, Scottish taxpayers will be due a different rate of relief-at-source on their personal pension contributions.
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