Examination of Witnesses (Questions 100-114)
HM REVENUE AND
CUSTOMS
1 MARCH 2006
Q100 Mr Davidson: How many cases
have you raised with the relevant professional body?
Sir David Varney: I do not have
a number, but we can let you know.[4]
Q101 Mr Davidson: Many?
Sir David Varney: No.
Q102 Mr Davidson: Could you just
let us have a note on that?
Sir David Varney: I am happy to
do that.
Q103 Mr Davidson: Can I just be clear
about this? If you identify within a particular company that there
is a practice which is going on that you are ruling against and
the company's defence is that they took best advice, would you
then go off and see whether or not that accountant was applying
the same advice to other firms? That would seem to me to be an
obvious way to go.
Sir David Varney: Yes, that is
part of the risk analysis. If your doctor, let us call your firm
of doctors accountants, comes up with a company, one of the things
we obviously look at is how many other companies were advised
by this practitioner and whether he has given that advice to other
companies which would obviously affect the risk register. I would
just say that the vast majority of practitioners—and some
of you are married to them—want to ensure that people meet
their obligations. The vast majority are not shopping around looking
for the dodges. We do quite a lot of educational work with the
profession.
Q104 Mr Davidson: Let us not get
carried away here.
Sir David Varney: I was trying
to stop you.
Q105 Mr Davidson: We do actually
have 40% understating their business receipts, including their
personal expenses in the company's accounts and not taxing loans
made to directors. This is the client group with whom we are dealing
here.
Sir David Varney: But only 4%
of those are responsible for 70%, so a lot of the errors are very
small amounts of money.[5]
Q106 Mr Davidson: That is because the
businesses are very small in many cases. They would probably cheat
more if they had more money to cheat with.
Sir David Varney: No, we are dealing
with—
Q107 Mr Davidson: You are a very
generous soul. Could I finally raise a point in paragraph 2.8
where it says 40% of inquiries produce no change? That means presumably
that 60% do produce a change. Could you just clarify for me the
percentage of those that go up and the percentage of those that
go down?
Sir David Varney: Few go down,
most go up. As I said earlier, 81% of the full inquiries produce
an increase in tax take and 58% of the aspect inquiries produce
an increase.
Q108 Mr Bacon: Very quickly I should
like to return to electronic filing. When do you think companies
that want to do so will be able to transfer their accounts data
directly to your computer systems?
Sir David Varney: This summer
we think. In the nature of this, I should not be surprised if
we uncover that there are some bits of the taxonomy that are not
clear. I should not regard that as a failure, I should regard
this as work in progress, trying to get this system to work properly.
Q109 Mr Bacon: When do you expect
the new risk assessment database to be available to areas?
Mr Banyard: It is available now;
we are rolling it out as we speak. I was talking yesterday to
the pilot office which has been running it for six or seven months
and they have had some very good initial work and results from
it. We are reasonably confident that this system is good and that
the offices that are using it are very pleased with it.
Q110 Mr Bacon: In what circumstances
would you switch off the paper return facility?
Sir David Varney: That is really
a political decision. Lord Carter must be thinking about that
and the Chancellor must be thinking about what his reaction is
going to be.
Q111 Mr Bacon: Let me rephrase it.
When would you be in a position to switch off the paper return
facility?
Sir David Varney: As soon as we
have a system which we are convinced is robust and can deal with
the volumes and can produce on both sides the sort of data that
we can both rely on.
Q112 Mr Bacon: When?
Sir David Varney: We are quite
encouraged with what we have seen so far in terms of preparation;
we shall now have to put it to the test.
Q113 Mr Bacon: But in terms of timetables
ahead. Would you be in a position to do this in one year, three
years, five years' time or what?
Sir David Varney: Once we have
worked out whether the taxonomy we have works, we shall also be
talking to British industry about how fast they can adapt to it—it
is not just a straight switch exercise—then, as we see,
as with the self-assessment electronic returns, an increase and
we get to the point where we have two systems, a more expensive
paper system and a much more cost-competitive electronic system,
then we shall want to move as fast as we can into the electronic
world. There are issues around people, as you will know better
than I do, who are not into that electronic world and then how
you deal with the people who are excluded.
Q114 Chairman: Well it seems to have
been a very useful inquiry by the National Audit Office which
I am sure has helped you. Undoubtedly at present your chances
of being investigated apparently do depend on where you live in
the country and apparently not all your staff historically have
been located in the right place. If we can bring up the level
of service of the worst-performing areas to the best, then
we might raise tens of millions of pounds. We shall try to help
you to do that.
Sir David Varney: That is a positive
note on which to end.
Chairman: Thank you very much Sir David.
4 Note by witness: Since the creation of HMRC
there has been one instance where HMRC have referred a practitioner
to their professional body. In the four years prior to the creation
of HMRC there were four referrals to professional bodies. Back
5
Note by witness: Correction: 5% of cases are responsible
for 70% of the yield. Back
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