Select Committee on Treasury Minutes of Evidence

Examination of Witness (Questions 308 - 319)




  308. Minister, may I welcome you and apologise on behalf of the Committee for keeping you waiting. We had a meeting of the main Committee and I am sorry you were delayed. It would be helpful if you would identify your two colleagues.

  (Dawn Primarolo) Please do not apologise. I know there was a vote and that you had very pressing business this afternoon so there was a slight delay. May I introduce Stephen Banyard who is the Director of Local Services and Sue Pither who is Assistant to the Director?

  309. We are coming to the end of an inquiry into self-assessment in which we have received a great deal of evidence and been exploring. A number of those submissions do refer to the difficulty and the complexity in understanding self-assessment. Mr Banyard himself, when he gave evidence, actually said to us that there was that particular difficulty. Would you accept that you have a duty to the taxpayers to make it as simple as possible?
  (Dawn Primarolo) Yes, I would entirely accept that proposition. Self-assessment as a whole is working very well, but the questions of who is in the self-assessment system, with particular focus on pensioners, and the information and support which we provide to taxpayers to make that process where they are in self-assessment as easy as possible is an obligation on the Government and the Inland Revenue which I do accept and we need to make some progress on.

  310. If it is an obligation and you simply need to make progress, are you doing enough to simplify the system? Mr Banyard told us there was no deadline, no formal report for the work which is ongoing on simplification. You presumably receive reports periodically.
  (Dawn Primarolo) This is referring to the review which I have asked for. Clearly the priority on the introduction of self-assessment was to get the system in and working. Through that period, where possible, we have tried by alteration to the system to reduce the complexity and ease the position for taxpayers. The review is not time limited in the sense that it cannot make proposals on what should be done until the end of the period. I expect to receive reports as the review progresses on how changes can be made and to bring those changes in when I can and as soon as I can. Although the review started in February of this year, it is difficult to describe it as a review. Whilst it has an urgency about it now, picking up the point you made about the obligation to the taxpayer, it should be a function which runs forward constantly as we assess how the system operates, the changes we can learn from that operation and from others' experience and how we can improve that. To start with, I have asked the review to focus particularly on the issue of making the return shorter and precisely the type of information we now need and whether we can reduce the number of pages. That is the first priority. The second priority is to look at this difficult question of whether we really need as many people within self-assessment as we currently have. I know that the Committee is very interested in pensioners but there are other issues which we need to look at and whether we really need these people in the self-assessment system or whether we can remove them completely and allow them to be within the general system. That is the priority for the work now. Then it will need to move on to other areas which evidence to your Committee has identified that we need to address. I should be more than happy to keep the Committee fully involved in every sense in assisting through this process. There do not have to be any questions of secrecy here; this has to be about improving the functioning of the system. I am already very grateful for the work which organisations like TaxAid, the Low Income Tax Reform Group, the Working Together Group and the professional organisations are offering to the Revenue and how we can share that information.

  311. I am sure my colleagues will pick up on your hint about scope and pensioners. When Mr Gibbs came here to give evidence on the Budget he said that in the Budget itself there were no measures on self-assessment simplification. Why was that?
  (Dawn Primarolo) There were several changes in the Budget which assisted taxpayers in their returns, particularly the self-employed and in the area of company taxation. I would freely admit to the Committee that it is proving very difficult, for instance in the priority of wanting to remove taxpayers wherever possible from the obligation of self-assessment, to settle on a clear system which does not end up making it more complicated for them. I would share the views of the Committee that I would have hoped to have been further on, but we are not and we need to press forward as quickly as we can. I am more than happy if the Committee wish, for instance, to provide, perhaps on the return from the recess, a meeting early in October to give you a progress report on some of the projects we are working on now which we would hope to bring forward to give you an involvement and an idea on how we are trying to take it forward.

  312. That would be very helpful. The Chartered Institute of Taxation submitted to you a series of what they called Quick Wins on tax simplification. Mr Gibbs again told us in the Budget hearings, "I have to say that none of the specific proposals we have had have been terribly useful".
  (Dawn Primarolo) As a Treasury Minister there are many people who offer us advice and advance solutions which at different times we are not always able to proceed with. What I want to establish is a working relationship with all of these organisations where the priorities of Government can be understood alongside the priorities of these organisations and how we work through those to deliver the objective of simplification where that is possible and ensuring that the taxpayer gets the very best service. There is always a balance here in terms of fairness and certainty. Sometimes producing simplification in one area of tax can produce complications in another. If we are to promise people that it is to be easier for them, we need to make sure that an unforeseen problem does not arise somewhere else. That is really where we are now. What I should like, but I realise that it is very important not to raise expectations here, is some Quick Wins to put on the table frankly, to show a definite indication of the commitment that I am trying to stress here. For instance, making the return shorter would be a huge indication, a huge step forward, whilst making sure that we are fair to all taxpayers in how we proceed on that basis.

Mr Plaskitt

  313. The self-assessment form does not carry with it an explanation as to why it has been sent to an individual taxpayer. When Mr Banyard was before us he said that he did not think there was any scope to provide that explanation because it was too complicated[1]. Is that fair?

  (Dawn Primarolo) Wherever possible we should make every effort to explain to the taxpayer how the rules operate. As far as I am concerned, there can be no holds barred in ensuring that we try to move to transparency in providing the information but in a way which is usable. Information can be provided but if the way the information is provided is totally incomprehensible, it does not really take us any further forward. I think that the issue is how to take what are sometimes complicated explanations and convey them in a way which is accurate but does not transfer that complication to the taxpayer.

  314. Will you be able to help a pensioner who for a year or two receives the form, then the following year does not and yet sees all the commercials on the TV saying you must get your form in by so and so otherwise you are fined and gets into a panic about it? Can you do something with your transparency reforms which will help someone in that situation?
  (Dawn Primarolo) Yes, we have to do this. The complication is that we can and do provide access for enquiries. Many pensioners who are not even in the self-assessment system ask why they have not had a self-assessment return and it is very difficult to allay their fears. We can offer visits, we can make sure they get rapid response from the Department. Your point really goes to the heart of the matter, particularly with regard to pensioners, which is how we ensure that that anxiety does not develop in the first place. That is about whether they should be in the system in the first place. I am very conscious that with nine million people within the self-assessment system currently we really have to try very hard to focus on how we can remove them from the system entirely so that we do not get this concern because they had the tax return last year but not this year. It is reaching that point in a system which only became active in 1997 and was a huge change. Now it is bedded in, we really need—and that is what I want the review to go on to do—to ask ourselves what information we really need and what information we are collecting which we do not need to ask for. That is the sort of process we have to work through.

  315. There is that, but there is also the people moving in and out of the system. There are issues about what the system is like once you are in it; then there are also issues as to whether you are in it or not. There is a certain movement of people in and out of the system over time. What is the difficulty of simply having a statement incorporated on the form which says "You may come in and out of this system depending on various circumstances" so at least people know that their relationship to the system can change over time.
  (Dawn Primarolo) What is very important is that where somebody has been in the system and they are out of the system, we should be absolutely clear at that point with them—and we do not always manage that—that they will not get the form again and they should not get it and if by error they do, then there is a procedure they can follow and just ignore it[2]. Pensioners particularly, although maybe other taxpayers as well, are not very comfortable with the idea of ignoring something which comes from the Inland Revenue and therefore the obligation is all the greater on us. One of the issues I found with designing forms is how much information is on the form and therefore lengthens the form, but if we cross-reference it to guidance notes, people find it difficult when they get to a question which says "See Guidance Note 11". One of the tests I tried—I know this is not terribly scientific—was to sit down and fill in the form myself and find how far through the form I could get before I was stopped in my tracks and needed to go away and get some other information or needed to refer to the guidance notes. There is a balance here. If we want to keep the form very short, which is certainly one of the points which has been made to us strongly, how much of the information on the form is really relevant. In explaining what might happen next, the priority has to be to say we should tell people that they cannot and should not get the form again and we have to sharpen up on that. We have then, in how the system operates, to be clearer with people when we are telling them that they are coming into the system. The obligation is on us rather than trying to guess. This is obviously a big programme. What I have said to the Revenue is first get everybody out of the system who does not need to be there. At the same time we can focus in on what information we need to provide in support for those who are still within self-assessment. I have to say it sounds much easier when I say it than it is in practice, but that clearly is the right thing to do and clearly has to be the dynamic. Delivering it is not quite that easy.

  316. When you go through that process of weeding the people out of the system who should not be in it, there is no reason why you should not, once having identified them, write to them and say thanks for the forms you have completed, we shall not be sending you any more. That is possible, is it not?
  (Dawn Primarolo) Absolutely; yes, as a minimum. Yes, I absolutely agree.

Kali Mountford

  317. I was pleased to hear in part of your answer that you are already looking at reducing the size of the form and impressed that you tried to fill one in. I employ an accountant myself. Most of us, as well as the eminent organisations who have given evidence to you, are taking our evidence from our constituents and they do not all have the benefit of an accountant and find some of these forms extremely difficult to complete. Have you looked at the experience of the Department for Work and Pensions and their work on reducing the benefit claim form from 40 pages to just 10? As you are looking at reduction, have you looked at other Departments and what they have done?
  (Dawn Primarolo) Yes, we have. I hesitate to say how many pages might be relevant on a self-assessment form so I will just speculate here on a target and perhaps the Committee will accept it as that. If we could get the form down to four pages, we should be doing extremely well. If we get it down to fewer, that would be brilliant. The other thing about the people within self-assessment is that something like 50 per cent of them do not need an accountant. We see that in terms of the returns we get before the September deadline. It is a question of how we approach this problem and it is quite right, as has been identified both in evidence to you and what Members of Parliament themselves have said in Debates on the Floor of the House, that the first obligation is to make sure that we do not have people in the system whom we really do not need. The next step is to make sure that the system is transparent, that forms are reasonable, and that there are different ways in which to the convenience of the taxpayer, the taxpayers who are in the self-assessment system can then deal with us. That is the sort of process we need to go through because for some people I should quite like to know why we cannot code more people out of the system basically. When the design was made of self-assessment the decision was taken that all high rate taxpayers would be within the system? Do we absolutely need to say all higher rate taxpayers are within the self-assessment system. These are the sort of fundamental questions we now have to ask because that would influence how form design, information, support systems would then dovetail in behind that. We have to look at lots of different ways of designing the forms once we are clear—and that has to be the priority—who is in the system.

  318. Am I to infer from that answer that one of the problems in form design is the breadth of population the form is currently aimed at if we are to get accurate and complete information from a wide group of people in different circumstances?
  (Dawn Primarolo) Certainly if you look at the form in many places it says "Ignore this page" and it is quite difficult. The point is that just receiving the form is daunting for some people. Yes, we have to tailor what we do to the specific groups we have within self-assessment and then what we have to do, as our experience is building up we are becoming more proficient at this, is to test the forms properly before we bring them into the system. We have gradually improved our expertise and ability to do that by model offices or using taxpayers who are prepared to volunteer to be involved in pilots which get the form design right by them filling it in and saying there was not enough information about whether that was relevant information. One of the things we find is that they give us a lot of information we might not need, but they give us everything because they are not clear about the form. That sometimes makes the logging of the information very difficult because we are doing it electronically, taking the forms through and the system will not do that. Yes, we have to do all the things you say.

  319. It sounds as though there is a prospect of self-assessment defeating its own objective if we are not careful. Is there a balance to be struck between use of Revenue staff time in having to answer questions about how to complete the self-assessment form and if we shorten the form and perhaps lose some clarity, may there be further dialogue because of the lack of information coming from the individual taxpayer?
  (Dawn Primarolo) That is exactly the balance to be struck. It would be counter-productive not to have enough information and to have to go back to the taxpayer. In a sense, much like our own tax forms as Members of Parliament, there can be a standard simple form for the majority in the system whose tax returns are straightforward, but there will be those taxpayers whose affairs are more complicated and therefore they still may require additional sheets to explain the information, collect the information which is relevant to them. What is necessary is that we understand better. Instead of sending everything to every taxpayer, we can send relevant information gathering to the taxpayers we need to.

1   Note by witness: At the earlier hearing Mr Banyard said that the Inland Revenue was looking at how to give people a clearer idea of whether or not they were in Self-Assessment. Back

2   Note by witness: The legal position is that a taxpayer who is issued with a Return must complete it and send it back. But where a Return is issued in error the taxpayer should contact the revenue and discuss the position. Back

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