Taxation: Income Tax

Lord Higgins Excerpts

Monday 11th October 2010 Lords Chamber

Asked by

[Lord Higgins]

To ask Her Majesty’s Government what rate of interest they propose to pay to people who have paid too much income tax because of mistakes by HM Revenue and Customs; and what rate of interest they propose to charge people who have paid too little income tax for the same reason.

[The Commercial Secretary to the Treasury (Lord Sassoon)]

My Lords, HMRC interest rates are linked to the Bank of England base rate and are currently 3 per cent on late payments and 0.5 per cent on repayments. The interest position in instances of error or delay by HMRC is considered on a case-by-case basis.

Underpayments arising from the current end-of-year PAYE reconciliation exercise will not attract an interest charge, provided that people who have been notified of an underpayment contact HMRC and agree a payment arrangement.

--- Later in debate ---

[Lord Higgins]

My Lords, I am grateful to my noble friend for that helpful reply. The situation in Her Majesty's Revenue and Customs is another example of the problems which have been left by the previous Government. My noble friend will be aware of the disturbing and complacent evidence which was given to the Treasury Select Committee in another place on 15 September. Apart from the uncertainty and distress which has been caused to something like 6 million taxpayers and the minimal rate of interest which is being paid to those to whom Revenue and Customs now propose to refund something, a large amount of money has been written off. What is the overall cost of what has happened in the department, against a background of trying to cut public expenditure?

[Lord Sassoon]

My Lords, as my noble friend points out, this is another part of the inheritance which we are getting on with having to tidy up. On his specific questions, I can only apologise to the taxpayers who are caught up in this reconciliation exercise. We are trying to make the process as painless as possible. The bills for those owing less than £300 are being written off. That will entail a cost of some £600 million. The cost of the overall exercise, in which 90,000 letters a day are going out between now and Christmas to clear it up, will be up to £10 million.