Select Committee on Public Accounts Minutes of Evidence


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?


  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
2000-02001-02 2000-012001-02
Staff in post2,650* 2,650233230
Reviews29,70739,166 282297

  * 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.


  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.


  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.


  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.


  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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