Examination of Witnesses (Questions 100-119)
MR DAVID
VARNEY, MR
PAUL GRAY
AND MISS
SARAH WALKER
12 OCTOBER 2005
Q100 Mr Mudie: I am just asking these
for the benefit of the Ombudsman.
Mr Varney: And I am sure she will
be very grateful to you. We are looking at the extent to which
we can deliver more case capacity and—the point that was
made earlier—the accessing of multiple files. Clearly, given
the resources we have, there is a limit to how much case management
we can do one-on-one but we are going to take that recommendation
forward.
Q101 Mr Mudie: The three you have
mentioned, the last three, I regard as policy and I would not
have thought you need ministerial agreement for those. But one
to nine are administrative. Have you accepted those as recommendations?
Mr Varney: We have accepted 11
of the 12 recommendations.
Q102 Mr Mudie: Which one have you
not? Just the write off?
Mr Varney: The write off.
Q103 Mr Mudie: So you are accepting
the statutory test?
Mr Varney: We were asked to give
consideration to the adoption and that is what we are going to
do.
Q104 Mr Mudie: That does not mean
to say you are accepting it. You are considering it.
Mr Varney: That is what the recommendation
says. I do not want to be pedantic. It is a good job I brought
my copy. It says, "Consideration should be given," and
that is what we are going to do.
Q105 Mr Mudie: You are considering
it.
Mr Varney: If the recommendation
said, "You will adopt," I might take a different position.
It asks us to consider it and we are seriously—
Q106 Mr Mudie: How long will it take?
Mr Varney: We are in discussion
at the moment in all these aspects. Paul and Sarah have been talking
to the Ombudsman. This is a matter which we will take forward.
Q107 Mr Mudie: On the "payments
page", paragraph 3, are you doing it?
Mr Varney: This is the challenge
in terms of COP 26 and TC846.
Mr Gray: We talked in response
to an earlier question about revising the guidance material, and
this is one of the issues we are looking at as we revise the guidance
material, whether we can make that clearer. It flags up the dilemma
I was discussing with Mr Viggers, in that at the same time as
simplifying the guidance we are trying to make sure that we add
extra things into this.
Q108 Mr Mudie: Could we have a note,
a position statement, up to these dates on each of the recommendations,
whether they are being considered, being reviewed or being implemented,
and, if so which date of implementation.
Mr Varney: Yes, we could do that.[5]
Q109 Mr McFall: The deadline for application
for tax credits renewals was 30 September. How many applications
were supposed to have been returned by that date? Of these, how
many do you estimate have in fact been received? Is it likely
to be more or less than last year?
Mr Gray: Slightly more than last
year. If I could answer it in the negative, in terms of those
that have not been returned: last year the figure was slightly
over 200,000 and this year it is almost exactly 200,000, so the
number for which we have not had completion of the renewal process
is slightly smaller. The caseload of course has gone up a few
hundred thousand over the years, so the number actually returned
in absolute terms has gone up.
Q110 Mr McFall: Can you confirm that
within a few days—if it has not happened already—those
people who missed the application deadline will stop receiving
their tax credit payments?
Mr Gray: As we speak, this week,
termination notices are being issued to those approximately 200,000.
If any of those people were quickly to respond to provide the
information we need and demonstrate to us good cause why they
were not able to do that beforehand, we will reinstate their payments.
Last year, approximately one-half of the people who received termination
notices did respond quickly and we reinstated them.
Q111 Mr McFall: Are you satisfied
that steps were taken to impress upon people the importance of
beating this deadline?
Mr Gray: Yes. We have done more
things this year than we did last year. We have had a bigger and
more proactive telephone campaign, we have done advertising, we
have sent at least one communication—probably more—to
most people. We feel we have done as much as we reasonably could.
Q112 Mr McFall: Will all the people
who have missed the deadline also be expected to repay immediately
the total amount of any overpayments which they have received
in the past? To what extent will that cause hardship?
Mr Gray: They will not face a
repayment schedule any different from anybody else who has an
overpayment, so we will apply the normal rules to them.
Q113 Mr McFall: How do you intend
to treat those people who miss the 30 September deadline and reapply
in October? Will they be treated as new claimants and expected
to repay some of the tax credits received earlier in the year?
Mr Gray: It depends. If they quickly
respond to us and provide the information we need and a reasonable
reason why they have not done it before, we will reinstate. If
we do not hear from them, say within 30 days, then the termination
process will be completed and the overpayment procedure will be
put into place. If they then wish to reapply, it will be treated
as a new claim and normal arrangements for up to three months'
backdating of credit.
Q114 Mr McFall: In that case, how
does such treatment differ from being a penalty for late submission
of the application for renewal?
Mr Gray: I am sorry, you are implying
that we are imposing a penalty for not renewing?
Q115 Mr McFall: Yes. If you are treated
as a new claimant and expected to repay some of the tax credits
received earlier in the year—and you said yes to me on that—how
does such treatment differ
Miss Walker: They have not made
a valid claim. If we have not heard from them by 30 September
and then within a month of getting their termination notice they
still have not notified us that they had a good reason for being
late, then there is no valid claim for that year and they then
have to start again.
Q116 Mr McFall: Is there a penalty
for that?
Miss Walker: No, it is not a penalty,
but there is no longer an entitlement to the amount we have paid
them on the provisional basis for the first part of the year,
so that becomes repayable and we would have to treat them as a
new claim under the legislation.
Chairman: We are going to move on to
the merger.
Q117 Peter Viggers: A large merger:
two large organisations, the Inland Revenue being very much the
larger of the two: three time larger in terms of group size and
18 times the budget, and of course a different ethos. The Ombudsman
review looked at the prospective merger and warned of potential
risks. Do you feel you have been able to maintain service to your
clients during the early period of the merger?
Mr Varney: It would be a foolish
man, reflecting on the conversations we have had for the last
hour and a bit, who said we have done it in every theatre, but
I think that in quite a lot of theatres customers have been satisfied.
The expectations of us are rising and we are trying to respond
to those. I think moving to new premises in the Treasury was actually
very helpful, because people left behind their tribal homes: people
have come together and want to make a success of HMRC, which has
been a very encouraging basis for moving forward. Also, because
we had a year in which Parliament was deciding what were the powers
and status of HMRC, we were able to engage the people who worked
in the organisation in designing the structure. We have looked
around the world at the organisation of Revenue and Customs authorities.
I do not think any Revenue and Customs authority feels it has
the right organisation. That encouraged us to go for the structure
we have gone for, which we think better manages the risks.
Q118 Peter Viggers: Will your customers
have felt a benefit?
Mr Varney: Some of them are remarkably
coy when they feel a benefit. I think we have seen some progress
in terms of reduced size of the self assessment form. We are talking
to all small- and medium-sized enterprises that we can about how
we can have a regime which achieves the objectives we want with
less negative impact on them. I think that has been positive.
I think we are at an early stage in terms of large business: we
have put large business together from the two organisations and
we are beginning to be able to talk to some of the bigger companies
in the land economically about both the old Customs sector taxes
and the Inland Revenue. In law enforcement, there is another class
of customers who are not the customers we want to delight: they
are the people we want to discourage and hunt down; the people
who are not complying with their obligations or are involved in
criminal activity. There I think the merger between the skill-base
of Customs & Excise and the Inland Revenue has been very positive.
Q119 Peter Viggers: Has there been
a clash of cultures or ethos? A constituent's company was fined
one-third of a million pounds by Customs & Excise some years
ago. I pointed out that this would bankrupt the company and, without
a qualm, the company was duly bankrupt by Customs & Excise—a
decision from which there was no appeal. Do you find the staff
are thinking differently? Are you seeking to transfer staff in
order to build up the awareness of these cultures?
Mr Varney: I think the popular
view outside is that we have two cultures. I sometimes think we
have 19 and to have two cultures would be a luxury! It is the
case—and it is true of Customs authorities around the world—that
where they have defined legal obligations and defined situations,
they tend to have a clearer position and a more forceful position
on their interventions: it is either right or it is wrong. In
a lot of cases in the Inland Revenue there has been negotiation
about what the law means. There is a scope for consideration.
We have done what you have suggested, so that there are people
in different parts of the outfit: in areas which were traditionally
Customs, we have Inland Revenue people, and Customs people in
Inland Revenue areas. It will take time, though, because there
is a big need to make sure that people are trained and developed
for HMRC, and most of the people who have worked in the two organisations
have been developed by the Inland Revenue or Customs & Excise.
That is also true for companies. Companies have the same issue.
They have people who have skills in Inland Revenue tax or VAT,
and they will need to produce an integrated big personnel, so
that will take time. Professional firms have to do that too. So
maybe there is some common ground between us.
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