Government made tax error

The Government has admitted there were more than 1,600 faults in a computer system which has led to many new graduates being overtaxed.

The problems were first discovered by Tommy Docherty, a lecturer at the Institute of Chartered Accountants of Scotland and Strathclyde University. He found that graduates who had signed on for income support before taking up a job were given an emergency tax coding which drastically reduced their personal allowances.

His MP, Tony Worthington, Labour's spokesman for Northern Ireland, has now taken up the matter in the House of Commons. Mike Fogden, chief executive of the Employment Service, has admitted there have been 1,673 faults in the system since 1992 and estimated that up to 70,000 "clients" were affected each year.

It is not known how many were graduates, but Mr Fogden said claims peaked each year from mid-June until the end of July which could be attributed to students graduating. "It has proved impossible to obtain figures for the amounts of tax involved."

Mr Docherty calculates that a graduate who last month began a Pounds 8,500 job will have overpaid Pounds 300 in tax by Christmas. "These are just admissions, not solutions,'' he said of Mr Fogden's statement. When he recently polled 100 of his ICAS students, every one had the wrong tax coding.