Rural businesses may have been mistakenly sent letters from HM Revenue & Customs stating they underpaid their 2005-2006 tax and national insurance.

Businesses were offered a £250 incentive for completing their 2004-2005 PAYE form online. The sum was to be deducted from the following year’s online payment.

However HM Revenue & Customs failed to recognise this, even where formal notices of acceptance were issued for the complete PAYE form.

Susan Shaw, tax director at accountant Smith & Williamson, said the letters claimed tax and NI for 2005-2006 had been underpaid and interest will be charged.

“Anyone receiving such a notice incorrectly should write to or phone the issuing office insisting the demand be withdrawn,” she said.

“One can only hope such computer errors are corrected before 2008, when the majority of taxpayers will have to submit their annual tax return over the internet.”

A spokesman for HM Revenue & Customs apologised for the letters, but defended the online process.

“Some customers made errors on their annual returns and in a small number of cases it took us longer than we would have wanted to put those errors right.

“Until they were, and able to pass through our systems, the £250 electronic incentive could not be credited to their PAYE account.”

Fewer than 10,000 businesses were thought to have been affected, he added.