Further supplementary memorandum submitted
by HM Customs and Excise
Question 104 (Mr Davidson): Can you give me any
indication of the scale of over-payment?
The Report refers to research Customs has undertaken
as part of the Compliance Testing Programme. The programme is
designed to provide year-on-year comparisons of certain compliance
factors and also produce a trend analysis of results that will
inform the risk process. It showed that about one third (31%)
of the 1.7 million VAT-registered traders may be misdeclaring
their VAT liability. Of these, around 28% of errors relate to
underdeclarations and 3% are overdeclarations.
Across the scope of the VAT business, declaration
errors are brought to Customs' attention in two ways; firstly
as a result of our own intervention resulting in an assessment
and secondly as a result of a voluntary disclosure by the registered
business. During the last three years the value of overpayments
and underpayments in those categories can be broken down as follows:
| Overpayments |
2001-02 | 2002-03 | 2003-04
|
| Total value of overpayments (inc Officer assessments
and voluntary disclosures |
£1.1bn | £1.2bn |
£1.1bn |
| Total value of Officers' assessments (overdeclarations)
| £0.15bn (value)
18,114 (no) |
£0.2bn (value)
14,520 (no) | £0.1bn (value)
11,469 (no)
|
| Total value of voluntary disclosures (overdeclarations)
| £0.95bn (value)
17,162 (no) |
£1.0bn (value)
21,662 (no) | £1.0bn (value)
20,430 (no)
|
| |
| |
| Underpayments |
2001-02
| 2002-03 | 2003-04 |
| Total value of underdeclarations from Officers'
assessments |
£2.5bn (value)
107,002 (no) |
£3.2bn (value)
103,031 (no) | £3.0bn (value)
84,362 (no)
|
| Total value of voluntary disclosures (underdeclarations)
| £0.52bn (value)
13,245 (no) |
£0.61bn (value)
14,631 (no) | £0.67bn (value)
14,780 (no)
|
| |
| |
The total value of repayments made to businesses which includes
the amount of overpayments is shown below, together with the percentage
of assessment and disclosure errors resulting in overpayments.
| 2001-02 |
2002-03 | 2003-04 |
| Total value of repayments |
£43.8bn
| £44.7bn | £44.5bn
|
| Percentage of all errors resulting in overpayment (by value)
| 25% | 25% | 25%
|
| Percentage of all errors resulting in overpayment (by numbers)
| 23% | 23% | 24%
|
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Question 125 (Mr Davidson): Action taken against professional
advisors
The Number of Investigation cases undertaken where accountants
and legal representatives and tax advisors have been involved
in a professional context
| Year |
Criminal investigations
| Civil evasion
investigations |
| 2001-02 | 14 | 1
|
| 2002-03 | 10 | 0
|
| 2003-04 | 8 | 4
|
| |
|
Of these 37 investigations
— 24 involved VAT offences,
— 11 money laundering, and
The criminal cases lead to custodial sentences of over 41
years and confiscation orders of £8.7 million and in the
civil cases civil evasion penalties of over £200,000.
Question 126 (Mr Field): Accreditation of officers involved
in anti-fraud work
All our internal investigators undertake professional training
to achieve status as an Accredited Counter Fraud Specialist (ACFS)
in association with Portsmouth University and the NHS Counter
Fraud & Security management Service.
During early 2001 our Internal Investigation Division negotiated
with the NHS Counter Fraud & Security Management Service (as
is now) for our investigators to undertake its formally accredited
training. This covers "Investigation Law and Procedures",
"Principles of Good Practice", "Investigative Interviewing",
and "Proactive Evidence Gathering" and supplements our
internal training. We use the accreditation route to ensure our
overall professionalism, and to identifying and reflect good practice.
There are two levels of certification. Award of ACFS is achieved
through formal classroom and practical training. Working towards
an advanced level of certification is optional and follows a course
of academic study (distance learning) with Portsmouth University.
This achieves status as a "Certified Counter Fraud Specialist"
(CCFS) together with the academic award of a "Certificate
of Higher Education in Counter Fraud & Criminal Justice Studies".
Currently all our internal investigators undertake training
to ACFS accreditation level. Since 2001:
— 22 staff have been awarded ACFS.
— 2 staff have been awarded CCFS and the Certificate
in Higher Education and further 6 staff are nearing the end of
their academic study towards it.
— We also have one investigator who is in the second
year of a full degree programme[13]
Since 2003 all our Intelligence staff follow the same route
of accreditation and professional award.
Question 127 (Mr Field): Accreditation of officers involved
in anti-fraud work
Following the Butterfield Review of investigations and prosecutions
undertaken by HM Customs, Customs has accepted and is implementing
all of the recommendations made, including those relating to investigation
training. These concluded that while the Basic Investigation Training
(BITs) provided to investigators is reasonably thorough and is
regularly updated, it needed supplementing with:
— Regular refresher training for investigators every
five years.
— Specific training geared to particular key jobs
within investigation, to include a written test before an officer
is allowed to take up the new post.
— Training to reflect changes in the criminal justice
system.
To address these recommendations Customs is developing professional
skills that build on the Police Skills and Standards Organisation
(PSSO) National Occupational Standards. We joined the community
of police and law enforcement forces covered by the scope of the
PSSO in August 2003.
PSSO are not themselves an accreditation body, but have assumed
the role of Standards Setting Body by developing a comprehensive
development programme to establish a suite of National Occupational
Standards covering all policing roles. In the Police Services
of England, Wales and Northern Ireland the suite of National Occupational
Standards is being used as the basis for the development of nationally
recognised qualifications, and perhaps the development of a scheme
of Professional Registers, led by the Police Training Development
Board.
At the present time we do not have any accredited external
fraud investigation training or accredited external fraud investigators.
We do have a small number of officers who have completed an investigation
NVQ. We are however, looking to obtain external accreditation
of training and externally recognised qualifications for all our
external investigation staff. We aim to achieve this by selecting,
through open tender, an accreditation body approved by PSSO to
cover Investigation training, most likely a University.
The Counter Fraud qualification referred to by Mr Field is
a Government sponsored accreditation programme set up by the NHS
and DWP in association with Portsmouth University to be an Accredited
Counter Fraud Specialist (ACFS). All our Internal Investigation
and Intelligence staff undergo this accreditation process (see
supplementary note to Question 126).
Question 128 (Mr Field): Referring accountants to their professional
bodies
In line with the current data protection legislation the
Department has adopted strict guidelines relating to disclosure
of such information. Under these guidelines, it is possible for
breaches of professional ethics by accountants and other professionals
such as lawyers and insolvency practitioners to be reported to
their parent regulating bodies. In general terms, such disclosures
will only be made where:
— specific professional ethics or conduct have been
seriously breached; and
— there is sufficient evidence to substantiate the
breach; and
— there is an overriding public interest for making
the disclosure;
Under these guidelines, Customs has reported three accountants
to their professional bodies. In one case the accountant was struck
off by the Institute of Chartered Accountants. In the second the
accountant was cited, reprimanded and fined by his professional
body. In the third case the accountant, a trainee passing himself
off as a qualified accountant, became involved in a money laundering
fraud. Following criminal proceedings, the accountancy firm employing
the trainee was reported to the ACCA in relation to the trainee's
conduct and lack of supervision by the firm.
In addition, we have an agreement with the Insolvency Practioners
Control Unit (IPCU), part of the DTI based in London, that we
will submit a detailed report to them on any Insolvency Practitioner
(IP) whose professional conduct we deem to be unsatisfactory,
and who has not satisfactorily responded to our requests to bring
their conduct up to an acceptable level. The IPCU will then pass
on the report to the licensing body of the particular IP involved.
By this method, a central record of any complaints, and their
outcome, is kept both here and at the DTI. "Unsatisfactory
conduct" in this context is defined by a set of criteria
that was agreed with stakeholders, including the IPCU, when this
system was set up.
To date, we have only one completed case, with another ongoing.
In the one completed case, the IP was reprimanded and fined £8,000
by his licensing body.
While it may seem surprising that so few professional practitioners
and advisors have been referred to their professional body, it
should be remembered that such action is only taken when all other
attempts to improve performance has failed, or the actions of
the practitioner constitute a serious breach of professional ethics.
These disclosures are in addition to action taken against
professional advisors involved in criminal activities (see supplementary
note to Question 125)
Question 137 (Mr Field): The bonus system
The main method for recognising and rewarding performance
in Customs and Excise is through our performance pay system. We
also have a `manager's reward' system and have recently trialled
team bonus payments. These are described below together with the
considerations that led to our current policies.
PERFORMANCE PAY
(REFERRED TO
AS OUR
"BONUS" SYSTEM)
We have a performance pay system that is based on an annual
assessment of an officer's achievement against a set of mainly
operational objectives. The objectives are standard for each grade
and work area, and are described in a series of "role profiles",
which set out the role and responsibilities of each job, together
with the operational objectives and the key competencies required
for the work. These are qualified by performance indicators that
adapt the objectives by setting specific targets that take account
of an individual's levels of training and experience.
Staff who perform well against their operational objectives,
observe certain behavioural standards and also achieve any personal
development objectives set for them, receive a "Top"
or "Good" marking and, as a result, are awarded an annual
performance pay increase. This includes a progression payment
that moves them up their pay range to the pay range maximum. The
top 10% of performers receive an additional bonus. Last year this
was 2.5% of their salary.
Our pay system includes a means by which staff that fail
to achieve their objectives or only just do so, may receive a
smaller pay increase than those who perform in line with expectation.
A key challenge in designing these arrangements is to find the
appropriate financial balance, within available funding, between
the level of performance payments made to top and good performers.
We reward, in a meaningful way, the work achievements of the vast
majority of our staff who deliver the Department's PSA objectives
whilst also acknowledging the greater contribution made by those
whose performance significantly exceeds expectations.
MANAGER'S
REWARD SCHEME
The Manager's Reward Scheme provides managers with a facility
to acknowledge particular achievements as they occur during the
course of the year by making a relatively small payment to staff
(£100) and publicising this. The scheme allows awards to
be made at the time of the achievement and is primarily about
recognition rather than reward. The aim is to enable managers
to recognise a specific job well done that might otherwise be
lost in the year as a whole. Payment can be to individuals or
a team.
TEAM BONUSES
A report "Incentives for change" produced
by John Makinson for the Government's Public Services Productivity
Panel, called for pilot trials of a team bonus system by Customs
and two other departments. These were held in Customs in 2001-02
and 2002-03. We concluded that while the system produced some
positive benefits, the particular arrangements for team bonuses
that were trialled did not fit with our current organisation and
structure, and were costly to administer. The Inland Revenue use
Team Bonus arrangements but have a different system from the one
we were asked to trial. Our intention is to look at the team bonus
concept in the context of setting up HM Revenue and Customs.
CONCLUSION
Our current performance pay system, which looks at an officer's
whole year performance, avoids arguments about an officer's impartiality
when implementing customs and taxation policies. Our systems will
be reviewed when HM Revenue and Customs is set up.
Supplementary information for the Public Accounts Committee
in response to Question 138 concerning legal fees in prosecution
cases
Question 138 (Chairman): How much paid out in legal fees to
independent barristers and solicitors for the 69 prosecutions
that were secured last year?
LEGAL FEES
PAID IN
VAT PROSECUTION CASES
| Year |
Total |
| 2001-2002 | £2,284,090.59
|
| 2002-2003 | £3,066,399.80
|
| 2003-2004 | £2,874,584.84
|
| Total over 3 years | £8,225,075.23
|
| |
— The figures relate to VAT Prosecutions only.
— The figures included all ongoing or completed
case during this three-year period. (eg in 2002-03 this equaled
377 VAT prosecutions).
— All fees paid between 1st April- 31st March in
each financial year were included for this purpose.
2 June 2004
13
Portsmouth University recently developed a degree course-Bsc (Hons)
in Counter Fraud & Criminal Justice Studies. The ACFS award
constitutes foundation level training and allows automatic entry
on to the "optional" degree programme. Back
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