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. INCOME TAX
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
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
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
"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."
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
occurthe complexity of the tax system being one reasonbut
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 costusually
in the time of agentsto 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.
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
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 clarifiedmany 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 Initiativenow 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 smoothlythat
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.
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.
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
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.
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
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
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 peopleapart from taxpayers themselveswho
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
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 whenunpredictability 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. ABOUT "WORKING
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
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
4. FILING PATTERNS
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 followingalthough
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 riskor 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 Januarybut
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 happensand for reasons already explained at 4.4 above
this may be considered by some agents to be in the client's best
interestshowever, 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
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. LATE FILING
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
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 peoplearound 10 per centfail 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. ISSUE OF
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 Septemberahead
of the 31 January payment dateand 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 softwarea 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 processingperhaps by telephoneas
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 Revenueand 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 circumstancesfor
example when a mistake has affected most or all of an agent's
clientswill 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
taxpayerswhen a form R40 is sent to a Revenue office specialising
in repayment claimsthere 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 systemsfor self-assessment
and for repaymentsare 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 formsfor instance
the R40are 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
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
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,
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
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 ELSand the initial experience of
FBIhas 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
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
See Ev 28. Back