Uncertainty for millions as a leaked email shows the taxman made miscalculations in many 'final' bills for last year
More than five million British workers face uncertainty after leaked emails revealed that their tax bills for last year may have been wrongly calculated.
HM Revenue and Customs has privately admitted that those who underpaid or overpaid income tax last year may still have paid the wrong amount.
Most have already been sent new tax demands or sent repayments – but now face the prospect of having their bills recalculated once again. HMRC has stopped sending repayments until the crisis is resolved.
Accountants expressed disbelief. Elaine Clark of the Cheapaccounting tax practice said: "This is extraordinary, a disaster, and heads need to roll at HMRC."
HMRC said tens of thousands would ultimately be affected but admitted it currently had no idea about the scale of problem.
Four months ago, HM Revenue & Customs admitted it had collected the wrong amount of tax from more than five million people in the 12 months to April 2014.
Since then, the taxman has sent those affected notification letters explaining how it would claw back or issue refunds for on average £300.
In an email leaked to The Telegraph, a select group of senior HMRC staff and accountants were told "thousands" of mistakes were made.
The recipients were advised to tell taxpayers who questioned their bills "not to repay any underpayment" of tax.
It said anyone who had overpaid tax should not cash any cheques they had received. Anyone who has already cashed a cheque will see the money potentially clawed back if a mistake has been made.
Whistleblowers behind the leaked email said the numbers affected by the latest blunder could "easily run into the hundreds of thousands".
"HMRC refuses to admit the system doesn't work, and it's scandalous that there is no politician holding them to account as the whole programme of welfare reform could be put at risk because of this," one said.
"The system is not fit for purpose, it's inherently flawed and routinely produces errors that cause a huge mess for families and employers.
HM Revenue & Customs insisted less than 100,000 people were likely to have been hit, but was unable to be more specific.
The errors are the latest embarrassment for HM Revenue & Customs, which has faced fierce criticism for its "aggressive" treatment of taxpayers later shown to be the innocent victims of the taxman's own misjudgements.
At the end of every tax year in April, HMRC works out whether people in the Pay As You Earn (PAYE) system have paid the correct amount of tax.
Millions end up paying the wrong amount if changes in their circumstances, such as moving jobs or receiving a pay rise, are not reflected in their tax code. Others find that state or personal pension payments conflict, with HMRC sometimes unaware of a second income.
HMRC typically collects outstanding debts by altering workers' tax codes for the following year. If it owes money, it often issues taxpayers with a cheque.
In June, the Revenue said the number of people who owed money, or were due refunds, had risen from 5.2 million to 5.5 million in 12 months.
The figure was higher despite the introduction of the taxman's £270 million “Real Time Information” (RTI) programme, which was supposed to eliminate errors.
RTI has forced employers to report the amounts of money paid to staff on a weekly or monthly basis, rather than annual. Accountants warned this may have led to more errors occurring, as larger quantities of data were being sent to the Revenue. Almost a million people a year are affected by a computer "flaw" which duplicates the entries under their name, they said.
In the leaked email, HMRC admitted that duplicate entries for workers was a major factor behind its latest errors. It also blamed employers for failing to provide the correct salary information in submissions about staff.
The email said: "We are urgently investigating these cases and will look to resolve the matter in the next six to eight weeks.
"We currently do not know the scale of the issue but some large employers are involved, so several thousand of employees may be affected."
Mrs Clark said taxpayers were being forced to wait more than half an hour to get through to HMRC to discuss tax demands. She said many then faced months in limbo before letters arrived, which might now be incorrect.
"The Revenue's flagship new reporting system was supposed to fix these types of problem but it appears to have failed completely.
"The pressure put on individuals who face demands for tax is enormous, so it's extraordinary that HMRC should again have made such basic errors."
Stuart Phillips, director of tax advisers the Private Office, said: "If the Revenue continues to make these kinds of mistake it completely undermines confidence in the tax system – and particularly new and aggressive efforts to collect more tax such as lifting money directly from people's bank accounts."
A spokesman for HMRC said the incorrect letters were "not demands" but merely tax summaries, "like the annual ones your credit card or bank sends you showing your total transactions across the year".
"No one has been asked to hand a penny over in tax because of this," the spokesman added.
"The majority of the errors have happened because an employer failed to make a final payment statement for the 2013/14 tax year, meaning our records were incomplete despite reminders that these submissions had to be made.
"We are sorry this has happened and we aim to issue corrected calculations in the next few weeks."