The taxman's blunders – and how to avoid them

HM Revenue & Customs has made a series of expensive mistakes recently that will leave many people with a hefty bill. So how can you minimise your chances of being caught out?

Just a few months after admitting to the Pay As You Earn (PAYE) tax code blunder that's left millions of people with additional tax bills, HM Revenue & Customs (HMRC) has admitted to yet more mistakes. Months ago the tax collectors revealed that 5.7 million of us had been assigned the wrong tax code as a result of a system error. This meant some of us had been overpaying and others underpaying tax. The result? Some people have been left facing large, unexpected tax bills. You'd think HMRC would have made sure that no more new errors surfaced. Instead, HMRC it has made more mistakes.

Firstly, it didn't take into account taxable employee benefits when working out whether people had paid the correct amount of tax for 2009/2010. This means thousands of people who got a tax rebate having overpaid previously could now face a demand to return at some of the money. "If there is one thing more upsetting than receiving an incorrect tax demand, it is being paid a refund and then being told you must give it back," says The Daily Telegraph's Ian Cowie. The taxpayers most likely to be affected by this are employees whose employer pays for a company car, healthcare, or childcare and in each case only if that was a new benefit the employee started receiving in 2009/2010. If there was a mistake, you'll hear from HMRC soon.

The second problem concerns online requests for repayment, or for the reduction of tax payments on account, sent by taxpayers between 1 October and 15 November this year. It seems all these requests have been lost. "We are very sorry to hear of the problems some customers have had," says a spokesman for HMRC. On top of this people filling out self-assesment forms online are getting shut out of their accounts if they try to amend them, reports Lauren Thompson in the Daily Mail. HMRC claims that none of the mistakes are particularly large, or likely to affect too many people. However, similar claims were made before the full extent of the initial PAYE blunder was revealed. So what should you do?

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To minimise your chances of being caught out, the best bet is to check your tax code and make sure it is correct. If you are not sure how to do this, contact your local tax office and ask them to explain it. And always keep a copy of all correspondence.