LIST OF CONCLUSIONS AND RECOMMENDATIONS
(a) People receiving Self Assessment tax
returns are not told why they are issued, even though once received
they are obliged by law to complete and return them. The Inland
Revenue do not publish the criteria for issuing Self Assessment
tax returns because of the enormous number of situations in which
a return is issued. We believe this to be an unsatisfactory state
of affairs, which stems from the complexity of the tax system.
We note that the Inland Revenue is examining how it can provide
greater transparency so that people have a clearer idea of whether
they are covered by Self Assessment or not. We wish to see the
criteria for issuing Self Assessment returns published in the
interests of fairness to taxpayers. (paragraph 7).
(b) We are concerned at the Revenue's
failure to inform taxpayers who need no longer submit Self Assessment
tax returns of this fact, causing unnecessary worry to taxpayers
waiting for tax returns that will not arrive. We therefore welcome
the Paymaster General's undertaking to the Committee that the
Inland Revenue will now write to taxpayers when they are no longer
required to submit a return to inform them of this fact (paragraph
(c) The Inland Revenue recognises that
there are too many people with low incomes, particularly pensioners,
in Self Assessment and is looking at ways of taking them out of
the system altogether or of making it easier for them to assess.
We support these aims and expect the Revenue to make real progress
towards achieving them over the next year (paragraph 13).
(d) We are disappointed that the Budget
contained no measures specifically designed to simplify Income
Tax Self Assessment. Given the existing level of complexity, we
support the proposition that there should be annual changes to
the tax system aimed solely at simplification. We therefore recommend
that this be included as one of the Inland Revenue's key performance
targets against which the Revenue should report progress annually
(e) We recognise that the tax return reflects
the complexity of the tax regime and the need to obtain sufficient
information to calculate their tax liability from taxpayers with
different circumstances. But we consider there is scope for a
shorter and simpler tax return, particularly for those with relatively
straightforward affairs. We therefore recommend that the Revenue
continues its efforts to develop a suitable form (paragraph 24).
(f) We are concerned that, despite the
marginal improvement in the number of taxpayers that filed their
tax return on time last year, one in ten taxpayers had not filed
by 31 January, the due date. We expect the Revenue to monitor
this position closely and review what further steps it can take
to encourage people to file on time (paragraph 30).
(g) There is a misconception, which the
Revenue needs to address, that filing early increases the chance
of being selected for enquiry. In fact the reverse is the case.
We recommend that the Revenue takes steps to make this clear to
agents and taxpayers in its publicity. We also recommend, to encourage
early filing and spread filing peaks, that the Revenue considers
the possibility of changing the enquiry window to run for twelve
months from the date the tax return is received, rather than twelve
months from 31 January (paragraph 31).
(h) We were very surprised to learn that
there are tax returns outstanding from the start of Self Assessment
in 1996-97 and for each of the following years. We are concerned
that the Revenue has not actioned these cases in a timely manner
and recommend urgent action now be taken to resolve this matter
(i) The potential benefits from Internet
filing to both taxpayers and the Revenue are considerable. But
take-up of the service in the first two years has been very disappointing
and much lower than the Revenue had anticipated. The Revenue will
only achieve its ambitious target of 50 per cent take-up by 2005
if it offers a reliable service that meets users' expectations.
In this context we are concerned that one in five attempts to
file on-line fail and we recommend a review to identify the causes
of these failures and remedies for those within the Revenue's
control. We also recommend that the Revenue examines what further
steps it can take to make its on-line service more attractive
to potential users (paragraph 41).
(j) We are very concerned that failings
in the Revenue's Internet filing service allowed taxpayer confidentiality
to be breached and that the service had to be withdrawn for more
than a month while remedial action was taken. We note the Revenue's
admission that there are lessons to be drawn from this extremely
serious incident, including wider issues of Internet security,
and that it is working with the e-Envoy's office to ensure that
these are shared more widely. We expect the Revenue and the e-Envoy
to include in their work a review of the procedures used to test
the Revenue's system before it was implemented, and to report
on the outcome of their deliberations on the lessons to be shared
(k) It is too soon to determine what impact
this incident has had on the level of Internet filing. We expect
the Revenue to monitor this closely, and to examine what additional
steps it can take to restore taxpayer confidence in the security
of the system should this be necessary (paragraph 47).
(l) We note that the Revenue has been
testing a scheme to allow taxpayers to pay monthly instalments
by direct debit towards their Self Assessment liability. We believe
that many taxpayers, particularly the self-employed and those
starting a new business, would find such a facility useful. We
are therefore concerned that this trial appears to have reached
no conclusions after three years. We recommend that the Revenue
evaluates and reports on the results of this trial as a matter
of urgency (paragraph 52).
(m) We agree with the Paymaster General
that people should be able to pay tax rapidly and conveniently
in various ways, but introducing new payment methods does not
appear to be a matter of priority to the Revenue. We recommend
that the Revenue pursues this matter with more urgency than hitherto
displayed. We also recommend that the cost to the Revenue of providing
a facility to pay by credit card be evaluated (paragraph 53).
(n) It appears from the evidence we have
received that Corporation Tax Self Assessment has been introduced
without any significant problems. We note the suggestion that
the quarterly instalments large companies are required to pay
should be based on prior year figures, rather than on estimates
as at present, with a final adjustment based on outturn when known.
We recommend that the Revenue examine and report on the costs
and benefits of such a change (paragraph 57).