Taxation: Millions face pounds 100 fines as the taxman closes in

With just two days to go to the deadline for self-assessment, the Inland Revenue's helpline is getting 10,000 calls a day from panicking taxpayers. As Andrew Verity reports, the Revenue is set for a windfall of up to pounds 200m in fines from late payers.

The extent of delays and administrative problems is such that tax agents are predicting that the Revenue will be forced to be lenient to taxpayers who miss Saturday's deadline.

According to the Revenue's own figures, more than 2 million self-employed taxpayers - nearly a quarter of the total - have still not sent in tax returns. They face fines of pounds 100 each if forms arrive after Saturday, netting the Revenue pounds 200m.

Late payers will also face a surcharge worth 5 per cent of the tax bill, plus interest, if the first self-assessed payments are received after Saturday. This will rise to 10 per cent for payments still awaited in July.

Tax agents are protesting that the Revenue's own computer problems and administrative errors have aggravated delays. The Revenue has already apologised for delays in sending out tax bills but has refused to put back the deadline.

Agents say Revenue staff are turning away inquiries and asking taxpayers to call back later. When taxpayers called back, Revenue staff have still been unable to call up the necessary computer records.

Gerry Hart, head of leading tax advice network Tax Team, said: "We expected problems in the first year of self-assessment but not as many as we're facing. It looks like the phones are being jammed. The only explanation can be that the Revenue's software is not working properly."

Kay Hardy, a tax agent in south Oxfordshire, said: "More than once the computer has gone down when I've been talking on the phone to the Revenue. Only yesterday the system was down."

The Association of Certified Chartered Accountants said its 60,000 members had experienced similar difficulties. It said many taxpayers were still receiving bills this week, despite sending them in by 30 September, the initial deadline. Chas Roy-Choudry, a senior officer, said that tax bills dated for the end of December were still arriving this week.

"When they see the stats for the number of returns that are late, and the fact that inquiry lines are being jammed, I am sure they will extend the deadline," Mr Hart said.

A Revenue spokesman yesterday admitted that its system had crashed once and was slow in calling up records, forcing Revenue staff to turn inquiries away. But he insisted the system, constructed by US computer giant EDS as part of a pounds 1.6bn contract, was working properly.

Evidence is also emerging of bewildering hiccups in the Revenue's administration. Adrienne Neal, a 54-year-old free- lance secretary from Didcot, Oxfordshire, first filed her return with the Cardiff 3 tax office in July. It was sent back because of minor omissions.

Her tax agent completed the form correctly and sent a new form on 3 October, only to find in December that the Cardiff office could not trace it. Later in the month, another tax office, Reading 4, got in touch to demand that a return be sent.

Earlier this month, a neighbouring office, Reading 3, wrote to thank her for the return, which had been forwarded from Cardiff. A tax refund of pounds 118 was included with the thanks. On the same day Mrs Neal was sent a red "final demand" notice warning her she was approaching the deadline for payment and could face a fine of pounds 100 - from Cardiff. "It was a nightmare," Mrs Neal said.

The Government is thought unlikely to move the deadline back. However, agents hope it may waive surcharges and interest payments - at least for those who have been forced to pay at the last minute.