Examination of Witnesses (Questions 40
WEDNESDAY 25 APRIL 2001
MONTAGU CB, MISS
CB, MR JOHN
YARD CBE, MR
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
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Agency to be out of date very often.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suggest that the address data for them are out of date in the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.
(Miss Chant) These are all people in
employment. It is 1.04 million instances which, as Mr Montagu
42. In employment now or were in employment
(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
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.
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
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.
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
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
(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
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
Note: See Evidence, Appendix 1, page 14 (PAC 00-01/182). Back