Select Committee on Treasury Minutes of Evidence

Examination of Witnesses (Questions 140 - 159)



  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 business—self employed—and 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 else?
  (Mr Whiting) No, not simply processing errors. Processing errors certainly would be one. It is the enquiry regime of knowing—or not—who 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 is—and perhaps we should be pleased—a 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.

Mr Beard

  147. The Inland Revenue, when they were speaking to us, said that—roughly speaking—they 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 July.
  (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 all—that is something we have argued for a long time needs some proper looking at as to why that is. There could be many reasons—complexity of the system, fear of the system, ostrich attitude—all sorts of reasons—but 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 Association?
  (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 up?
  (Mr Whiting) Largely that they are thinking about it and they are interested in encouraging earlier filing, so we return to Mr Plaskitt's comment—we wait to see.

  The Committee suspended from 5.26 pm to 5.36 pm for a division in the House.

Mr Beard

  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 electronically—which has to be the way forward—then 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 should accrue.

  155. Is that the main message you would give in terms of improving the system—that the benefits are to be shared?
  (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 people—not represented people but unrepresented taxpayers—having 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 self-assessment tax.

Mr Plaskitt

  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 self-assessment.

  159. In general, however, would you say that the implementation of corporation tax self-assessment has gone pretty smoothly?
  (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.

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