David Leppard, The Sunday Times
Published at 12:51PM, January 26 2008

THE government faced a new data row this weekend after it emerged that HM Revenue and Customs has set up a secret “two tier” security system for online tax records giving extra protection to a small group of MPs, royals and other VIPs.

The Tories protested about the government’s “double standards” after the HMRC admitted that 29m ordinary taxpayers did not benefit from the same high levels of protection as MPs and other members of a small elite.

Consumer groups said the government’s admission that the majority of the 29.7m tax records were less secure than those of a few thousand “high profile” people was “shocking”. They claimed the department had lost the confidence of the public.

Although the HMRC denied that the security of its online computer system was in doubt, a spokesman admitted that there were “bad apples” in the organisation who could present a risk that data would be compromised.

Tax records contain home addresses, bank account details, national insurance numbers and details of savings and investments, all valuable to fraudsters.

HMRC was at the centre of a major political row last year after it lost 25m child benefits.

The latest row comes as hundred of thousands of people are expected to use the electronic system in the run-up to this weeks January 31 deadline for tax returns.

The agency is expanding the system and anyone wanting to file a self-assessment tax return after October will have to do so online or face stiff penalties.

Under the elite system, staff working at HMRC who snoop into the tax files of celebrities or MPs are instantly identified by an automatic warning signal and subject to disciplinary action — usually dismissal. The alerts are only connected to the accounts of well known figures, and not members of the public.

The HMRC admitted yesterday that “a small minority of people” will not be using the online system because they are MPs, peers or other VIPs who have been given extra protection.

Full article here.