£2.8bn a year lost in tax errors

£2.8bn a year lost in tax errors

Revenue and Customs lose up to £2.8bn a year in tax from people who have provided the wrong information, because it is not cost-effective to get the money back, the Treasury admits to MPs today.

The missing amount almost exactly matches £2.7bn that Alistair Darling, the chancellor, admitted on Tuesday he would have to borrow to put right the mess caused by the abolition of the 10p rate, which put up taxes for 5.3 million people. The admission comes in a report by the Commons public accounts committee into the failure of Revenue and Customs to meet best business practice .

The report condemns the Revenue for not having a user-friendly website, failing to meet standards in answering calls, giving wrong information, and triggering nearly 200,000 complaints in two years.During the inquiry, Revenue and Customs gave Don Touhig, Labour MP for Islwyn, a breakdown of missing revenue - caused by taxpayers giving the wrong information - of between £2.4bn and £2.8bn a year for three years. "Recovery of all understated liabilities would involve work with many millions of taxpayers and would not be cost-effective," it said.

Touhig said the figures showed that the Revenue ought to look again at tax self- assessment: "It is a colossal amount."

The shadow treasury minister, David Gauke, said: "This highlights the fact that administrative failures are costing the exchequer serious sums of money, while in another part of the system, individual.....continued below

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taxpayers lose out through the incompetent handling of the tax credits system. Gordon Brown, the man who led HMRC for 10 years, has to take responsibility for the mess he left behind."

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