Select Committee on Public Accounts Minutes of Evidence

Examination of Witnesses (Questions 260 - 279)



Mr Williams

  260. Now I have to be polite to you, as I always am. With self assessment are any specific or great difficulties presented to you when dealing with income in kind?
  (Sir Nicholas Montagu) I am not aware of any particular ones.
  (Mr Hartnett) There will always be one, Mr Williams, and that is valuation.

  261. And that is what I am coming on to. That really is of importance, is it not? If you get the valuation wrong someone is getting off with an awful lot of money. I have got a letter down on my desk at the moment from a constituent whose miner's pension went up one penny a week this year and he had to notify that to the Housing Benefit so that they could reduce his benefit by one penny. Valuation is very important when we are dealing with benefits in kind and beneficial value. I have an idiosyncratic interest in five major public housing complexes in which there were approximately 270 units when I started asking questions about them and they have come on several occasions before the Public Accounts Committee to explain what they are doing with the taxpayers' money. Let me give you an example and tell me how you go about assessing the beneficial value. The highest rent being paid is £43,000 for five bedrooms and five living rooms and that, according to the occupant, is not the market value because no-one could afford to pay the market value for these particular properties. How do you determine the tax? I do not want the NAO prompting you, do not look over there.
  (Sir Nicholas Montagu) I can promise you, Mr Williams, you will get a diamond answer from a fully trained Inspector of Taxes, whichever of these two answers.

  262. Tell me how you deal with that situation. They say there is no point in valuing it themselves because no-one can afford to rent. Do you value it?
  (Mr Hartnett) It depends on the circumstance in which the property is provided.

  263. I bet it does.
  (Mr Hartnett) You knew I was going to say that.

  264. I bet it depends on the people as well, does it not?
  (Mr Hartnett) It will depend on a number of things, such as what sort of taxpayer are we talking about.

  Chairman: We do not want to get too much into that perhaps.

  Mr Williams: All I want to know is how it works. It is important to me because of my man with one penny a week who feels he is being treated rather badly. I want to know how many at the other end of the pile are dealt with by you.

  Chairman: Just general principles.

Mr Williams

  265. I do not want to know about individual cases, I am asking you how you would deal with that situation which obviously is new to you despite the fact that it is familiar to us, and that is worrying.
  (Mr Hartnett) I have to say, Mr Williams, that I am really struggling to determine who is providing the property and in what circumstances. I cannot actually lay out general principles until I see what—

  266. We have five occupied Royal Palaces in which the Royal Households live. We have pressed them on tax. I put a question down when Ken Clarke was the Chancellor and was assured that they have to pay tax on the same basis as anyone else, which I assume is market value, but there is no market value for these things.
  (Sir Nicholas Montagu) I am sorry, Mr Williams, I am going to have to invoke the fact that I cannot discuss an individual's tax affairs.

  267. It is not individual.
  (Sir Nicholas Montagu) I am sorry, Mr Williams, I do want to help the Committee but I will not discuss the taxation of the Royal Family.

  268. I am asking what system you use to assess their tax.
  (Sir Nicholas Montagu) I am sorry, Mr Williams, I am not going to answer questions about the taxation of the Royal Family.

  Chairman: I think we are in a bit of a cul de sac here.

Mr Williams

  269. I will follow up in written questions but let me make this point clear: if I am asking about an individual you would have a right to refuse to give information to this Committee but I am asking you about the system you use and how it is operated and if you refuse to give that information to this Committee then you are in contempt of this Committee.
  (Sir Nicholas Montagu) Let me say this, Mr Williams. I would not answer questions about any individual or family.

  270. You are not being asked about individuals.
  (Sir Nicholas Montagu) Or family. What I will say is that the memorandum of understanding on the taxation of the Royal Family is in the public domain and I am not prepared to go beyond that.

  271. In that case why can you not answer questions on it?
  (Sir Nicholas Montagu) Because it is in the public domain and I am not prepared to be more specific than it.

  272. I regard your response as singularly unco-operative and bordering on contempt of the House.
  (Sir Nicholas Montagu) I am sorry you see it in that way, Mr Williams.


  273. Would you like to talk about general systems at all, not talking about the Royal Family? Mr Williams is asking you about the two ends of the scale.
  (Sir Nicholas Montagu) I think the most useful thing, Chairman, would probably be if we reflect on this and let you have a note to the best of our ability.[18]

Mr Williams

  274. I am not talking about the Royal Family incidentally, I am talking about the general Royal Household, the royal civil servants who enjoy all these grace and favour apartments. I am not chasing the Queen's income tax, that is her personal affair, as my income tax is my personal affair.
  (Sir Nicholas Montagu) I will see if we can help by getting Dave to set out the general principles on which taxation works.
  (Mr Hartnett) Mr Williams, it is broadly like this for people in employment. Why are they in the property? Is the property what we might call a simple benefit to them or are they there in some representative capacity in order to carry out their work? If I can move in a slightly different direction, a greenkeeper at a golf club will often be in property provided by the golf club but he will be there to protect, to get up at five o'clock in the morning and do other things, so it is unlikely that the property will be a benefit to him. Then there are quite complex rules which we can happily set out for you to describe how the calculation is actually made. For self-employed people there is no general benefit rule within the tax system, so a self-employed person provided with a property, we would look very carefully at the circumstances in which they received that property. Perhaps the only other one to mention which occurs occasionally is where in a family company maybe a property is provided to a member of the family and we might regard that as a distribution, another technical term. I think beyond that we would have to let you have quite a full note to explain how it works.

  275. Let me have a very full note.
  (Mr Hartnett) Certainly.[19]

  276. How do you deal under self assessment with people with minority languages? I am not speaking of the Welsh, although we are probably one of the smaller minorities actually. In how many languages are the forms and the explanatory notes available?
  (Sir Nicholas Montagu) I do not have the exact figure offhand, again I can let you have this. It is an extremely high priority that all our basic leaflets are available in the major minority languages. In addition, we have access to native speakers of the languages not covered in leaflets. The Committee probably knows that in addition to my revenue responsibilities I am the Permanent Secretary Champion on Diversity and this is clearly a very high personal priority that we make not only our own internal ranks as diverse as possible but the style of service that we provide to the community.[20]

  277. Inevitably with the change in population flows over recent years, probably every few years new languages appear. How are you able to accommodate or identify the need for them?
  (Sir Nicholas Montagu) We would attempt to do so, Mr Williams, by identifying the major communities in an area covered by one of our offices. We would see if we had ourselves a native speaker of that language, if not we would get access to them to do so. For example—if I may say so your example is a very good one—Birmingham has an enormous Somali population and I would be seriously worried if the offices principally serving a district with a large Somali population could not provide somebody to talk to Somali customers in the appropriate language.

  278. I have one area of questioning coming back to the essence in this whole report. Is there any way, Sir John, in which we can tell whether the new system is leading not to a higher amount overall, because that is such a variation in income tax levels and so on? Is there any way of establishing whether the new system is achieving a higher percentage of potential yield than the system that it replaced?
  (Sir John Bourn) Since we did not know what the potential yield was under the previous system we cannot know how it compares with the present system. I think that the way in which you have to look at this is as the report says, and as the Committee's discussion has to consider, which is to focus on a whole series of particular ways of creating improvements in the way in which tax is assessed and tax is collected.

  279. Since we cannot make a retrospective comparison there is no way of telling whether this is a success or not, all we can tell is whether it is improving or not and there have been plenty of questions on that. If we take the minimum figure of the potential yield that is not being obtained each year we have 1.8, which is nine million over the last five years. At the same time we are told that you have, by special means, identified 25 per cent of that and have made administrative savings of half a million a year on the change of system. I estimate that over the five years there is a net less of 4.5 billion of uncollected yield as against the benefits you have obtained. I have lost you, I think.
  (Sir Nicholas Montagu) Yes, I am afraid you have, Mr Williams. I always find your calculation difficult to absorb and relate to the figures that I have signed up to in the Comptroller and Auditor General's Report, I confess.

18   Ev, Appendix 1, p30; and also Q 275. Back

19   Ev, Appendix 1, p30. Back

20   Ev, Appendix 1, p32. Back

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