APPENDIX 1
Supplementary memorandum submitted by
the Inland Revenue
Question 119: Could you give us a note about the
structure of this compliance unit and how many people work on
employer compliance and how many work on compliance by individuals?
STRUCTURE
The Department's Employer Compliance activity
is structured around two customer groups:
— Very large employers are the responsibility
of the Large Business Office Employer Compliance teams, based
in 12 locations across the UK. These teams carry out compliance
reviews of those employers with more than 1,000 employees and/or
those with geographically dispersed locations.
— All other employers are the responsibility
of 70 geographically based Area Employer Compliance Units spread
throughout the UK.
| Area Units |
| Large Business Office Teams |
|
| 2000-0 | 2001-02
| 2000-01 | 2001-02
|
| Staff in post | 2,650* |
2,650 | 233 | 230
|
| Reviews | 29,707 | 39,166
| 282 | 297 |
* Estimated average: 2000-01 was the year in which Employer
Compliance was restructured and this resulted in some staff fluctuation.
As part of the restructuring of Employer Compliance following
the merger with Contributions Agency, specialist Employer Compliance
Investigation posts were created in the Area Employer Compliance
Units. These posts were created to reflect the fact that some
Employer Compliance reviews involve substantial, time-consuming
investigative work beyond that normally undertaken. One of the
areas identified specifically as likely to be within the scope
of these staff was collusive employers. Presently there are approximately
195 staff deployed to this specialist work.
REVIEWS
Employer Compliance staff are responsible for ensuring that
employers are complying with their statutory obligations regarding,
tax, NICs, Tax Credits, Statutory Payments and Student Loans.
The Employer Compliance review achieves this in a number of ways
by:
— undertaking a number of standard, mandatory checks
designed to test the veracity of the employer's records (which
are extended should any reveal anything untoward);
— scrutinising the employer's records to identify
entries/anomalies requiring investigation/explanation;
— reviewing more widely the context of the employer's
business and its records, including where appropriate discussion
with the employer and employees;
— having full regard to all relevant information
available; and
— scrutinising in-depth those aspects identified
as areas of risk during the risk assessment.
MANDATORY CHECKS
INCLUDE CHECKS
ON TAX
CREDITS
Employer fraud and collusive employers are not confined to
Tax Credits. If fraud is present in Tax Credits it is quite likely
to be present in other areas as well. The Employer Compliance
review enables anomalies that may be indicative of fraud/collusion
to be identified and investigated.
RISK ASSESSMENT
Cases for review are selected in two ways. A small but statistically
valid sample (around 4 per cent) is selected at random. The remainder
are selected following risk analysis performed at both national
and local level. Where an employer has been authorised to pay
Tax Credits this will be a feature of the risk analysis. The degree
of risk presented by a particular employer will have regard to
all factors relating to the employer and the weighting given to
Tax Credits will vary from case to case.
INDIVIDUALS
The Inland Revenue tackles non-compliance by individual applicants
through central units within the Tax Credit Offices in Preston
and Northern Ireland, called the Compliance Co-ordination Units
and through around 30 teams of investigators in local offices
across the UK.
The Compliance Co-ordination Units are staffed by about 240
people, most of whom carry out risk analysis and support functions,
such as preparing information packages for investigators and calculating
revised awards where non compliance has been found. About 25 people
in these units carry out enquiries where face to face contact
is not necessary.
The 30 local office teams have in total 260 investigators.
They carry out enquiries where face to face contact with the applicant
is necessary, for example where it appears that the applicant
has not disclosed the existence of a partner or where a self-employed
applicant appears to have understated their income.
Inland Revenue
June 2002
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