Further pressure will be piled on HMRC in 2013 when they have to claw back child benefit payments to higher-rate tax payers.

George Osborne has decided that families with a parent who earns more than £44,000 a year will see their child benefit axed as from 2013, a move expected to save around £1bn annually.

However, instead of simply stopping the payments, the funds will be clawed back through the taxation system. This is likely to make individuals’ tax affairs more complex and increase the pressure on the Revenue. HMRC recently miscalculated six million people’s tax liabilities and considering it is undergoing a major cost reduction program at the moment, the chance of errors occurring under a yet more complex tax system seems extremely likely.

The Public and Commercial Services Union said the miscalculation could be linked directly to 2005 when the Revenue and Customs merged. Since then 30,000 jobs have been lost in the department. This loss has had a serious effect on the efficiency of the taxman. HMRC has 17 million outstanding queries to deal with and nearly 50% of all telephone calls to the Revenue’s enquiry centres went unanswered in 2009 because they aren’t fully staffed.

Despite all these problems, HMRC wants to introduce Real Time Information, or even more ambitiously, centralised deductions, in a bid to make PAYE deductions more accurate.

However, the CIoT warns that these proposals will not only present significant challenges for the government, they will also require a large investment of time and money if they are to work efficiently.

John Whiting, the tax policy director at the CIoT, also pointed out that the Centralised Deductions scheme would probably involve additional costs for employers, especially those who would have to implement electronic means of paying their employees.

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Image: Pressure Guage by wwarby

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