Select Committee on Public Accounts Forty-Ninth Report


2  Improving the performance of Areas

17. There are significant variations between Areas in the coverage, results and costs of enquiry work. On average 4% of returns are subject to enquiry, but this ranges from 2% to 9% across Areas so that companies of a similar size and complexity are more likely to be subject to an enquiry in some Areas than in others. The average yield from enquiries in some Areas was five times higher than in others - a difference not explained by economic factors. The proportion of enquiries resulting in a tax or profit adjustment ranged from 44% in one Area to 80% in another. Similarly, average enquiry costs were two to three times higher in some Areas than in others, which was not simply the result of economies of scale in Areas with larger caseloads or the complexity of the task.[18]

18. These variations in the coverage and results of enquiries indicate scope for higher tax yields and improvements in efficiency. For example, if Areas with below average enquiry yields could have secured the national average, the total yield could have been £60 to £100 million more in 2004-05, and more still if all Areas could have matched the best performing Areas.[19]

19. This variation in performance stems from a mismatch between the numbers of staff and skills deployed on Corporation Tax work in the 68 Areas and the distribution of the company caseload. It also reflects the small size of some Areas: the largest having 33 Corporation Tax staff, but some only five. A third of Areas had a target number of enquiries which was more than 25% higher or lower than the number warranted by their company tax-base (Figure 3). Areas have also adopted different risk assessment practices, with some making greater use of more sophisticated techniques and databases.[20]

Figure 3: Corporation Tax enquiry staff in Areas - comparison between complement and staffing levels indicated by the Areas' company caseload (2004-05)[21]



20. The Department acknowledges the need to improve performance. It intends to introduce the type of benchmarking analysis in the C&AG's Report to drive up performance in Areas to the standard of the better-performing Areas. It is also introducing new resource planning information systems to identify more accurately the work done by staff.[22]

21. To address variations in workload and even out inconsistent coverage, some Areas have made informal arrangements to redistribute their workloads. The Department expects to address the more deep-seated causes of performance variation through a more fundamental restructuring of the network, as it rationalises the operations of the newly merged Department. It intends to restructure the network into fewer, larger offices. The restructuring will need to take account of all work carried out by local offices, of which Corporation Tax work, involving 2,000 out of the 39,000 staff, is only part. Any transition to a new structure would need to recognise that the work depends on a cadre of professionally trained staff with many years of experience, and that new staff could not easily be recruited locally to fill posts.[23]

22. On Corporation Tax work, the Department is moving towards a nationally-based assessment of risks. Rationalising into fewer offices would allow greater specialisation in risk assessment techniques and also in compliance work on particular business sectors. While a local presence enables staff to acquire knowledge of their local companies and agents, only 5% of the Areas' work involves visiting businesses.[24]


18   C&AG's Report, paras 2.13-2.14, 4.4 Back

19   ibid, para 2.23 Back

20   ibid, para 2.15; Qq 13, 28 Back

21   C&AG's Report, Figure 7 Back

22   Qq 28, 78 Back

23   C&AG's Report, para 2.16; Qq 14-15 Back

24   Qq 11-13, 52-53, 76 Back


 
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