Personal finance: Millions lost to the tax moguls

Overcharging by the Revenue is unnoticed and goes uncorrected every year

TAXPAYERS STRUGGLING with tomorrow's deadline for tax payments might be comforted to know that someone, somewhere in the financial world, is standing up for the little guy. That champion of consumer rights, the Personal Investment Authority, has been flexing its muscles.

This week it was Liverpool Victoria, fined a record pounds 900,000 for serious and widespread failures to comply with the rules.

Two weeks ago, another regulator, Imro, fined Lloyds TSB pounds 425,000 for persistent poor management of its unit trusts. A large part of the problem was down to its computer system.

Right enough. But there are some quarters of the financial world which lurk out of reach of the regulatory machine. In this customer's hell, poor administration is widespread. Customers are frequently overcharged. They are never paid interest when they're owed money. And they're often forced into overdraft. What's more, it's all done with impunity. The culprits' actions affect our finances more intimately than any unit trust company. And yet they are never fined. In fact, they fine us.

Which brings us back to the Inland Revenue. The sins of Lloyds TSB have been repeated, almost to the letter, by the Revenue. Overcharging, to the tune of hundreds of millions of pounds, goes unnoticed and uncorrected every year. No interest is paid when they have incorrectly estimated your tax liability and take months to refund it, though officials will slap a surcharge plus interest on those of us who underestimate.

This week it emerged that the Revenue's bad admin had caused over 800,000 incorrect tax returns to be sent out. The returns were sent out as part of the Revenue's "guarantee", a promise to calculate the tax of those who got their forms in by September 31. The calculations were supposed to be with taxpayers before the end of January.

Unfortunately, when they arrived, they appeared to charge customers double the amount they owed. An apology letter followed, but customers had to work out, according to an obscure formula, how much they really owed. So much for the guarantee.

Last year, the Inland Revenue's tax statements were even worse - they confused credits with debits and vice versa. Thousands owed refunds by the Revenue were fined for non-payment. Red faces in Somerset House all round, and public apologies - but no one was punished.

It is not as if this is confined to the Revenue. MPs this week slammed the dodgy technology installed at the DSS to administer national insurance. NIERS2, the pounds 100m computer system installed by Andersen Consulting, had failed on no less than 1,919 counts. Over 17 million contributions had not been processed. Payments to private pension schemes had been delayed for months - costing scheme members some pounds 38m.

Compared to the private sector, the public part of the financial world runs wild. But a simple reform would do the trick: interest and surcharges for delays, and a pounds 100 fine for each cock-up.