Select Committee on Public Accounts Minutes of Evidence

Examination of Witnesses (Questions 40 - 59)



  40. So they are all going to get a letter telling them that you think they may have overpaid?
  (Mr Montagu) Yes. They will get a letter telling them what the position is, that theirs are among the records which we have not done any follow-up for for 1997-98 and if they think that they have paid too much or too little tax, and can support this with documentary evidence, then they should get in touch with us.

  41. We know there was a problem when it came to contacting people who might or might not have been affected by the SERPS row because the addresses were thought by the Contributions Agency to be out of date very often. Are you confident that you have good, up to date addresses for all these 1.04 million?
  (Mr Montagu) As far as we know. There is nothing to suggest that the address data for them are out of date in the way that I understand the DSS had difficulty[6].

  (Miss Chant) These are all people in employment. It is 1.04 million instances which, as Mr Montagu has indicated—

  42. In employment now or were in employment in 1997-98?
  (Miss Chant) They were and some of them will still be in employment and still on our records.

  43. You hope.
  (Miss Chant) Three years ago or so there was an employer who held an address for them as well. It is 1.04 million instances where we have cleared the case on the assumption, as we usually find every year, that in some cases we have not gone into a clerical approach to the person because the answer is they will have paid the right tax, but we will check it anyway. The sampling that we found in the work that we did in one of our offices that 87 per cent was, in fact, right is not at all untypical of what we would expect every year.

  44. That 13 per cent, and you gave the figures just now, is still due £22 million and that is quite a lot of money going to somebody if they can go round and claim it.
  (Miss Chant) It is a range. It is a range of what people may have underpaid and what they may have overpaid. On those sorts of figures the typical overpayment would be £74 and the typical underpayment could be £200, it is that sort of range.

  45. Although the total underpayments are very much less than the total overpayments.
  (Miss Chant) On the statistical sampling those are the two broadest—

  46. We are talking about a much larger number of people who have overpaid than underpaid and on average they will get about £74 back.
  (Miss Chant) That could be a typical payment.

  47. Quite a number of people will be owed hundreds of pounds and they will be sent letters to their old address, or whatever address you had for them in 1997-98, and some of them obviously may feel that they have not overpaid, some of them may feel that they have underpaid, and will not be willing to contact you. How are you going to ensure that the letters have got through?
  (Miss Chant) You cannot be certain running the whole of the PAYE system with 20 million a year. You can never be certain. We never do resolve every single case.

  48. Are you going to make an attempt to contact the employer's address?
  (Miss Chant) I will say yes and then just come back to that, also remembering that we may still have their case to look at for the 1997-98 or 1998-99 year as well. The broad point you can take is we will do our utmost to contact every one of those people making the point to them that they may or may not choose to take up because it could be, as it is every year, there is a small overpayment or underpayment or whatever. We are not going to force people to say yes or no.

  49. You are not, for example, going to be sending them by recorded delivery?
  (Mr Montagu) No, we will not be doing that, Mr Rendel. We need to keep this within reasonable proportions. We will write to the individuals. If there is a significant indication that our addresses are no longer up to date we will need then to contemplate action, but I do not at this stage envisage our going to the employers. I think that what we are aiming for is to alert the individual to the fact that their records are as they are and if they want us to take action they should get in touch with us. Can I just also elaborate the figures which Ann gave the Committee, just for the avoidance of any doubt. She quoted, I think, a typical value of overpayment of £74 and underpayment of £228. This is the typical median value, the corresponding average values are rather higher.

Mr Williams

  50. I do not understand your figures. My reading of the figures is there are about 130,000 people left who will have had a wrong payment either in or out. 22 million of that has been overpaid. 130,000, if we take the lot of it as being overpayment, works out at £170 per head, not £74 a head. Where do you get the £74 from?
  (Mr Montagu) That was the median figure, Mr Williams.

  51. Median is not good enough.
  (Mr Montagu) That is why I corrected and amplified. If you are after average figures I can give them to you.

  52. Please do.
  (Mr Montagu) £148 for the average overpayment and £362 for an underpayment are the figures that I have here[7].

  Mr Williams: It is still too low. It still does not add up arithmetically. It is £170 average overpayment on 22 million divided by 130,000.

  Chairman: We will give you a few minutes to look at that.

Mr Steinberg

  53. Mr Rendel has questioned you very extensively on this issue. Very basically it says that in 1997/98 the Inland Revenue eventually decided to close off the records for one million taxpayers without doing the normal checks.
  (Mr Montagu) Yes.

  54. And that you thought that you were going to gain two million pounds by that.
  (Mr Montagu) We thought that it was going to balance out at around the six, seven, eight million point broadly speaking.

  55. In fact what has actually happened is that it has been a net gain for the Exchequer of £18 million.
  (Mr Montagu) Yes. You said "without doing the normal checks". I think that I must qualify that to some extent. Every year we decide as a matter of sensible administration that there are some cases where we do not have pay and tax details and where disproportionate effort would be required in following these up further. That is true across the tax system, across the contributions system.

  56. That is a little bit unfair on the poor bloke who you owe two hundred quid to though, is it not? You would still be coming in for that two hundred quid if he owed it to you.
  (Mr Montagu) If we knew who these people were we would already have been in touch with them. I must make this absolutely clear. These are if you like the cases at the end of the road where we have tried to get pay and tax details, where we have tried to allocate tax and where we have failed. These are the residue of a huge number where we will have identified overpayments and repaid them. What we are doing is not saying, "There is an end of it". What we are saying is that we will not be taking further action because we believe that there will be diminishing returns, though if anything comes to light or if these people get in touch with us, then of course we will re-open our action.

  57. It is all right saying if they get in touch with you, but it is a bit difficult to get in touch with you if they do not know that they have overpaid.
  (Mr Montagu) It is a bit difficult for us to get in touch with them if we do not know—

  58. You are the Inland Revenue. You are the ones that are doing the taxing, so you should know.
  (Mr Montagu) But the point is that these are cases where we have tried to take tracing action to get pay and tax details allocated in an individual's records and where we have been unable to do so.

  59. I will bet a pound to a penny that if they owed you money you would soon be after them.
  (Mr Montagu) We are talking about underpayments here as well as overpayments, Mr Steinberg, as the Comptroller and Auditor General's report makes clear.

6   Note by Witness: Although the records relate to 1997/98, we are issuing the letters from our current database, not from the database as it was then. So where we have been told of a change of address in the intervening period, the letter will go to the new address. Where we know from the record that the address held is not current (because other correspondence has been returned) the case will be listed for a clerical review to obtain the new address (usually by writing to the employer). Back

7   Note: See Evidence, Appendix 1, page 14 (PAC 00-01/182). Back

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