Select Committee on Treasury Minutes of Evidence

Examination of Witnesses (Questions 240-259)



  240. You say you would like to see some flexibility in discretion applied by the Revenue in waiving penalties for such people when they do get up to date, even if they have not got any reasonable excuse in the accepted sense. How would you see that working in practice? I know of concrete cases where people did have penalties waived when they could show that they were depressed, but if they actually could not give any reason except that they had not done it, on what basis would this discretion be exercised?
  (Ms Moore) Reasonable excuse, as the Revenue interpret at the moment, does not include things like your agent letting you down or you not understanding the form, that sort of thing. That is the sort of problem that does crop up, unfortunately, which is a difficult one to solve. A number of our clients are never, no matter how many times you give them a form to fill in, they are never ever going to be able to really get to grips with it, and they cannot afford an agent. To some extent that is a reasonable excuse, although I know ignorance of the law is no excuse, but they have a reason. Often they come with a great stack of returns and documents. They have it all, it is all there, they just cannot negotiate the forms, and of course there is discretion with penalties anyway, and somebody who has been late in notifying the Revenue in the first place will have a penalty which is a discretionary one, based on the reasons, the degree of cooperation, the gravity of the offence, the size of the tax, whatever, so I would not see this as too different a situation. I would have thought the same approach could be applied.

  241. I just see a difficulty once you move out of objectively verifiable situations such as a medical condition. I see a difficulty in distinguishing between the case which you describe and somebody simulating the case which you describe.
  (Ms Moore) Yes, well, that is a difficult thing requiring something of a value judgment, I know. I do not have a pat answer to that, really. I just feel that it should be looked at more closely because there is no doubt that the string of penalties that go onto the Statement of Account when a return is late and there is interest and so on is one of the things that terrifies people about filing, and that is a fact.

  242. Would it not be better if the Revenue could form a practical partnership with bodies like yours, so that they could instruct people to hand over their affairs to an authorised agent or pay the penalty, so that they offered them a concrete way out?
  (Ms Moore) Yes, we do actually get cases referred to us by the Revenue sometimes who fit into that sort of category, and a lot of people know about us at the Revenue and know that we can unblock the situation, and often a voluntary body like us can succeed where the Revenue cannot because we are independent, whereas somebody who is not likely to approach the Revenue, no matter how helpful the reception might be, they are just not going to do that, it needs neutral territory. There are discussions going on at the moment which TaxAid and the Low Incomes Tax Reform Group are participating in, in exactly how the Revenue can work with voluntary bodies, so it is being looked at, we are pleased to say.
  (Mr Williamson) I would just mention there, we have had discussions right at the beginning with the local offices in the areas where the Low Incomes Tax Reform Group set up Tax Help for Older People pilots, and the local tax authority in the West Midlands was very keen on the idea for precisely this reason, that it was seen as an independent source which would increase choice for the customer, and that it was seen as breaking down the barriers which sometimes exist between pensioners who are frightened of officialdom and the Department, and this thing has been taken up. We are working with the Revenue, as Jane says, on it.

  243. You acknowledge the improvements that the Revenue have made to the Tax Calculation Guide, but you note that people still have difficulty in calculating their tax. What more should they be doing?
  (Ms Moore) I think the biggest problem is that with the number of tax rates that we have at the moment, and different allowances given in different ways, there is a limit to what the Revenue can be expected to do to simplify tax calculation guides. We have a short version now, but it is 15 pages, and short in the sense that it is not 36 pages, which is what the long version is. It is quite hard to negotiate, whereas if you do it on a piece of paper, probably six numbers and a quick calculation will give you the answer, but many of our clients just find that hard to do. There is a calculation guide, I think I mentioned in my report, linked to the "filing by internet" bit of the Revenue site which is quite good. It is a spreadsheet. You bung the numbers in and it completes the calculation, but it is not so well flagged this year as it was last year, and I think it is a very useful thing that could be made more of, or tax offices could have it to help people calculate online in an enquiry centre, for example.

  244. You have both referred to your concerns about the level of processing errors which are occurring on Self-assessment returns. Can you quantify this in any way?
  (Ms Moore) The Revenue have quantified it in their Annual Report that came out at the end of last year, that the number of accurately processed returns was 80 per cent, or the number of inaccurate returns were 20 per cent, depending on how you want to look at it, which beat their target which was only 77 per cent accuracy, and was better than the year before, but still leaves quite a large number of things which are not processed accurately. I cannot give you a figure for how many cases we get which contain errors which the Revenue would not have picked up themselves because I just do not have sufficient numbers to make sensible statistics, really. I did not get the impression that processing errors were on the increase, but we do still get cases through where something has not been picked up in the box and the taxpayer ends up having £500 to pay, rather than a small refund. That sort of thing is quite frequent and the unrepresented taxpayers that we see tend to rely on the Revenue to get it right, not unreasonably.

  245. You think this is getting slightly better, but still serious problems?
  (Ms Moore) Not that it is getting better. I certainly do not think it has got any worse, and also I know that it is for the Revenue to tackle it. It is a little bit hard to say. We have not seen many problems from last year's tax returns yet. I imagine they will start coming through in the next few months leading up to the next payment date.

  246. Have you discussed the issue with the Revenue directly?
  (Ms Moore) It has certainly come up at various Committees that I have gone to. I have not discussed it on a one to one basis with anybody specifically.

Mr Beard

  247. Mr Williamson, you refer to the difficulties facing pensioners seeking advice from the Revenue, and you note that they find the helpline inaccessible, and many find themselves unable to have face to face conversations about their worries through mobility problems. When we have put that point to the Inland Revenue, they told us that people can go to one of their 300 enquiry centres for face to face advice, and that they provide home visits for those with mobility problems. What more should they be doing?
  (Mr Williamson) The Revenue certainly do provide home visits. There was a time when this was not widespread within Revenue offices. I believe it has become more widespread now than it was then. The question is: "Do people know about this; are the older people going to sit at home worrying about their tax; do they know that they can get a home visit from a Revenue office?" It is not always proactively advertised. We did have a case, which is mentioned in the written submission of a very elderly lady: 88, cataracts, could hardly see, heart trouble, living in the very North of Scotland whose tax office was in the South of England. All her income was in fact taxed under PAYE, but she had to fill a Self-assessment return anyway because her untaxed income came to just over the limit of £2,500. We asked for her to have a home visit. There was some delay getting her a home visit, but once she had one, it was fine. The two Revenue officers went to see her in the remote place where she lives in the North of Scotland from the local office there. The papers were sent and I think there was tax of about £5.00 to pay. The key here is it is a question of publicising the home visits and getting people to know about it. The helpline is a problem. I do not know what the answer to that is if you are an older person and your hearing goes. Your confidence tends to go as well, particularly when using the telephone, and if you are telephoning a government department, your confidence is right out the window. What is the answer to that? Maybe here we have to fall back on the help from the voluntary sector in partnership with the Inland Revenue, which we are working on at the moment. But again, the help which the Revenue do, we believe, provide to people who have impaired hearing could do with being more widely publicised.

  248. How would you suggest they could best publicise it?
  (Mr Williamson) Local newspapers. There are a number of local newspapers, certainly in the areas we operate our Tax Help for Older People pilots, which older people tend to read and pass around, and they tend to read them from cover to cover. There are these sorts of publicity sources which can be identified and they will carry those sorts of advertisements. Local television, local radio.

  249. Is there not a form in with the tax form that tells people?
  (Ms Moore) No, there is not. If the tax returns were to be made more specific to particular client groups like pensioners, you could then obviously send out with every tax return something which told them what facilities there were that they might want. But they do not get it automatically, no.

Mr Cousins

  250. Just for one moment, following this very interesting issue of pensioners, particularly the older pensioners of the kind you have rather interestingly described, have you had any discussions about pension credit in this respect?
  (Mr Williamson) We have made a submission in response to the consultative document on pension credit. We have not taken an active part in consultations since then, though we understand that other parts of the Chartered Institute have done, and one of our members who is a Policy Officer for Age Concern is also taking an active part in that.

  251. You are unable to inform the Committee, for example, how whatever is proposed for pension and credit matches with the kinds of tax reforms that people are used to now, because the intention is that the pension credit will be a tax-like piece of administration, rather than a means tested benefit-like piece of administration.
  (Mr Williamson) I am not sure what point the negotiations have reached on the forms.

  252. That might be interesting for the Committee. Maybe I should not have pursued that particular point.
  (Mr Williamson) It would certainly be an interesting one to pursue because you have the DWP's publicity organs as well as the Revenue's, and there is scope we believe—One of the submissions we did make was for joined up working between the two departments, particularly in making the services known, which would enable people to claim the pension credit when they are entitled to it.
  (Ms Moore) Plus, we have made representations for similar definitions of income and similar sorts of forms and general consistency in that way in everything we have said on tax credits and pension credit.

  253. If I could turn to you, Ms Moore, you have suggested a facility to pay by instalments, or for the Revenue to provide people with suggestions about how much people ought to put away to meet tax liabilities. How has that gone down with the Revenue?
  (Ms Moore) The Revenue are receptive to that. There is a pilot, or was a pilot in Gateshead, I believe, on paying by instalments. Stephen Banyard would be able to give you chapter and verse, but it came up at a Committee meeting I went to at the Revenue a bit earlier this year. It is a problem for self employed businesses to put money aside. They know they should. They have trouble working out how much, and they have trouble setting the cash aside when there are other pressing demands, and there is of course this 18 month gap with a new business particularly, before they have to pay anything, and people get into difficulties. Particularly this January, because the tax due at 31st January this year has been increased because the National Insurance has gone up and the Married Couple's Allowance had gone, so there are some quite big tax hits at 31st January. So we have always felt that it would be a good idea if they could pay somehow on account. I realise that there are practical difficulties with this, not least because it would, to some extent, under current legislation, be a voluntary payment. Until there is a liability crystallised, of course the amount that people might pay on account at the moment would be essentially voluntary, and the Revenue are concerned that if they take the money, they would be asked to pay it back again, and they do not particularly want to act as a bank. So there would have to be legislative changes or it would be a voluntary scheme. I do not have the easy answer to that one.

Mr Beard

  254. Why could they not have a system as with gas and electricity bills, where you pay a certain amount each month, and then if it is out of line with the assessment in the end, you top it up, or it is evened out next year. If the gas and electricity organisations can cope with that, why can the Inland Revenue not do so?
  (Ms Moore) I think it should be looked at, but as I understand it, and you would need to speak to the Revenue, but one of their problems is that if, for example, somebody's Self-assessment liability does not actually fall due under the legislation until 31st July, say, if they are paying on account in advance of that, at the moment, they would be paying it to the Revenue, but there would be no liability to set it against. The person could ask for it back again.

  255. That is true of a gas bill.
  (Ms Moore) I am not sure how the mechanics work with gas bills, to be honest.

  256. You just pay on standard arrangement, and then settle up at the end of the year.
  (Ms Moore) I do not know the answer to that, but I have understood, perhaps I have misunderstood that that is one of the issues.

Mr Cousins

  257. Could I say, being somebody who, obviously before I became a Member of Parliament, had several different sources of income, I left money lying with the tax from year to year. I did use them, I suppose, as a sort of bank. In fact, they paid quite a reasonable rate of interest, I recollect, which of course is not taxed. Is that extremely unusual? It seemed to me to be quite a logical way.
  (Ms Moore) At the bottom end of the market, which is what we deal with, that is very unusual. Somebody who has profits of £5,000 or £6,000 a year and has to pay their living costs tends not to have money sitting with the Revenue, or anywhere, and because they are not having tax deducted from it under PAYE, they spend it sometimes. The children need shoes, you know, they need to pay their rent, to keep their house. So with the best intentions, they do not necessarily set the money aside when they should.

  258. I think I shall move on, because I am now left with the feeling that my children were deprived of shoes while I left the money with the Inland Revenue, and that will never do.
  (Ms Moore) Only you can know the answer to that.

  259. Even in this age of presbyterian virtue, I do not think that would be right. Ms Moore, you say that a scheme for allowing payments by instalments was—that you have discussed this with the Revenue, but they have not really pushed this idea. Is that still the case?
  (Ms Moore) It did, as I say, come up at the Operations Consultative Committee which I went to earlier this year, and we asked what had happened to the pilot scheme and nothing much had happened to the pilot scheme. I would be interested to know what the basis of that was and what the findings were. The Revenue are receptive to suggestions as to how payment by instalments could be made to work because they do appreciate that there is difficulty there, but the matter was rather left at that, as I recall.

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