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Finally, the Revenue said sorry: "We apologise for the disruption to the service and can assure you that no details have been lost and there is no need to resubmit successful returns. Any returns submitted today will be processed in the normal manner."

The number of taxpayers filing their tax return online was this year expected to exceed one million, as the method grows in popularity. More than 700,000 people used the internet to pay their 2002-03 bills, compared with just 76,000 for the 2000-01 tax year. Last Thursday alone more than 34,000 people filed their returns over the internet

Accountants had predicted that the Revenue could have made an estimated £4 million by fining taxpayers for late returns caused by the computer problems.

Earlier, IR had tried to insist that there was nothing wrong with its website. One Revenue official insisted: "The site is running, it hasn't been down at all. It is slightly slower because of the sheer volume of traffic."

Each year about 10 per cent of the 9.5 million people who must complete a self-assessment form misses the deadline, incurring a £100 fine. Interest is then levied at 7.5 per cent a year on the unpaid debt and surcharges are also imposed.

The Revenue uses various tools to tackle the widespread failure of so many to pay their personal taxes. It has issued 15,500 penalties of up to £60 a day to taxpayers who have failed to file returns on time.

The taxman must seek permission from the Revenue’s independent commissioners to demand daily penalties. The Revenue believes that levying daily penalties is an extremely powerful deterrent.

An official said: "The daily penalties are there for a specific purpose: to tackle those individuals who are persistent non-taxpayers."

In addition to the daily fines, the taxman makes personal calls to hundreds of thousands of self-assessment payers to goad them into paying on time.

Stubborn non-payers may also find that they are more likely to be singled out for one of the 350,000 investigations carried out by the Revenue each year.

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