Tax chief finally says sorry for PAYE mistakes

Wave of condemnation forces official to perform U-turn – but no more concessions are made

The country's top tax official was forced into an embarrassing about-face last night, when he finally apologised to the 1.4 million people who must pay more tax. His contrition followed an angry backlash and calls for his dismissal at his earlier refusal to express regret.

Dave Hartnett, the HM Revenue and Customs permanent secretary, last night said he was "deeply sorry that people are facing an unexpected bill".

His statement came swiftly after a government minister waded into the row, claiming Mr Hartnett should be sacked if he refused to apologise. In a remarkable outburst, the Treasury front-bencher Lord Oakeshott said Mr Hartnett's response to the tax crisis made the BP chief, Tony Hayward, "look like a model of disaster management". The Liberal Democrat peer accused Mr Hartnett of being "in a world of his own; I wonder what planet he is on".

"This is the latest in a series of management failures in the HMRC going back many years. If Mr Hartnett cannot see why he should apologise for this one, then he really should be reconsidering his own position," Lord Oakeshott said.

Mr Hartnett also sparked an angry reaction from taxpayers over his "arrogant" claims there was no need to apologise. Speaking on BBC Radio 4's Money Box programme, he denied the HMRC had made mistakes and defended its decision to ask people who owe more than £2,000 to pay the money back quickly by arguing these taxpayers were likely to be higher earners.

"I'm not sure I see a need to apologise," Mr Harnett told the programme when asked if he would say sorry to taxpayers facing unexpected bills. "I've read the papers, listened to the media and heard stories of HMRC blunder and IT failure – neither of those are true. Every country that I know of that has deduction of tax from wages and salaries has to do a reconciliation at the end of each year and we're doing one."

The public outcry that followed his comments resulted in a swift change of heart. "Everyone in HMRC is working hard to make this as painless as possible," Mr Hartnett added in a statement last night. "I apologise if my remarks came across as insensitive. I am working flat out with my colleagues to ensure everyone's tax is correct and the new computer system will help us do this. It was this new system that revealed the extent and size of reconciliations required – and will help us be more accurate in future – but we do not underestimate the distress caused to taxpayers and, once again, I apologise."

Taxpayers were quick to voice their fury at his words. Philip Cooke, of Birmingham, in a BBC website posting, said: "I have to say that Mr Hartnett's comment that no apology is required seems somewhat arrogant to me. It cannot be disputed that 'all is not well in the state of the HMRC'."

Another comment, from John in Bristol, added: "Mr Hartnett's arrogance beggars belief. I remember watching him in an interview about tax office mistakes, and his attitude was exactly the same then: 'we are a big organisation and we make mistakes – so what'."

It is thought errors in pay-as-you-earn (PAYE) tax codes mean 2.3 million people underpaid income tax during the past two tax years. However, around 900,000 will escape having to repay any money after the Government raised the write-off threshold. A total of around £2bn is owed collectively.

Mr Hartnett told the BBC. "Once or twice in the past the numbers have been very large – sometimes they're less – it depends on how the system has been operated and what issues there have been.

"We didn't get it wrong. This needs to be reconciled."

People who owe less than £2,000 will be able to pay in monthly instalments taken from their salary over one to three years, but those facing larger amounts will have no more than three months to pay the money.

Mr Hartnett said these people faced a shorter timetable "because I think owing the most may actually mean they're earning the most".

HMRC has sent out about 45,000 letters as a pilot, which will allow for changes to be made before the rest are sent before Christmas to the remaining six million people who either owe tax or are due a refund.

HMRC checks every year that the tax and national insurance an employer deducts matches information in its records. An incorrect amount of tax may have been paid if people failed to tell HMRC about changes to their circumstances.