Select Committee on Treasury Minutes of Evidence

Examination of Witnesses (Questions 40 - 59)



  40. When you say you have increased their risk score, what does that mean exactly?
  (Mr Banyard) When we have received all the Self-Assessment returns, we perform an analysis on all of them to see which ones of them present greatest risk, in terms of understating the income. And one of the factors we have found, that is associated with risk, is that people who file late also have a greater chance of underdeclaring their income.


  41. Sorry, may I interject, just on that particular point. You did also give us some supplementary information, yesterday, I think, to the Committee, about the proportion of returns that are filed on time, and I wonder if we could just touch on that. As I understand your letter, you have said, to give a more realistic view of performance, you have looked at the basis of the figures, in essence, you have rebased them; and it so happens that your result comes out at 90.6 when the target was 90.5, for filed on time, and comes out at 96.4 for the ones filed within 12 months when the target was, in fact, 96.4?
  (Mr Banyard) I think the main thing is, from the run of the figures, if you look at column G, which is the figures on the original basis, whether you look at that for the new basis, the main result is we have effected an improvement, improvement is there on either basis. But what we did also was to look at the way we defined this, to see whether we were being realistic in the figure that we were declaring, and we have talked to our own internal audit, we have exposed it openly to you, and we have rebased the figures slightly; it makes a small difference. But the main conclusion I draw from those figures is that we have reversed a four-year downward trend, and we have some indicators of what we can use in later years to encourage better filing.

  42. It must be good news that you have reversed the downward trend, but we are bound to observe that the rebasing of the figures has brought them incredibly close to the original target?
  (Mr Banyard) It means we have hit our target, but I am confident that the rebased figures are realistic.

Mr Cousins

  43. I just wanted to follow up this very interesting issue of risk scores. Does everyone have a risk score?
  (Mr Banyard) Not in the sense that we attach a number to them, but what we do is, when the information from your Self-Assessment tax return is received, we want to investigate only those cases where we think tax is at risk, we do not want to worry people, the overwhelming majority of people, who comply. So we try to see which cases are most at risk of being non-compliant; we do that by looking at the figures that people have declared themselves, we add into that data from third-party information that we receive, and then we have—

  44. Third-party information?
  (Mr Banyard) Bank and building society interest figures. And then we have our own local risk and research teams which add in local information, and from that we make a judgement on which cases are most at risk, and therefore to which ones we should devote our enquiry resources.

  45. So these risk scores, or the people who have risk scores, are they generated largely by computer, electronically, or are they generated by, as it were, individual assessment, by your staff?
  (Mr Banyard) Initially, the computer looks at the data that is on the Self-Assessment return, and, from our past experience in investigations, predicts those cases which are more likely to be at risk. We then feed into that third-party information, and we then also feed in local information, and from that our staff make a judgement on which cases they best enquire into. The aim of this is to make sure that we investigate the cases that should be investigated and leave people alone when they are compliant.

  46. How many people have risk scores?
  (Mr Banyard) I am not sure, I am looking at my colleagues, as to whether we actually attach a number to people so much as we do a risk analysis and identify the most risky cases. I do not think we attach a score to people, per se.

  47. So when you say a risk score, you do not actually mean a score, you mean they are either risky or not risky?
  (Mr Banyard) There are degrees of risk, are there not, and it is that degree of risk.

  48. How many people do you regard as having a degree of risk; how many cases?
  (Mr Banyard) We look at the population as a whole, we score the tax return, not the person, and the risk score is—

  49. We have dealt with the risk score, it is not a score. I am asking how many cases are risk scores; how many people are in this category of being deemed at risk?
  (Mr Banyard) It varies across the population as a whole, and it depends where you see the level; it is smallest amongst pensioner groups.

  50. Yes. How many?
  (Mr Banyard) I have not got the number, in terms of whole numbers.

  51. Is it millions?
  (Mr Banyard) A proportion of the community has a risk of underdeclaring their income.


  52. But what is that proportion?
  (Mr Banyard) It depends on groups. A pensioner group, for example, we would estimate, there is a 2 per cent chance of their underdeclaring. And I would not want you to understand, from that, that we assume automatically that pensioners . . . Perhaps I should explain that we do a random audit each year and we investigate 0.1 per cent of the Self-Assessment population, and from those we can form a picture, proportionately, of where risk lies, and it is from that that we produce the figures.

  Chairman: Alright; well perhaps if there is any more specific information you can supply it afterwards.[6]

Mr Beard

  53. In July 2000 you introduced a system for filing tax returns on the Internet, and, in the first year, you estimated that there were would be 350,000 people using it; and, in fact, 39,000 used it, a big gap. Can you explain it? The same was true last year as well.
  (Mr Banyard) Internet projections are notoriously difficult to do. We did customer research, we looked at trends in the industry and we looked at take-up of Internet services elsewhere, and formed the estimate to the best of our ability. It was meant to be a maximum figure, because we had to size our system so that actually it would cope with the demand.

  54. It was not 10 per cent out, was it, it was nearly ten times out?
  (Mr Banyard) Yes.

  55. So it is a fairly big error?
  (Mr Banyard) It is a very difficult area to make projections in; it is a territory where it is very difficult to predict, and other people have also either underpredicted or overpredicted the proportion of people who take up.

  56. But you predicted that there would be very big advantages to people who were filing by Internet; do they not trust your account of things?
  (Mr Banyard) We have found slow take-up of the Internet service. We have talked to people and done research with people who have used it, and, as a result of that, we will be introducing changes this coming year, as in fact we did in the past year, to improve the service, to try to address areas where people wanted us to make it easier, and introduce them. So, for example, next year, we will be making the service simpler to use and we will be introducing more facilities to it, so that it is more useful to people. People had some difficulty with the registration process, and we are streamlining that for them next year; we are also simplifying the return itself, so that it will be done on a question and answer basis, so that if you do not need to use part of the return you answer a question and it will take you through to the next part. In those ways, we hope to make the service more useful to people and that the take-up then will increase. Perhaps I should say that, although the take-up of the Internet service itself was 39,000 in the first year, 75,000 in the second, we also have an Electronic Lodgement Service, which 350,000 people use, and if you add the two together fully 5 per cent of our Self-Assessment taxpayers—

  57. I am sorry, I missed that?
  (Mr Banyard) It is an Electronic Lodgement Service. It is a different way of submitting your return electronically, but it is not over the Internet.

  58. What does it mean; what is involved in it?
  (Mr Banyard) It is a commercial service, where you submit your file electronically, agents, in the main, use it, and you do not have to send us paper, you send it on 'e', but it is not an Internet service. If you add that into the Internet service, about 5 per cent of our taxpayers are coming in electronically.

  59. When you said part of the difficulty was through registration, what is involved in registering, what is that process?
  (Mr Banyard) The process really is around security, but in the coming year we will be writing to all of our unrepresented taxpayers in the spring, and we will be giving them a password, so that if they want to have a go at the Internet service they can log on, use their password and submit the return, in one go. Last year, you had to wait, you had to send off for your password and the password came back, and then when you registered there were one or two steps to go through. This year, we are cutting through all that, and it will be a very much simpler process.

6   See Ev. 22, para 2. Back

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