The Inland Revenue has admitted it needs to make its self assessment forms more "customer friendly" and improve accuracy in working out tax liabilities.

But after extensive consultation with the public, the Revenue concluded that "there is nothing fundamentally wrong with the principle of Self Assessment or with the way it was designed, introduced and is currently operating".

The report said taxpayers' main concern was the complexity of these forms, which they found difficult to complete.

But the Revenue added that this was partly because the tax laws in the UK were so complex.

The Revenue said it would be providing clearer forms in future, helping explain further specific points that caused difficulty or uncertainty.

Statement of account forms in particular came in for a barrage of criticism and the Revenue said changes were already in hand to make them easier to understand.

The Revenue said that in its first year "some mistakes did occur and some things did not go to plan".

The consultation showed that as well as mistakes, taxpayers were concerned about the delays getting through to tax offices, breakdowns in internal communications and inconsistency between local offices.

The Revenue said that now tax offices were familiar with the system there should be "fewer errors, greater consistency, reduced delays and better internal communications in the future".

But it added it had invested in staff training and was piloting a "national quality monitoring system" to improve some of these problems,

However, the Revenue remained unyielding when it came to compensating taxpayers for mistakes it had made.

The report said: "There must be a serious error or persistent error in handling a taxpayer's affairs to justify a claim to reimburse the cost the taxpayer incurred putting matters right."

Nick Montagu, chairman of the Board of the Inland Revenue said: "With a change of this magnitude it is not surprising that there are things which call for improvement. We always expected Self Assessment to take a little time to bed down, and that we would need to learn lessons from its first year of operation."

John Whiting, a tax partner at PricewaterhouseCoopers said he welcomed the report but said there was a "touch of complacency" in it.

"It would be nice to see a little more acknowledgement from the Revenue that they could be doing better," he said.

Converted for the new archive on 30 June 2000. Some images and formatting may have been lost in the conversion.