Examination of Witnesses (Questions 100-118)
HM REVENUE AND
CUSTOMS
14 NOVEMBER 2005
Q100 Mr Williams: We are entitled
not to be very impressed by you.
Mr Varney: You are entitled to
have your views.
Q101 Mr Williams: Yes, I am entitled
to my views, but I am also entitled to know what has happened
to the money, that is what this Committee is about. Where is it?
How much is it?
Mr Varney: I am telling you that
at this stage, when this Report was done, we did not know and
that is regrettable and that is something which the NAO has drawn
to our attention and we need to improve the management information.
That is what we will do now.
Q102 Mr Williams: You know that you
incorrectly imposed late filing penalties on 30,000 taxpayers.
You know what you imposed on them. How many people then got compensation?
Do you know in how many cases compensation was paid?
Mr Varney: Do we? We do not. If
they wrote back and said they thought it was unfair, which they
do, they say "You say we late filed, but we did file on time",
we realise that we need to improve the logging system of collecting
the data, which is what we are doing.
Q103 Mr Williams: Who makes the decision?
Let us get back to that first of all. Who decides whether someone
is entitled to compensation? At which level in your system is
it decided that compensation is due?
Mr Varney: That would probably
be within the distributed processing organisation and there would
be guidelines and those guidelines would say—
Q104 Mr Williams: How would you know
whether the guidelines were being observed, if you did not know
how much was being paid or for what?
Mr Varney: In trying to control
this, the question is whether it was properly authorised.
Q105 Mr Williams: How can you try
to control something when you have no idea what it is?
Mr Varney: We do not know what
the sums of money are in total, but that is not to say the individual
items will not have been properly authorised in accordance with
the policy for giving compensation.
Q106 Mr Williams: We are getting
nowhere on that. I hope that by the time you come here next time
you will have tried to address this problem, because we should
probably like to return to it. I see that three quarters of the
tax loss, which is £2.8 billion, is accounted for by 5% of
returns, which is around 400,000 people. That works out at about
£5,000 each. We are told that half the inaccurate returns
are from partnerships and sole traders; half of them are coming
from the same place every time and it is £5,000 per year
on average. Does that mean that the same people are year after
year making similar mistakes? Are you sure a lot of them are not
getting away with it?
Mr Varney: If we find that there
is a mistake, we try to provide advice, if we can identify who
the people are. There is some degree of fluidity in this. Obviously
what we try to do is to provide those who are making errors with
the information and the explanation to encourage them not to make
those errors. We have been able to mop up returns over a number
of years in some of the areas where we have been using the daily
penalty regime.
Q107 Mr Williams: Let us come back
to the people who have been undercharged. Do you sometimes write
that off? We know you do in fact.
Mr Varney: Yes.
Q108 Mr Williams: Do you know what
that comes to, because that is different from compensation, or
is it counted within the compensation figures?
Mr Varney: Undercharging is more
difficult. If they are undercharged and they still have an ongoing
relationship and we become aware that they have been undercharged,
then, as long as it is not outside the statute of limitation,
we can collect it.
Q109 Mr Bacon: I have a couple of
questions about e-filing. I understand that for the corporate
sector e-filing is more advanced than for personal taxpayers and
indeed companies above a certain size must file online. Is that
correct?
Mr Varney: Yes.
Q110 Mr Bacon: What is the threshold
above which you must file online?
Mr Massingale: The new mandatory
regime for Pay As You Earn employers' filing requires employers
with 250 and more employees to have filed online this year. The
requirement moves to employers with 50 or more from next year.
Q111 Mr Bacon: There were stories
in the press, though you cannot always believe something just
because it was in the press, about people being unable to file
their corporate returns on line because the system was not working
properly. Is it correct that processing was stopped?
Mr Massingale: I do not believe
there was any serious problem about filing online.
Q112 Mr Bacon: Is it correct that
processing was stopped? Yes or no. Was processing stopped?
Mr Massingale: I do not think
the question is capable of a binary answer.
Q113 Mr Bacon: By "not capable
of a binary answer", do you mean you are not capable of saying
yes or no to the question? Was processing which should have been
taking place not taking place because the system was jammed?
Mr Massingale: There was some
delay in some of our back-end processing but we had no problem
about receiving employers' returns.
Q114 Mr Bacon: There was delay.
Mr Massingale: No.
Q115 Mr Bacon: Was any money involved?
Was there money which should have been collected which was not
collected?
Mr Massingale: No.
Mr Varney: The information which
was collected was held in a stockpile so that it could then be
fed through to the processing.
Q116 Mr Bacon: And has the stockpile
now been cleared?
Mr Varney: Pretty substantially;
yes.
Q117 Mr Bacon: Is it possible you
could send us a note about that?[5]
Mr Varney: Yes.
Q118 Mr Bacon: And will you?
Mr Varney: I shall, of course.
Chairman: Thank you very much, Mr Varney;
that concludes our hearing. We look forward to receiving a full
note on your evidence for Lord Carter. Thank you very much.
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