Reuters is reporting that around one million people in Britain are paying the wrong amount of tax because of errors in processing by HM Revenue and Customs. This may be especially true of small businesses who have a more complex tax structure than individuals.

The news comes in a report to Parliament, Accuracy in Processing Income Tax, from the National Audit Office, published today.

The NAO found that errors resulted in £125 million ($250m) too little being paid and £157 million ($314m) too much being paid during 2006/07.

The errors have a much wider impact, the NAO added, in taxpayers’ anxiety, wasted time and effort in trying to put matters right.

Some groups are likely to be disproportionately affected, including taxpayers with complicated tax affairs, such as freelancers and people with several sources of income.

The NAO recommended that the HMRC separates out more complex cases for processing, develops staff training and strengthens the help available for taxpayers affected by errors. “HMRC has improved its processing of income tax returns but there are substantial numbers of taxpayers who are affected by processing errors.”

The opposition Conservative Party said the amounts involved were “unacceptable”.

“With such a dismal track record, it beggars belief that the Revenue is asking for powers to deduct tax it claims is owed direct from bank accounts.”