Up to five million people may be paying the wrong income tax because HM Revenue and Customs' computer systems are "no longer well suited" to handling the tax, the UK National Audit Office has warned.
The figure, which comes in the NAO's report on HMRC's accounts for 2006-07, is five times higher than that identified in a separate report by the public spending watchdog that was published earlier this month.
The earlier examination of income tax collection found that more than a million people were paying the wrong amount of tax because of processing errors.
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Speaking as the new report was published, Sir John Bourn, head of the NAO, said: "HMRC's computer systems are no longer well-suited to the efficient administration of income tax, especially where people have more than one job or change jobs frequently."
This was because the systems structured tax records around jobs rather than individual taxpayers. "As a result, the Department can have difficulty identifying all relevant sources of income when calculating tax that should be paid," the report says.
These difficulties had been compounded by inconsistent working practices at HMRC as a result of staff being unaware of or failing to follow procedures.
"Based on its most recent estimates, each year the department may not be pursuing some £880 million of tax due, and taxpayers are likely to have overpaid around £340 million, resulting in potentially five million taxpayers not paying the right amount of tax," the report says.
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