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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