The Inland Revenue has gained a windfall of up to �20m because of computer problems which meant some taxpayers never received the tax refunds they were due.

Nearly 150,000 taxpayers are owed refunds from four years ago, when their tax records were classified as "missing" by the Revenue.

But according to the trade magazine Computer Weekly most are yet to collect any money.

In a letter to the Liberal Democrat MP Matthew Taylor, the Treasury minister Dawn Primarolo confirmed only 13,657 repayments have been made - less than a tenth of the total.

'Missing' records

In 1997/98, tax records for more than a million people were classified as "missing" by the Inland Revenue.

Details for hundreds of thousands of cases had gone astray during the introduction of a new computer system for national insurance.

Though not strictly lost, tax records were left incomplete in many cases because of technical problems in the changeover from the old PAYE system, to the new national insurance recording system, known as NIRS2.

That meant tax officials were unable to determine whether taxpayers whose records were "missing" had paid too much or too little tax.

Criticism

Yet the Inland Revenue decided to clear more than a million cases which it could not resolve.

That drew criticism from the government spending watchdog, the National Audit Office.

Around 150,000 of the missing taxpayers had paid too much tax in 1997 and 98.

But now they would miss out on their refunds, just because of the computer problems.

"The impact on individual taxpayers could be significant," said the NAO.

Poor response

Last summer, the Revenue wrote more than a million letters last year, inviting taxpayers to seek a review of their tax if they believed they had overpaid or underpaid.

An estimated �22m was at stake between 148,000 people, according to a Revenue estimate given to the Public Accounts Committee last year. The Revenue now says that figure has fallen to �15m.

According to Computer Weekly, only a quarter of the letters have gained a response, and only 13,657 repayments have been made.

Mr Taylor says few people responded to the letter because they probably feared it would cost them money.

A spokesman for the Revenue said: "We are still willing to review people's taxes for the year and put things in motion if people think they are owed a refund from four years ago."