Examination of Witnesses(Questions 20-39)
SIR NICHOLAS
MONTAGU KCB, MR
DAVID HARTNETT
AND MR
STEPHEN BANYARD
MONDAY 20 MAY 2002
20. Is that regardless of circumstances altogether?
They have all been sent notices.
(Sir Nicholas Montagu) Yes; indeed. Equally, this
year for the first time, we have flagged up very specifically,
if you think you should not have got this penalty notice or you
don't know why you have, give your local tax office a ring.
21. Towards the end of last month, I received
a letter from the tax office following the sending off of my tax
return which I sent off just before the due date by First Class
post. At the end of April I got a letter from your group in Cardiff
which was a late tax return penalty notice. It says, "Notice
of Determination of Penalty for Late Tax Return for the Tax Year
ended 5 April 2001". You quite rightly said at the last meeting
that of course you could not rely on the post and if the post
was late it was your fault. So I was not entirely surprised to
received this notice, except for one reason. The notice says,
"I did not receive your tax return by the due date so you
are liable to a penalty. Under section 8 or 8(a), as extended
by section 12 of the Taxes Management Act 1970 you were required
to send in a tax return for the tax year ended 5 April 2001 but
I did not receive it by the due date. As a result the penalty
imposed on you under section 93 (2) of the Taxes Management Act
1970 is £0.00", which did sound like a big penalty and
I looked over to see how I should pay this. It says, "The
penalty is due for payment 30 days after the date of this notice".
I am happy to say I still have six days to pay you £0.00;
thank you very much for that.
(Sir Nicholas Montagu) You have certainly done so
successfully so far.
22. You do warn me that if I pay late, interest
is charged on this amount. I am wondering when and if you are
going to send me a reminder because I am refusing to pay this
penalty and I am expecting that I will get a reminder shortly
to tell me that I must pay the penalty of £0.00 and if not
you are probably going to take me to court.
(Sir Nicholas Montagu) I think the way you are going
you will probably get a knock on the door at dawn from the heavy
mob working for the special compliance office.
23. This is what I am worried about. I wonder
not only whether I am going to get a knock on the door from the
heavy mob, but how many other people are also going to get a knock
on the door.
(Sir Nicholas Montagu) To go back to the point about
penalties, I have to ask you this: are you quite happy for me
to discuss your tax affairs with you in this Committee?
24. I am perfectly happy and I am sure what
you want to reveal is the reason why I have a penalty of £0.00
which I am happy to say is because I overpaid my tax, rather than
underpaid.
(Sir Nicholas Montagu) Exactly. As I said to the Committee
on previous occasions, the normal penalty is £100, but the
maximum penalty is the amount actually due to us. If somebody
has overpaid or has given us a payment on account which extinguished
the liability or has a liability of less than £100, that
would be reflected in the penalty. What you have is a computer
generated notice.
25. I am sure it is computer generated; I am
sure they are all computer generated.
(Sir Nicholas Montagu) No doubt when we extend the
customised portal, whose virtues I was extolling to you last time,
it will say, "Thanks, Mr Rendel, you're a whizz taxpayer:
be as good next year", but we ain't there quite yet.
26. Not only are you not quite there yet, but
you are apparently sending out payment notices for £0.00.
I do not know how many people you are sending them to, but I do
wonder if you know how many people you are sending them to.
(Sir Nicholas Montagu) No, I do not. What we are doing
is sending out something to tell people like you that we got your
tax return late. You are okay. Other people are not. You say you
had overpaid. Maybe you will not have overpaid next year. What
we are trying to do is to encourage you to think about it and
maybe, bearing in mind Consignia's performance, on which it is
of course not for me to comment, to get your cheque in the post
to us on 24 January next year.
27. It is interesting though that you do not
know how many of these penalty notices have been sent out. It
does seem to me that the Inland Revenue is wasting a considerable
amount of money sending out notices to people and charging them
£0.00 and in particular, if I do not pay it, I am wondering
whether you are going to send me a reminder, because if you do
send me a reminder that is going to cost twice as much. The refund
payment came to me two months earlier. You sent me the money towards
the end of February which I claimed on my form. You must have
had the form within a day or two of the due date, it having been
delayed in the post. You sent me the refund almost straight away
and yet continued to charge me a penalty of £0.00 two months
later. That seems to me a considerable waste of your money and
I am surprised you do not know how many people are sent this.
May I suggest that if you do not know or your department does
not, then you ought to look into this because frankly I think
you are wasting an awful lot of money on this, and it is no doubt
of some concern to some of the people. I was able to understand
what had happened pretty well immediately, but maybe some people
would be concerned to receive a penalty notice like this and think
they are genuinely due to pay something even if it says £0.00.
(Sir Nicholas Montagu) I think you underestimate the
intelligence of your fellow taxpayers.
28. Maybe I do, but I would suggest that it
might be sensible to have a simple line in your computer programme
which says, "If the penalty is £0.00 don't be so silly
as to send out a form claiming it". It just needs one line
in the computer programme.
(Sir Nicholas Montagu) The penalty notices went out
later than usual this year, which may be why you noticed that
time lag. The plain fact is we did not get your tax return on
time. We should like you to be a compliant taxpayer next year
and let us have it on time. Whether you had to pay this year or
not is in that sense neither here not there.
29. If you are seriously using that as an excuse,
may I suggest it would be a lot better if you were to send out
a notice saying "Although you were actually an overpayer
and therefore there is no penalty due, please note that your form
did not actually reach us until after the due date". It must
be very simple to do a letter of that sort.
(Sir Nicholas Montagu) I have to say that you delude
yourself if you think that anything of that kind is simple when
you are dealing with a system which has to cope with nine million
taxpayers. I am sure that were I here in five years' time, which
I shall not be, answering questions from you, who may or may not
be here, we would be having a very different sort of conversation
because we will be talking about much more individualised portals
of the sort that we talked about last time. At the moment we are
talking about systems which are in the factual rather than the
evaluative sense gross. We deal with nine million people from
whom we expect self-assessment returns on time.
30. I have to say to you that I have written
computer programmes myself in the past and to write a line in
there which says, "If penalty equals zero then do this other
form of letter", is really a very simple computer programme
change to make. I really cannot believe that it is going to take
your computer people that much effort to put in a line of that
sort.
(Sir Nicholas Montagu) I should be very happy for
you to come up to Telford and show my computer people how to do
it. Dead seriously. The computer environment for self-assessment,
the so-called CESA system, is pretty inflexible. Ever since I
arrived at the Revenue, I have been making a nuisance of myself
about much more customised statements of account and it is extraordinarily
difficult to change the system. We keep on trying and we shall
get better, but for the moment I would urge you to pay us on time
rather than hold out hope for a customised letter next year.
31. I paid you not only on time, I paid you
early, may I remind you.
(Sir Nicholas Montagu) Let us have your return on
time. I am delighted you paid us on time. Keep that up.
32. I paid you too much.
(Sir Nicholas Montagu) Keep that up too please.
33. I have another case which is slightly more
worrying, which is one of my constituents, who last year was told
that, as a result of having retired and no longer having the form
of income that he had before, a tax form would no longer be needed.
He was nevertheless sent a tax form last year and then he was
sent a second tax form as a reminder after 5 April 2002. When
he phoned the helpline to say that in fact he had been told he
would not need a tax form this year and why was he being asked
to fill it in, he was told the simplest way to get over the problem
would be to fill it in, even though he had been previously told
he did not need to, and send it in. So he did fill it in and send
it in, as a result of which he is now being charged a penalty
for not having sent it in on time. He was not actually owing any
tax, so he does not have to pay any tax, but he is nevertheless
being charged a penalty for having done what he was told to do
in order to try to overcome this blip in the system where he had
been sent a form when he should not have been.
(Sir Nicholas Montagu) Did you say he was being charged
a penalty?
34. Yes, he is being charged a penalty for late
payment.
(Sir Nicholas Montagu) No, he will not have been charged
a penalty. You said he had no tax to pay. It follows from what
I said to you a few minutes ago that if his tax liability is nil,
his penalty is nil. In the case you mention, I can only apologise
to your constituent. We do get this wrong from time to time. What
we have done this year is to analyse the most frequent causes
of error on our part. We are trying to clean up our database maintenance.
We know that in some cases, when people have told us they do not
need to complete a return and we have confirmed that they do not
need to, we have not kept our records straight or something has
gone wrong and they get it. I apologise. That is absolutely a
fair cop, guv.
35. He has been charged a penalty at present
of £100; presumably because nobody has yet calculated how
much tax he owes. He has sent in his form but currently he is
being charged a penalty of £100.
(Sir Nicholas Montagu) If he gets in touch with his
local office, they should be able to sort it. If not, please write
to me and I will.
36. May I come back now to something the Chairman
was asking about on page R19 of the report? He was talking to
you about the overpayments and underpayments which are being claimed
for the year where some of the data is missing. A lot more has
been claimed in overpaid tax, £15.1 million, than £2
million, which has been offered up in underpaid tax, in spite
of the fact that a little higher up that paragraph 4.5, it talks
about the 1.04 million records with no pay or tax details would
have been cleared automatically had the information been available.
In other words, these are all ones which you expected to have
been correct payments of tax.
(Sir Nicholas Montagu) May I correct you? What Sir
John is saying in paragraph 4.5 is that on the basis of the responses
received the underpaid tax totals £2 million and overpaid
tax £15.1 million. These are not actual payments which have
been made. What these do, I think quite interestingly, is to qualify
the earlier figures which we agreed with the Comptroller and Auditor
General on the basis of our estimates then and our internal audit
survey. Overpaid tax looked like being £22 million. What
the actual analysis of the replies suggests is that it is smaller
and that underpaid tax is also much smaller in toto.
37. What you are saying is that this is the
whole 1.04 million which amounts to a total of overpaid tax.
(Sir Nicholas Montagu) Yes, that is the projection
from it.
38. How much of that have you actually received
in total? You said you have 160,000 responses out of 1.04 million.
(Sir Nicholas Montagu) We have repaid £1.54 million
to 14,000 people.
39. So what you are now saying is that of the
other 900,000 people or so for whom you have no records, you think
that they are owed another £13.5 million. Your current estimate
is that they are owed another £13.5 million.
(Sir Nicholas Montagu) Yes, it looks as though the
overpayments are in that region.
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