INLAND REVENUE: EMPLOYER COMPLIANCE REVIEWS
MINIMISING THE
ADMINISTRATIVE BURDEN
ON EMPLOYERS
47. In April 1994, the Department began merging PAYE
reviews and Schedule E reviews into a single combined review.[51]
The Department were asked why they planned to wait until the merger
was complete in 1999-2000 before considering whether it was achieving
its objective of reducing the burden on employers.[52]
They replied that, while there had been a certain amount of monitoring
of the merger, they did not yet have sufficient data to validate
one way of working as against another. They were clear, however,
that combined working would stop the irritation for employers
of having two different sets of officials going over their books
within a short time of one another.
48. When asked why 44 per cent of tax agents surveyed
by the National Audit Office thought that liaison between them
and the Contributions Agency was ineffective,[53]
the Department considered that this reflected the situation where
an initial visit by the Agency prompted a second visit by the
Department which did not find any unpaid tax liability. It was
for this reason that a crucial part of joint working with the
Agency was educating their staff to identify tax irregularities.
The Department said that they were aiming to ensure that compliant
employers only got one visit which might be from either the Department
or the Agency.[54]
49. The Committee also asked the Department about
visiting employers jointly with Agency staff.[55]
They explained that joint visits were made by Units where it was
felt that this would be worthwhile.[56]
However, because of the size of the businesses being reviewed
it was not generally cost effective and the number of such visits
was very small in proportion to the total number of reviews. The
Department said that it was cost effective for their National
Audit Groups and their counterparts in the Contributions Agency,
the Large Employers Unit, to undertake joint visits and 79 were
due to be completed in 1997-98. The National Audit Groups and
the Agency would be reviewing progress with this initiative and
setting fresh goals for 1998-99.
50. The Department told the Committee that they were
acutely conscious of the perceived burden by employers of separate
efforts by the Contributions Agency and the Inland Revenue.[57]
They had an extremely active programme of joint working, with
37 separate projects, some tripartite with Customs and Excise.[58]
By December 1997, each of their Regional Executive Offices would
have framework documents with the Contributions Agency setting
out the ground rules for liaison and planning of visits. As part
of their joint working initiative they would also be sharing their
computer systems with the Agency on a pilot basis with a view
to wider roll-out if it proved effective.[59]
The Chancellor of the Exchequer has, however, subsequently announced
that the Contributions Agency will be transferred to the Inland
Revenue from April 1999 to establish a single organisation to
deal with both income tax and national insurance, which would
benefit both employers and employees.[60]
51. Generally, Local Employer Compliance Units review
employers in their catchment areas, the main exception being Schedule
E reviews of London employers which are carried out by Units outside
London.[61] The Department
increased staff resources in the Units from 1,000 in 1992-93 to
1,200 in 1996-97.[62]
The Department have not systematically reviewed the relative balance
of employer compliance staff deployed in their ten Regions since
1987-88 and none is planned until 1999-2000.[63]
52. When asked whether this delay was acceptable,
given the importance of equitable coverage and treatment of employers
by each of the ten Regional Executive Offices,[64]
the Department acknowledged that there were inconsistencies between
Regions but thought it was sensible to wait until 1999-2000 when
they expected to be in a period of relative stability following
changes both in the Department and in their employer compliance
arrangements.[65] By
this time, too, they would expect to have the information necessary
to inform what could be far reaching decisions about the way employer
compliance staff are deployed, including information about the
number of employers in each Region, the risk attached to different
types of employer, and the time needed to review them.
Conclusions
53. The Department began merging PAYE and Schedule
E reviews in April 1994, but they do not plan to assess the effectiveness
of the new arrangements until 1999-2000 because of lack of data.
It is surprising that, after nearly four years, the Department
do not have sufficient experience of combined working to form
a considered view of its strengths and weaknesses. We believe
an earlier review might have been beneficial.
54. The Government's decision to establish a single
organisation to deal with both income tax and national insurance
contributions offers the opportunity to secure a significant reduction
in the administrative burden on employers. We look to the Department
to continue also to explore the scope for further co-operation
with Customs and Excise.
55. It is unsatisfactory that the Department have
not reviewed the balance of staff across regions for 10 years
and have no plans to do so before 1990-2000. We expect the Department
to ensure that, in future, the deployment of staff is reviewed
more regularly to ensure fair and equal treatment of employers.
51 C&AG's
report (HC 51 of Session 1997-98), paras 1.7, 1.8, 4.16 Back
52 Q70 Back
53 Q78 Back
54 Q80 Back
55 Q79 Back
56 Evidence,
Appendix I, p19 Back
57 Q28 Back
58 Q6
and Evidence, Appendix I, p19 Back
59 Q65 Back
60 Official
Report 17 March 1998, column 1104 Back
61 C&AG's
report (HC 51 of Session 1997-98), para 2.34 Back
62 Evidence,
Appendix I, p19 Back
63 C&AG's
report (HC 51 of Session 1997-98), paras 2.36-2.40 Back
64 Q84 Back
65 Qs
83-85 Back
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