Examination of Witnesses (Questions 260
- 279)
MONDAY 22 OCTOBER 2001
SIR NICHOLAS
MONTAGU KCB, MR
DAVID HARTNETT
AND MR
STEPHEN BANYARD
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.
Chairman
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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