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HMRC write off billions of pounds following PAYE errors

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As , a number of commentators have been calling on the government to write off billions of pounds in unpaid tax following the PAYE errors unearthed last week.

They argue it would be unfair to expect people to budget for HMRC's PAYE coding errors, which in some cases stretch back as far as 2004/05.

Well, yesterday Treasury Minister David Gauke announced that anyone who has been undercharged up to £300 in the past six tax years will have it written off, while those who owe more than £300 may be given up to three years to pay it back.

He said: "In cases of genuine hardship, HMRC will allow payments to be spread across a period of three years. As was already the case, HMRC will not pursue cases where the amount owed is for less than £300 - that's an increase from the previous threshold of £50 - and this applies to 40% of all underpayments."

Conflicting reports

Now, let's rewind a few days...

HMRC initially reported that around 4.3 million people paid too much tax and are due refunds of around £1.8 billion; while 1.4 million underpaid and will be asked to pay an additional £2 billion.

Well, according to the Guardian, HMRC didn't include those who owe £300 or less in these totals. This means that the 40% benefiting from a write-off would be in addition to the 1.4 million quoted as underpaying.

Moreover, HM Revenue's accounts show 18.2 million unreconciled cases dating back to the 2004-05 tax year where taxpayers either paid too little or too much tax.

This means that potentially around 13 million people paid about £5 billion too much tax; while around 4.5 million paid £6 billion too little.

As the government embarks on a swingeing round of cuts -- which aim to reduce public sector spending by £100 billion a year by June 2015 -- can it really afford to surrender all this revenue?

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