Her Majesty's Revenue and Customs has admitted that some Welsh taxpayers were deducted the wrong amount of income tax in April because they were coded for Scottish rates of tax.
Since the start of last month, all Welsh taxpayers should have a C for Cymru in their tax codes but HMRC say some employers incorrectly gave Welsh taxpayers tax codes with S for Scotland instead.
The codes make it possible for the Welsh and Scottish governments to set different income tax rates to the ones that apply in England. At present, the Welsh rates are still the same as England but in Scotland, there's a "starter rate" of 19p in the pound. That's 1p below the standard rate but better paid Scots face tax bands which are 1p higher than in Wales and England.
We have been made aware of an error in the application of new income tax codes for Welsh taxpayers by some employers which has meant some taxpayers payed the incorrect amount of tax in April. It is the responsibility of the employer to apply the tax codes provided by HMRC and we are working closely with the employers affected and providing support as they investigate and correct the problem.
HMRC say any errors in the amount of tax paid will be automatically put right without the affected taxpayers taking any action. It said it already had plans to make sure that the new Welsh tax code was working properly, which will be implemented next month.
The Chair of the Assembly's Finance Committee says he'll be demanding that HMRC appears before AMs to explain what went wrong.
HMRC’s admission is deeply disappointing as this Committee was repeatedly given assurances that mistakes like this would not happen. We raised concerns about the flagging process for identifying Welsh taxpayers during our inquiries into fiscal devolution and the Welsh Government’s draft budget. On each occasion we were told the matter was in hand and the lessons from the devolution of income tax powers to Scotland, where there were similar issues, had been soundly learned and would be put into effect. “We are seeking an immediate explanation of how this has happened and will be asking representatives from HMRC to appear before this Committee in the near future.
Llyr Gruffydd said his committee had been frustrated that the UK Government, which is responsible for HMRC, wouldn't give evidence to AMs.