More demands for extra tax due to errors at HMRC A spokesman for HMRC said the incorrect amounts that it had taken were part of the process of the Pay As You Earn (PAYE) system, where employees have tax deducted at source using a tax code that reflects past circumstances. Where an individual's circumstances change and these changes are not notified to HMRC, individuals could end up paying too little or too much tax during the year. The annual reconciliation process therefore checks whether the right amount of tax has been paid," he said. The move is the latest in a catalogue of woes for HMRC, which two years ago admitted that it had made mistakes in the tax affairs of 5.8 million people. At the time people thought that it was a one-off, but the tax reconciliations have continued, with MPs criticising the agency. The Treasury select committee called for "crucially important" improvements to be made to the PAYE system. Last month, 12,000 taxpayers received an incorrect letter stating that they were incurring daily penalties for not sending in a Self Assessment Tax Return despite being taken out of the system. Stephen Banyard, acting director general for personal tax, said HMRC was starting to use a new system called Real Time Information, which will tell it about PAYE payments at the time that they are made. He said this should reduce the need for corrective actions at a later stage. The entire process of refunds and reclaims should be complete by October this year, HMRC said. There is no need for customers to contact us.