The glitch has seen almost 200,000 company car drivers potentially receiving incorrect codes and now fleet decision-makers are being warned to double-check their drivers' tax codes.
The problem has created a major headache for the Inland Revenue that had requested employers to supply the carbon dioxide emissions of their company cars by the end of 2001.
The Revenue wanted the information so it could process the data in time to prepare driver tax codes for the 2002/03 financial year, the first year of the new emissions-based system.
Between eight and nine percent of employers, representing about 12% of the UK's company car drivers, responded to the requests, but their efforts appear initially to have been in vain.
Technical difficulties at the Inland Revenue meant the computer that held the company car CO2 data failed to link with the computer that created the tax codes. As a result, the drivers involved have received provisional tax codes based on the Inland Revenue's 'best estimates' of the CO2 emissions of their cars.
This could leave drivers who have deliberately selected a low emission car to qualify for a low tax charge under the new CO2-based benefit-in-kind company car tax system receiving a provisional tax code that would leave them alarmingly and erroneously out of pocket in the next financial year.
Fleet News has learned of a number of fleets whose drivers have received incorrect tax codes, despite supplying car CO2 information in good time.
The Inland Revenue has promised to correct the situation in time for the new tax year, and has pointed out that at least 90% of employers have failed to supply the requested CO2 data and therefore will see their company car drivers' tax codes based on its own estimates.
Mary Sullivan, Inland Revenue policy adviser, said: 'We have had a local IT difficulty and information kept on one computer did not flow to another that does the tax coding. For all the cases where employers have sent in the CO2 information we will re-input it and produce new codes.
About 195,000 drivers' records will be checked manually.' She added that the Inland Revenue will soon be writing to company car drivers whose employers have failed to supply the requested information, asking them individually to supply the CO2 emissions of their cars to ensure tax codes are correct.
Alastair Kendrick, director of PAYE/NI solutions at Ernst & Young, said: 'Employers need to alert their employees to make sure their tax codes match the tax changes.'