Select Committee on Public Accounts Minutes of Evidence


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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