Examination of Witnesses (Questions 140
WEDNESDAY 13 MARCH 2002
140.Use tax advisers and agents. Why
do you think that percentage is so high?
(Mr Whiting) Of that half I believe it breaks down
roughly to about 80 per cent being people with their own businessself
employedand 20 per cent essentially employed people. The
80 per cent clearly have quite involved affairs if they are also
managing a business and running businesses and need some assistance
with that, but I think what you have there is 4.1 or 4.2 million
people who feel, for a variety of reasons, that they want help
with their tax affairs which can range from, "I have better
things to do with my time, please would you deal with it on my
behalf?", down to "I cannot understand it, would you
help?", through to, "I need some practical planning
advice; what pension contributions should I make", down to,
"Capital gains tax is simply impossible; I give up; could
you help?". So there is a terrific variety of reasons. Many
of them come back to, "I need an adviser to help me cope
with my responsibilities".
141. You say in your submission in what is rather
a useful appendix that you commend the Working Together system
and the Revenue for their performance in that, but then you go
on to say that you blame the unpredictability of the system for
a lot of the difficulties that you and your colleagues in the
tax advice world face. Now there is a bit of a contradiction between
those two, is there not?
(Mr Whiting) Yes, it is a fair comment. Working Together
is, of course, something that has not been going throughout self-assessment.
It has been going for a year or so; it is going very well; it
is not going in all parts of the country but it is solving a lot
of the difficulties. One example of a difficulty we face that
we find an irritant is the number of processing errors that can
come up through self-assessment that take time to sort out. The
number of errors can be sometimes quite large and sometimes extremely
small but they take time to sort out, and an initiative such as
Working Together is a good forum for coming together to see if
we can find out why these errors arise and what is the method
of solving them.
142. Do you have any information on the number
of errors that your organisation identifies?
(Mr Whiting) I do not have anything on the number
of errors, no. It would be, I am afraid, just numbers that I could
pluck out. We can go away and research that and see what we can
find to submit to the Committee.
143. Could you? I think that would be helpful
to the Committee. When you were talking then about unpredictability,
were you simply meaning processing errors or was there something
(Mr Whiting) No, not simply processing errors. Processing
errors certainly would be one. It is the enquiry regime of knowingor
notwho is going to get enquiries, when they are going to
come, what the demands are, and various other aspects. Perhaps
one could say tax is unpredictable in that we do not know what
questions we are going to get, when our clients are going to ask
us or what the Inland Revenue is going to ask us, so I suppose
of itself we have to accept a certain amount of unpredictability.
144. So it goes both ways?
(Mr Whiting) Yes.
145. There is another phrase in your evidence
to the Committee in which you say that your clients have a "remarkable
tendency to assume that the Revenue is right even if it means
concluding that their agent is wrong", which is a bit astonishing
if half the people have agents. Why do you think that is the case?
It seems counter-productive.
(Mr Whiting) I completely agree. It is counter-intuitive
because we would like to say that our clients should be so impressed
with our service and abilities they automatically assume we are
right. Sadly that is not the case. I personally have had clients
who get very irate when something comes from the Revenue that
shows my calculations of their tax bill have been a few pounds
out. They say to me, "Why is this? You must have got it wrong".
Later, it is discovered that it is due to a small Revenue rounding
error or, in probably one of the early classics, the Revenue entering
£400 as £40,000 because they put the decimal point in
the wrong place, which obviously led to a slightly larger error.
But there isand perhaps we should be pleaseda great
belief that the Inland Revenue is always right because it comes
out on official paper, and I would say that one of the great messages
that I would like to get over to taxpayers in general, and especially
the 28 or 29 million who are not represented, is that the Revenue
are not always right and that, for example, they should take a
healthy interest in the tax coding notice that governs the PAYE
because too many of those are wrong. Most people, however, automatically
assume that something official is right.
146. Mr Whiting you can certainly visit Chateau
Cousins and have a word with my wife!
(Mr Whiting) I would be pleased to do so.
147. The Inland Revenue, when they were speaking
to us, said thatroughly speakingthey got about 45
per cent of returns back by September 30, another 45 per cent
by January 31, and another 10 per cent in dribbles until about
(Mr Whiting) Or later.
148. Yes. Do you think they are doing enough
to encourage early filing?
(Mr Whiting) I think there is more that can be done.
There is still a residual fear amongst taxpayers that, if they
file early, there is a greater chance of their return being picked
for enquiry, so there is a little bit more to be done there. It
would obviously be a trite comment to say that perhaps there should
be a little more incentive. The Revenue have a period for enquiry
and maybe, if that ran from the time you filed, that might just
encourage the earlier filing that in many ways would help us all.
You point to the near 10 per cent who do not make 31 January deadline
at allthat is something we have argued for a long time
needs some proper looking at as to why that is. There could be
many reasonscomplexity of the system, fear of the system,
ostrich attitudeall sorts of reasonsbut that to
us is a matter of some concern.
149. You mentioned in your evidence that some
people do not file early because they think there is a bigger
chance of them being picked out and looked at if they do file,
and when this was put to the Inland Revenue they said that was
not true at all and that the opposite was the case. They said
they were more likely to score highly against people who file
late and pull them out for scrutiny. So how could they get that
message across because obviously it is a misconception?
(Mr Whiting) It is. For example, if you look at the
advertising campaign that they have done, my personal view is
that was a little misdirected because all that did was remind
us about 31 January. It would be perhaps better to concentrate
on, "The sooner you get your return in, the sooner we will
have dealt with your affairs and it is ended", or something
along those lines. It is a psychological issue but there is some
work to be done. Maybe it could be as simple as a note in with
the tax returns when they are sent out, but certainly a move to
change the enquiry window would help.
(Ms Self) In addition to that, a lot of unrepresented
taxpayers believe there is a deadline of 30 September and a deadline
of 31 January and that there is almost no point in submitting
in between. They do not realise that the Revenue will still do
their best to calculate your tax for you even if you happen to
miss 30 September. That could be communicated better.
(Mr Whiting) Yes. That is a good point.
150. Have you spoken to them about this as an
(Mr Whiting) Yes. We talked to them in the early days
before self-assessment came in; we continued to work with them
through the Consultative Committee on Self-assessment and, increasingly,
this comes up through the Working Together initiative.
151. What have they said when you brought this
(Mr Whiting) Largely that they are thinking about
it and they are interested in encouraging earlier filing, so we
return to Mr Plaskitt's commentwe wait to see.
The Committee suspended from 5.26 pm to 5.36
pm for a division in the House.
152. Can we move on to electronic filing? You
said in your memorandum that experience of the electronic lodgement
system and of filing by Internet has "not been wholly satisfactory
for agents". Why is that so?
(Mr Whiting) I personally was heavily involved in
consultations on the electronic lodgement system. Of course, I
have also experimented with the filing by Internet. I think the
reason why we would say it has not been good for agents is, certainly
looking at the electronic lodgement system
153. Was that mainly for corporation tax?
(Mr Whiting) No, all for income tax. So far corporation
tax has not been in either system other than a very early bit
of experimentation. Electronic lodgement required quite a bit
of effort by agents, additional software purchases and additional
procedures in place to enable filing electronically. The savings
as we perceived them were all on the Revenue's side. It was a
worthwhile system to try but we remained disappointed that there
was no sharing of benefits, shall we say. As regards filing by
Internet, that frankly seems to be the way forward now. Initially,
of course, you and I as individuals could file by Internet but
I as an agent was not allowed to register to file your return.
It is only recently that that has come into play, so that in itself
has been disappointing in that it took us a little while to convince
the Revenue that, being realistic, if you wanted returns filed
electronicallywhich has to be the way forwardthen
the greatest chance of getting a significant number filed electronically
is to make it easy for the agents to do it, because the vast majority
of agents are already doing their returns electronically.
154. What exactly was the complication as far
as agents were concerned, given that they were already Internet-literate?
Why was it especially difficult?
(Mr Whiting) If you go back to electronic lodgement
it just required additional procedures. To give you an example,
one still had to print out the return, have it signed by the taxpayer
on paper, and only then were you allowed to submit the electronic
version. Naturally, in many cases you would look at it and think,
"If I have to get the taxpayer to sign the paper copy, frankly
the route is that I will send it to the taxpayer and also enclose
an envelope for the taxpayer to send it on to the Inland Revenue".
Why should I wait for it to come back and then electronically
file? So there is a little bit of streamlining in procedures that
needs to be done there. For filing by Internet, that does look
promising but the initial system was not for agents in that it
was not possible to file many types of more complex returns which
tend to be the ones done by agents electronically. I think we
would say that is the way forward but it requires quite a bit
of will really to make it work, and to share the benefits that
155. Is that the main message you would give
in terms of improving the systemthat the benefits are to
(Mr Whiting) Yes. We would like to see a wholehearted
embracing of electronic filing and, in terms of sharing the benefits,
things such as good electronic communications between ourselves
and the Inland Revenue: access to taxpayers' statements, for example,
that the Revenue hold, which is often a source of disagreement
and irritation and confusion. If we could see those and see what
the Revenue holds then that could be useful. Going back to earlier
comments about the unexpected, we would like to see where the
Revenue are in their processing because that can often be a problem
in that we just do not know where the return has been processed.
"Where have you got to? Have we not heard from you because
you have not processed or are we not going to hear from you?"knowing
more on how that is done would be helpful.
156. They have made changes from the original
scheme. Have they not overcome some of those problems?
(Mr Whiting) They have, and basically it is now a
more robust system. One of the disappointments with filing by
Internet is that it, I think, got launched before it was ready
and therefore got off to a bad start with too many peoplenot
represented people but unrepresented taxpayershaving difficulties
with it and being put off by it so it got a bad press, and I think
that is terribly disappointing because we would all say that is
the way forward and there is a certain hurdle to get over to recover
some of the lost ground.
Chairman: Let us turn, now, to corporation
157. Are there Quick Wins to be had here?
(Ms Self) We have again submitted a list of some ideas
on corporation tax.
158. What are the key things you want done?
(Ms Self) I think the one that comes to mind are expensive
cars. Where the limit for expensive cars is £12,000 companies
have to submit a separate computation for each individual car
with very little net revenue gain. There are also some frankly
ludicrous rules on shared vans, where the details of the computation
outweigh any potential revenue gain in cases where a company has
a van which is provided to more than one employee and you have
to calculate the amount relevant to each of them. Industrial buildings
allowances is also a case in point but they are more to do with
the corporate tax system as a whole rather than corporate tax
159. In general, however, would you say that
the implementation of corporation tax self-assessment has gone
(Ms Self) In general, yes, because it was a relatively
straightforward progression from the previous pay and file system
and there was not as much of a change for companies. The most
significant change for companies relates to the quarterly instalment
system which applies to larger companies.