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Administering the new Scottish rate of income tax (SRIT) will present "significant challenges", a watchdog has warned.

In its report,, external  the National Audit Office (NAO) confirmed the HMRC failed to contact 420,000 people to confirm the accuracy of its records.

HMRC began contacting potential Scottish taxpayers last December.

But an error in the "design of HMRC's taxpayer identification exercise" meant 420,000 people did not receive letters.

The Scottish government said it had made it clear to HMRC that the identification of Scottish taxpayers "must be robust and accurate".

Labour MSP Monica Lennon asks the practical implications for the 420,000 Scottish taxpayers who were excluded from the initial identification exercise. 

National Audit Office director Steven Corbishley HMRC says they have now been captured they will fall into the right Scottish tax code.   

Tory MSP Liam Kerr says there are a significant number of Scottish taxpayers who were missed and that was then notified to HMRC.

Mr Kerr says that's concerning and asks if HMRC would have been expected to have a check and balance system before it was rolled out.

National Audit Office director Steven Corbishley says "yes" that would have been expected and alarm bells should have been ringing. 

Mr Kerr says "these are vast sums of money we are talking about," and asks why an interim solution wasn't already in place. 

He asks if HMRC can guarantee that this will not happen again.

Mr Corbishley says that is a question for HMRC.

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The debate on a second Scottish referendum will continue on Tuesday, after it was postponed yesterday following the terrorist attack at Westminster. 

Parliament's business managers were split on when to hold it. 

The Conservatives, Labour and the Liberal Democrats wanted it to continue this afternoon but the SNP and the Greens preferred next week. 

The Greens have given up their debating time so the debate and vote can be held, which will mandate the first minister to seek a fresh referendum.

Tory MSP Ross Thomson asks how much confidence there is that HMRC can achieve the changes.

Mr Curbishley says there has been a lot of work going into it and HMRC will also say that they are having an ongoing discussion with the Scottish government.

Mr Beattie asks if there is "a feel" for what the real error rate is.

Mr Corbishley says "no" and that "there will never be 100% accuracy" because of the way HMRC operates. 

He says it is about being as accurate as possible. 

SNP MSP Colin Beattie says HMRC doesn't have a great track record in IT and asks if there has been any cost to the Scottish government.

National Audit Office director Steven Corbishley says there was a cost of about £150,000 to rectify the error but this cost was not passed on to the Scottish government. 

Mr Beattie says "it all feels a bit hit and miss" and there is a lot of reliance on employers doing "the right thing".

Mr Corbishley says there is a lot of reliance on employers in the Pay As You Earn (PAYE) system.

Image source, PA

From April 2016, the Scottish Parliament has set a Scottish Rate of Income Tax (SRIT). 

The accounts of HM Revenue and Customs (HMRC), who are responsible for collecting and administering the SRIT, are audited by the National Audit Office on behalf of the Comptroller & Auditor General.

To ensure the collection and administration of the SRIT, which is set by the Scottish Parliament, is subject to scrutiny by the Scottish Parliament, the Comptroller & Auditor General is required to report to the Scottish Parliament on HMRC’s administration of the SRIT. 

In turn, the Auditor General for Scotland provides additional assurance on the audit work on the SRIT by also submitting a report to the Scottish Parliament. 

Click here for the The administration of theScottish Rate of Income Tax2015-16 report from the Comptroller and Auditor General  and for the  the Auditor General for Scotland’s report on the administration of SRIT2015-16.  , external

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National Audit Office director Steven Corbishley passes on the apologies of Sir Amyas who cannot give evidence as he was caught up in lockdown at Westminster. 

Mr Corbishely  makes an opening statement.  

Auditor General for Scotland Caroline Gardner says "the Scottish Parliament's financial powers are changing substantially."

Ms Gardner says the reports submitted to the committee refer to 2015/2016.

The auditor general says HMRC are responsible for administration of the Scottish income tax rates.

Committee convener Jenny Marra says National Audit Office Comptroller and Auditor General Sir Amyas Morse will not be giving evidence as he was caught up in the lockdown at Westminster last night.

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The Public Audit Committee will take evidence on the comptroller and auditor general's report entitled "The Administration of the Scottish Rate of Income Tax 2015-16".

MSP will quiz: 

• Auditor General for Scotland Caroline Gardner
• National Audit Office director Steven Corbishley

Public Audit Committee convener Jenny Marra says she is sure all members will wish to join her in sending  condolences to all those who lost their lives yesterday.

Ms Marra says there will be a minute's silence at 9.33am as a mark of respect and sympathy.