Select Committee on Treasury Minutes of Evidence

Memorandum submitted by The Chartered Institute of Taxation


The Chartered Institute of Taxation

  1.1  The Chartered Institute of Taxation (CIOT) is pleased to be able to contribute to the Treasury Sub-Committee's consideration of the Self-Assessment systems. We have made submissions to the Sub-Committee for their earlier studies of aspects of the system and also had the opportunity to give oral evidence, which we would be pleased to do again to amplify this brief memorandum.


  2.1  The CIOT has always regarded self-assessment (SA) as a necessary modernisation of the tax system. From its inception, and then from its introduction over five years ago, we have been involved in consultations, working groups, and research on its operation. In particular, one of our recent research projects looked, in collaboration with the Inland Revenue, at how the Enquiry system was progressing.

The burdens of Self-Assessment

  2.2  It is inevitable that SA puts greater burdens on taxpayers and their advisers than was the case with the old system. Contrary to popular belief, the introduction of SA did not produce a boom for advisers with a flood of taxpayers seeking tax advice. Our members' experience is that in fact they have had to invest a good deal of time and effort into client education and, as we note later, in dealing with issues for which it is difficult to charge a client.

  2.3  As we noted in our submission to the Public Accounts Committee in October last year following the NAO report, we think the time has come for making the system more efficient. Fundamentally, the Inland Revenue (and indeed Government) have a duty to make sure that the administrative burdens of the tax system bear as lightly as possible on taxpayers, employers and advisers.

Late filing penalties

  2.4  We particularly endorse the recommendation of the NAO that the Revenue develop:

    "their management information to monitor the use of fixed and daily penalties, and tax determinations, and their effectiveness in ensuring that tax returns are filed. Without this information, the Inland Revenue cannot assess whether these incentives are effective or that local offices are using the arrangements properly."

  2.5  We welcome the announcement in that report that the Revenue are now carrying out research into patterns of taxpayer behaviour and the reasons why returns are not filed on time. It is a telling commentary on SA that the proportion of taxpayers who missed the filing deadline rose in each of the first four years of SA (see the NAO report, recording the Inland Revenue's own figures). We look forward to the results of that research with interest.

  2.6  We have long argued that there is a need for a serious review of the reasons for missed filing deadlines. Until it is understood why taxpayers fail to file on time, any action to improve filing behaviour could be mis-targeted. Advertising campaigns to alert taxpayers to the filing deadline may help if ignorance of the date is the main reason for late filing. If instead it is, as we suspect, a combination of reasons including the complexity of the forms and difficulty of collecting information in certain areas, then other actions are indicated.

  2.7  We continue to press for simplification of the tax system. To highlight some relatively easy changes that, inter alia, would have a beneficial effect on SA, we submitted a paper on "Personal Tax Quick Wins" to the Inland Revenue last summer.

Problems for the elderly

  2.8  We also believe it is necessary to reduce the impact of self-assessment on certain sectors of society such as the elderly. Our Low Incomes Tax Reform Group (who are making their own submission to this review) has long advocated removal from self-assessment for those on the lowest incomes. It seems a farce to send a long self-assessment form to an 85-year old widow with two sources of income totalling £7,000 per annum but we understand that this is what happens if you have "the wrong sort of income".

A simpler SA return?

  2.9  We believe that there is scope for developing a simpler return form for some taxpayers, including the elderly. Its development could be linked with the returns that will be necessary for the forthcoming group of New Tax Credit applicants in 2003 (Government estimate of potential applicants, 6 million), of which pensioners will be just one type.

  2.10  We had hoped that such a simplified return might also be linked with the forthcoming means tested pension credit (Government estimate of potential applicants 5.6 to 6 million). Recent debate in the House of Lords has also indicated that:

    "According to the Government's own long-term projections, by the middle of this century as many as 65 per cent of pensioners could be eligible for the pension credit, with all that that implies."[1]

  2.11  However, we understand from recent discussions with the Department of Work and Pensions that, despite comments in the consultation document on pension credit (published in November 2000) that steps would be taken "to reduce the overlap between the two systems", there is not much alignment between tax and tax credits and the pension credit system, the latter having to be based entirely on Social Security law because of the link with MIG and Housing and Council Tax Benefit. It appears unlikely, therefore, that a joint income tax and means testing form could be used. This seems a pity considering the potential number of applicants and again is despite suggestions in the consultation document that "to improve customer service and increase efficiency in government, the administration of tax and benefits should be brought closer together".

  2.12  Even without the alignment of tax and benefits we still strongly advocate a simpler self-assessment system, if only for those whose income is low.


  2.13  Also in our response to the Public Accounts Committee we noted that at Appendix 2 of the NAO report there is a reference to "processing errors" leading to gross errors of the order of £100 million. We still wonder how effective the Revenue are at correcting such errors. Whilst we understand their "process now, check later" principle, we have found, in practice, that this can lead to processing errors.

  2.14  We can understand and accept why these occur—the complexity of the tax system being one reason—but such errors take taxpayers and their advisers time and effort to sort out. We wonder, also, how many unrepresented taxpayers remain subject to uncorrected, unnoticed errors.

  2.15  Another source of frustration for taxpayers and advisers is the "repair" to a SA form that turns out to be unnecessary. Similarly, there are the late filing penalty notices that should not have been issued. The cost—usually in the time of agents—to sort out such matters is out of all proportion to the amounts involved and we would encourage an examination of procedures to reduce the numbers of such instances.

Electronic filing

  2.16  We continue to support the e-enabling of the self-assessment process and hope that all future development of electronic communication and services will recognise the incentives that are necessary to make this a success. We believe that these need to take several forms:

    —  incentives for filing by internet;

    —  incentives for earlier filing, to spread the load;

    —  making it simple so that people will use it.

  2.17  These are not necessarily monetary incentives but ways of sharing the benefits of electronic filing beyond the Inland Revenue. For example, enabling agents to access clients' tax accounts as held by the Inland Revenue would help considerably in confirming payment positions. Anything that encourages earlier filing would help agents and Inland Revenue alike in smoothing the 31 January rushes.

  2.18  We think it is unfortunate that the current Filing By Internet system was started before the system was properly ready and in particular before it was available to agents. Its poor start will mean that extra effort will be necessary to convince taxpayers to use it. The position of the Electronic Lodgement System needs to be clarified—many agents devoted time and money to setting up as ELS filers and are disappointed that their investment may be a very short-term one.

The position of agents

  2.19  Members of the Sub-committee will appreciate that our submission reflects the experience of our members as well as our views of the SA system and its impact on taxpayers generally. As a general observation, we feel that it is important for the smooth running of the whole Self-Assessment system that the role of agents is recognised and that changes made consider the impact on agents as well as taxpayers. In simple terms, SA cannot work without the active cooperation of agents.

  2.20  One of the most pleasing developments in the last two years has been the establishment of the Working Together Initiative—now firmly embraced by the Inland Revenue as part of working practice. This is proving an invaluable way of identifying and trying to solve the many practical issues that arise as the Inland Revenue and taxpayers' agents deal with SA. We warmly applaud the Inland Revenue's high-level support for the Working Together programme and we believe that it has a major part to play in ensuring that SA runs more smoothly—that the "grit in the self-assessment oyster" is eliminated.

  2.21  We have compiled a supplementary paper on the agents' position with SA that amplifies many of the issues identified in the foregoing paragraphs. We will make this available to the Sub-committee as an appendix to this paper.[2]


  3.1  CTSA applies in relation to accounting periods ending on or after 1 July 1999. For many companies, therefore, the first relevant accounting period was the year ended 31 December 1999. Accordingly our members' experience of CTSA is much less than for ITSA but some of the comments we have made about additional burdens through familiarisation with the new system are valid for CTSA as well.

  3.2  The vast majority of companies are small or medium-sized companies. For them, the transition from the Pay and File system to CTSA involved very little change. No significant problems were experienced.

Large companies

  3.3  For large companies, however, the change to CTSA was accompanied by the introduction of the system of Quarterly Instalment Payments (QIPs), under which large companies have to pay the tax for any accounting period in four instalments, two of which fall within the period itself. Practical problems have arisen in estimating taxable profits in advance.

  3.4  The problems are alleviated for groups by the ability to enter into a Group Payment Arrangement with the Revenue. Under such an arrangement, the group's liability can be estimated, and payments can be made, on a group basis. These payments are then allocated to specific companies in the group when the returns are submitted. However, the problems of estimating profits in advance remain.

  3.5  The Revenue have held regular discussions of these problems with the representative bodies under the auspices of the Self-Assessment Consultative Committee (Corporation Tax)—or SACC(CT). A Large Business Forum has also been established to deal generally with the problems associated with the taxation of large businesses.

  3.6  The Revenue have published guidance on QIPs and Group Payment Arrangements in Tax Bulletin Issues 40, 42, 45 and 52 and have promised further guidance on QIPs, following further discussions with large companies and the representative bodies.

  3.7  In summary, the Revenue have made strenuous efforts to make the system work. The problems are inherent in the current year basis for QIPs.

Transfer pricing

  3.8  Under CTSA, transfer pricing adjustments have to be self-assessed. The law makes provision for companies and the Revenue to come to Advance Pricing Agreements (ss 85-87 FA1999). The Revenue have published a detailed Statement of Practice on the operation of this procedure (SP 3/99). Due to limited resources, the Revenue are able to deal with large cases only.

  3.9  Under CTSA, companies are required to keep records to show that their returns are correct and complete. In relation to transfer pricing, the operation of this requirement has caused concern. The Revenue have published guidance in Tax Bulletin Issues 38 and 46. However, the record-keeping requirements are still seen as onerous.

Controlled foreign companies (CFCs)

  3.10  Under CTSA, any apportionable profits of CFCs have to be self-assessed. The legislative changes that were required for CTSA were the subject of detailed consultation and no particular problems have been reported to us.



  1.1  Current taxpayer filing behaviour produces an unacceptable bottleneck for agents prior to the statutory filing date of 31 January. Structural reform of self-assessment is probably needed to change this. At present there is insufficient reason for taxpayers generally not to put off filing their return to the last minute. Any such change needs to be informed by research into the drivers for filing behaviour, in cooperation with the professional bodies.

  1.2  There is scope to consider giving represented taxpayers an extension to the filing deadline to allow their tax agents to make more efficient use of the working year.

  1.3  It is unclear whether the current level of late filing after the statutory filing date would be reduced by better use of existing powers by the Revenue or whether those powers need to change. The Revenue have recently indicated that they intend to use their existing powers more effectively but it is too soon to assess this.

  1.4  Unpredictability and inaccuracies in the processing of paper returns, including incorrect and unnecessary repairs by the Revenue, provoke considerable resentment amongst tax agents because of the way clients react and the subsequent cost of sorting matters out. Tax practitioners would like to see the Revenue assume that any return prepared by an agent is more likely to be right than wrong, even more so where tax return software has clearly been used.

  1.5  For agents, electronic filing by Internet could solve a lot of the problems referred to in 1.4 above. However, in order for Internet filing to become the preferred option for most agents, the system will need to be able to cope with all tax return combinations and this is not yet possible. It should also accept the electronic submission of additional non-statutory information.

  1.6  Even with the Internet filing system up and running, it will take some time to convince tax practitioners that the Revenue really can provide a service that will cope effectively with millions of tax returns.

  1.7  Agents are more likely to be interested in electronic filing if there are other, subsidiary benefits, such as access to their clients' statements of account.


  2.1  In the United Kingdom there are two groups of people—apart from taxpayers themselves—who are uniquely placed to provide informed comment on the objectives, operation and achievements of Self-Assessment. The first are the staff of the Inland Revenue. The second, those tax practitioners who act as agents for some 4.1 million individual taxpayers (out of some nine million in total including one million partnership and trusts) who are within the scope of the Self-Assessment system.

  2.2  The Working Together initiative (see paragraph 3) was born very much out of the practical issues that arose for tax practitioners following the implementation of Income Tax Self-Assessment in April 1996. This paper draws particularly on the information published by Working Together, its public Register of Issues and its quarterly newsletters, available on the Inland Revenue web site in the dedicated Working Together area.

  2.3  Tax practitioners believe that there is considerable scope for improvements in Self-Assessment; however, establishing Working Together has made a real difference and both the Revenue and the professional bodies involved are to be commended for their commitment to this novel approach. It is also important to remember that the behaviour of agents and their clients is influenced as much by their perceptions of the system as by the system itself.

  2.4  It is often the unpredictability of the system that is the primary cause of frustration for tax practitioners, as much as the absolute performance achieved by the Revenue. Clients expect their tax agents to understand the system and tell them what will happen and when—unpredictability makes this very hard to do in practice. And clients have a remarkable tendency to assume that the Revenue is right even if it means concluding that their agent is wrong: inevitably this tends to be a source of friction that can undermine the agent/client relationship.

  2.5  But where agents can be enabled to help their clients cope better (with the self-assessment tax system or otherwise) everyone benefits from what is known as the "multiplier effect" because every tax agent has many clients.


  3.1  Since early 2000 there has been a unique partnership between the Inland Revenue and certain professional bodies whose members are tax agents, namely the Chartered Institute of Taxation (CIOT), Institute of Chartered Accountants in England and Wales, Association of Taxation Technicians, Association of Chartered Certified Accountants, Institute of Chartered Accountants of Scotland and the Northern Ireland CCAB.

  3.2  It was intended to strengthen local liaison between practitioners and Revenue Offices and to improve the operation of the tax system. Through such liaison, it attempts to identify, and wherever possible anticipate, national problems and issues that typically first become visible at local level. Key objectives are to improve two-way communication and provide greater transparency

  3.3  The work is overseen by a Steering Committee comprising representatives of the external partners and senior Revenue representatives including the Deputy Chairman and the Director of Local Services. A small team based in the Revenue Head Office, including one non-Revenue member, supports the work.

  3.4  During 2001 the Inland Revenue decided that Working Together should no longer be considered an initiative but a permanent part of the way the Inland Revenue does business


  4.1  A practical consequence of introducing self-assessment with a single statutory filing date of 31 January after the end of the tax year has been to create the bunching of return filing activity leading up to that date. This has serious consequences for the workloads of tax practitioners involved in this type of work as well as for Revenue staff.

  4.2  There is clearly an incentive to file sooner rather than later for those who are due a repayment. There is also a real benefit in filing earlier, by 30 September, for those employees within self-assessment and whose return shows a self-assessment underpayment of up to £2,000 that can be collected subsequently through their PAYE code. The other reason to file by 30 September is because the Revenue effectively guarantee to calculate any tax due in time for 31 January following—although they will do their best to do this if the return if filed later and in any event will ultimately calculate the tax position whether the taxpayer has calculated it or not.

  4.3  It is debateable just how much effect the 30 September deadline has on those taxpayers who are represented by a tax agent. Many tax agents would be only too happy to file many more returns by 30 September if they were able to obtain the necessary information from their clients in time to do so. Represented taxpayers typically have more complicated tax affairs that tend to militate against early return preparation and filing. For those agents who use tax software to prepare their clients' returns, the advantages of Revenue tax calculation are limited.

  4.4  More importantly, if a tax practitioner is asked by a client whether it makes sense to file earlier than the filing date they may draw attention to various disincentives that are perceived to exist. Prime among these is the perception that earlier filing gives the Inland Revenue a longer "enquiry window" and indeed that it increases the chances of the return being selected for enquiry. Despite Inland Revenue assurances that this is simply not the case, many practitioners simply decide not to take the risk—or in many cases their clients insist they do not.

  4.5  There is an unhelpful confusion surrounding the actual 31 January filing date, which can affect both the exposure to late filing penalties and the enquiry window. Some returns submitted on 1 February are not treated as late. And some returns delivered into Revenue post boxes in the early morning may be treated as received on the day before, a let out that is not available for returns filed electronically. This messy situation has arisen from a combination of administrative pragmatism and case law and the Revenue did issue helpful guidance this year in January—but the position is undesirable.

  4.6  Even without the bunching effect of 31 January, tax practitioners would prefer to be able to make better use of the full year for return preparation work. The 31 January deadline renders February and March practically useless for this type of work. And, depending on their mix of clients and the sources of data needed, work on tax returns may not in practice be able to start until some months after the returns are issued on 6 April each year. A straightforward example is provided by the 5 July deadline for employers to provide information on benefits and expenses to their employees. It is sometimes suggested that (where some information is delayed) agents could spread return work by progressive preparation for filing in stages but in general this is an inefficient and costly approach.

  4.7  It is sometimes suggested that agents exacerbate the last minute bunching of filing activity by deliberately delaying until the last minute the submission of clients' returns that have been prepared earlier. It is not possible to say this never happens—and for reasons already explained at 4.4 above this may be considered by some agents to be in the client's best interests—however, it is not considered to be typical. Virtually all practitioners would welcome any steps that would spread the flow of filing work more evenly over the year and reduce the January bottleneck.

  4.8  No single change to the structure of self-assessment is likely to achieve a significant change in the filing pattern. There is a need to eliminate perceived disadvantages to early filing and perhaps also to offer incentive for not leaving filing to the last possible minute. There is also scope to consider allowing represented taxpayers an extension to the filing deadline, possibly in defined circumstances, to allow the tax practitioners who represent them to make better use of the year. This need not mean changing the 31 January payment date as it could be decoupled from the filing deadline. It is noteworthy that the payment and filing dates are different for corporation tax self-assessment.


  5.1  It is unlikely that the flat rate filing penalty (currently initially £100) alone could ever be a sufficient deterrent to late filing in all cases. It is clearly irrelevant where either a repayment is due, or all the tax owing has been paid by 31 January, as in these cases the penalty is automatically reduced to nil once the return has been processed.

  5.2  The Revenue have recently indicated that they "will make increased and quicker use of Revenue Determinations and daily penalties." [Working Together newsletter WT7, November 2001] for late filing. In that same newsletter, the Revenue also indicated that returns that are filed later than the statutory filing date are considered to present a significant compliance risk. As a result, late filing is now known to be one of the risk factors that determine the selection of cases to be reviewed for any enquiry. All of this may well have an effect on late filing behaviour although it is too soon to tell.

  5.3  We think the existing penalty regime is quite adequate for the Inland Revenue's purposes and we would oppose any extension to it. However, we would suggest that the fact that so many people—around 10 per cent—fail to send their returns in on time suggests that the system is not working perfectly. Rather than increased penalties, we think the first step should be to look hard at the reasons for late filing. That will give guidance to remedial action which could mean, for instance, better education or the controlled easing of filing deadlines referred to at 4.8.


  6.1  There is a widespread perception amongst tax practitioners that far too many incorrect late filing penalties have been issued to date. This is believed to be caused by failures within the Revenue's own systems for handling submitted returns where for some reason the return is not logged as received or is logged with an incorrect submission date. Such incorrect penalties should be distinguished from penalties that are correctly issued but are subsequently reduced to nil once the return is (eventually) processed. But whether strictly incorrect or not, such penalties are another source of friction between agents and their clients.

  6.2  It is understood that efforts are currently being made by the Revenue to reduce significantly and progressively the number of strictly incorrect penalties issued following the 31 January statutory filing date.


  7.1  One of the main concerns is the unpredictability of the time taken to process returns. The background to this is that the Revenue have two published targets for processing returns. They aim to process by mid December those received by 30 September—ahead of the 31 January payment date—and by the end of March, those received later than this but filed by the statutory filing date. Against this background, the time taken to process returns is very variable in practice even though the Revenue's published achievement against both targets is very high.

  7.2  The second point concerns the accuracy of Revenue processing of paper returns and the number of occasions when the Revenue wrongly corrects ("repairs") a submitted return when processing it.

  7.2.1  Returns are repaired essentially as a customer service and as such this would generally be regarded as desirable; however, incorrect repairs take time to be sorted out and tend to be a source of friction between tax agents and their clients as it gives the false impression that the agent has made a mistake. Sometimes corrections are issued that contradict calculated tax calculations in returns submitted by agents using tax software—a circumstance that would tend to suggest that perhaps the return has been processed inaccurately in the first place. This led in the early days of self-assessment to adjustments of trivial amounts. Thankfully, the Revenue have largely eliminated these rounding adjustments but more needs to be done.

  7.2.2  Practitioners would like to see a more evident common sense check by the Revenue when considering making a repair. Such a check would give due weight to the fact that a tax practitioner has prepared the return/used tax software. It is not that mistakes are never made by agents but adopting a presumption that a return prepared by an agent is more likely to be right than wrong would improve matters.

  7.2.3  Most agents would be happy with more informal Revenue contact during processing—perhaps by telephone—as it would help to avoid incorrect return repairs whilst still enabling appropriate repairs to be made as a customer service. Both sides are naturally concerned over whether such contact would constitute the opening of an enquiry by the Revenue—and thus be their only opportunity to do so. But goodwill and common sense should make this manageable.

  7.2.4  The extra costs generated in sorting out incorrect repairs are themselves a source of friction. The taxpayer may or may not have a right to compensation to cover the extra cost under Revenue Code of Practice 1 (COP1) "Putting things right when we make mistakes". Normally such costs first have to be charged by the agent to the client, and paid for, for compensation to be considered. Only in exceptional circumstances—for example when a mistake has affected most or all of an agent's clients—will compensation direct to agents be considered. In practice, actually obtaining payment from a client to cover such extra costs can be difficult and this aspect of COP1 undoubtedly inhibits some valid claims. The Revenue is aware of this concern and undertook to keep the matter under review following the reissue of the code in November 2001.

  7.3  Particular areas of difficulty arising during the processing of returns are:

  7.3.1  Failure to action claims to reduce payments on account contained in the return.

  7.3.2  Failure to action repayments of tax arising from the carry back of reliefs to the previous tax year.

  7.3.3  Failure to take into account additional information provided in the return: when a return is processed, only the fact that such information has been provided is recorded on the Revenue computer system. To access the actual information given the return itself must be examined.

  7.4  Improvements have been made to the Revenue systems that process returns and some of these situations should be handled more automatically in future.


  8.1  Within the self-assessment system, in principle, the Revenue deals with repayment cases no differently from other cases. In particular the same return processing targets apply irrespective of when the return is submitted. In contrast, in most repayment claim cases relating to non-self-assessment taxpayers—when a form R40 is sent to a Revenue office specialising in repayment claims—there is a distinct processing target (95 per cent processed within 20 days).

  8.2  Where a self-assessment repayment case is clearly identified as such to the Revenue when submitted, then, as a customer service, it may be dealt with more speedily but this seems to vary considerably from office to office. This creates another difficult issue for agents as, once again, clients expect them to know what will happen and when, and tax repayments understandably tend to be regarded as particularly important.

  8.3  Information provided when repayments are made is insufficiently detailed if it involves more than one year. This is because current Revenue systems—for self-assessment and for repayments—are unable to produce an automated notification that separately identifies the components for each tax year.

  8.4  As a small point, we would ask that all tax-related forms are available electronically. The Inland Revenue's website is rightly praised and the availability of downloadable self assessment return pages saves agents, taxpayers and Revenue staff considerable time. But not all forms—for instance the R40—are so available.


  9.1  It has long been recognised that statements of account need improvement to make them easier to understand. Despite changes already made, even tax practitioners can still find the more complicated ones hard going.

  9.2  Currently, the full paper statement of account is sent automatically either to the taxpayer or to the agent (but cannot be sent to both), at the option of the taxpayer. In most cases, it goes to the taxpayer in which case the agent receives a clients' accounts information sheet that is not a true copy and does not show interest and penalties charged. The only exception is for those agents who use Electronic Lodgement (ELS) to file their clients' returns. They are able to receive true copy statements electronically and this is considered by those agents to be a real benefit.

  9.3  There would appear to be a strong case for making true copy statements available to both agents and their clients.


  10.1  Electronic filing by Internet (FBI) is likely eventually to become the preferred method for most tax practitioners. Ironically, some of the most compelling reasons for agents to adopt Internet filing stem from perceived shortcomings in the current Revenue procedures for processing and capturing returns. Ultimately electronic filing will enable agents to ensure that their clients' returns are efficiently transmitted directly into the Revenue's self-assessment system immediately they are submitted thus eliminating postal delay, processing delay and inaccurate processing.

  10.2  However, although since late 2001 it has been possible for an agent to file a self-assessment return on behalf of a client, some significant hurdles remain to be overcome if agents are to be persuaded to use e-filing more generally:

  10.2.1  The system must be able to cope with all self-assessment returns no matter how complicated. Agents generally will not want to operate more than one filing system and currently there are some restrictions on FBI. As well as being unable to cope with partnership and trust returns, some individual returns are too complicated eg those requiring more than one set of capital gains schedules. [Working Together newsletter WT7, November 2001].

  10.2.2  There is a general scepticism amongst agents as to the Revenue's ability to operate an efficient and effective Internet filing system for millions of returns notwithstanding that individual Internet filing is up and running successfully.

  10.2.3  The Internet filing system could be made more user friendly for agents both when registering initially and when using the system subsequently. For example, although the system helpfully allows the Revenue automatically to accept returns from the authorised agent, an agent's clients are listed on the system not by name but only their 10 digit Revenue identification number.

  10.2.4  Many agents will want to continue to be able to send additional supporting information with the minimum required for the statutory return: unless such information can be sent electronically with the return this will inhibit the take-up of Internet filing.

  10.3  It will also help to encourage agents if the Revenue are able to offer some added value by providing other electronic services, such as access over the Internet to their clients' statements of account and PAYE coding notices.

  10.4  The Revenue are understood currently to be consulting with external representatives in order to develop the electronic business options for agents.

  10.5  The place of the ELS system in the FBI development needs to be clarified. It needs to be appreciated that a number of practitioners invested time and money to use ELS. The experience of ELS—and the initial experience of FBI—has not been wholly satisfactory for agents. This, we feel, is regrettable: as noted, we think electronic filing is the way forward. It does mean that the push towards e-filing needs to be on the basis of sharing the benefits. It should not be on the basis of compulsory e-filing, as foreshadowed by the Carter report on payroll matters. E-filing should be made attractive so its use simply becomes the way to go.


  11.1  By their very nature, Revenue enquiries into tax returns tend to be a sensitive area. Tensions exist particularly in the following areas:

    11.1.1  Flexibility and cooperation between practitioners and Revenue caseworkers in working a case

    11.1.2  Length of opening letters with requests for information

    11.1.3  Revenue right of access to private information of business taxpayers

    11.1.4  Arrangements for holding meetings with practitioners and their clients in the course of an enquiry

  11.2  In October 2000, the Chartered Institute of Taxation and the Inland Revenue published jointly a collaborative research study Income Tax Self-Assessment Enquiries. The findings clarified the aspects of enquiries that were causing difficulty and set out the options for change identified. Following on from this, the Revenue has carried out follow-up work in consultation with external representative bodies and their own staff. They are expected to publish the outcome of that exercise very shortly.

  11.3  There is a strong belief amongst agents that the nature of Revenue targets on enquiry work distorts Revenue behaviour. There is a perception that insufficient credit is given to Revenue enquiry caseworkers for bringing to a rapid conclusion, with no return amendment, those enquiries where little if anything is found to be wrong with the return. In such cases small settlements with minor adjustments eg a private use adjustment, are sometimes accepted by agents and their clients simply to bring matters to a more rapid conclusion. It is understood that the Revenue are planning to change the nature of targets to take this into account.

Chartered Institute of Taxation

22 February 2002

1   Baroness Turner, State Pension Credit Bill, Committee stage debate 24.1.2002, Col 1592. Back

2   See Ev 28. Back

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