Examination of Witnesses (Questions 40-59)
HM REVENUE AND
CUSTOMS
23 OCTOBER 2006
Q40 Greg Clark: May I ask you one
last question about a different subject? It relates to the e-portal
you introduced. Paragraph 2.35 of the Report says that the e-portal,
"was introduced in 2002"—as we know. That paragraph
goes on to talk about "subsequent guidance issued by the
Office of the e-Envoy"—that is, subsequent to the e-portal
going live. In fact, that guidance was issued in September 2002,
only a month after the e-portal went live and when it was already
version 3.
I have a copy of the e-Envoy's guidance from that
time and it is absolutely clear that the guidance that came in
September 2002 said, "central government departments and
agencies must comply"—"must comply" is in
bold, which is the emphasis in the guidance—"with this
framework when installing and operating electronic business services".
Yet, the report goes on to say, "the HMRC first became aware
that attempted fraud through the e-portal was an emerging problem...
at the end of 2004". It also says that the peak was November
2005 and that the e-portal was not closed until 2 December 2005.
In other words, three years and three months since the e-Envoy's
report said that you were under an obligation to comply with its
guidance, you finally closed the portal. During three years and
three months there was a positive obligation in bold in the e-Envoy's
report, yet nothing was done. Who is responsible for that?
Mr Gray: The Department is responsible
for that. What we were seeking to do during that period, as I
sought to say in my earlier answer to the Chairman, was to strike
the appropriate balance between accessibility and the use of the
e-portal for those who wished to use it, and ensure appropriate
security.
Q41 Greg Clark: What is the point
in having an e-Envoy that gives unambiguous guidance that central
Government Departments and agencies must comply with, if agencies
decide themselves rather airily to strike a balance between convenience
and those injunctions?
Mr Gray: I understand what you
are saying, Mr Clark. We reached that decision in December 2005
and we are now absolutely clear that we will not reintroduce the
portal until we are satisfied it meets absolutely full and current
security requirements.
Q42 Mr Davidson: May I start by asking
about the extent to which you share information on the income
of individuals and families with other Departments? Do you have
access, for example, to information supplied to sections of the
Home Office?
Mr Gray: We exchange information
with other Departments where there is an appropriate gateway.
Q43 Mr Davidson: Is there an appropriate
gateway with the Immigration and Nationality Directorate?
Mr Gray: Yes. There are certainly
some gateways. I am afraid I do not have in my head precisely
what the elements are that we can exchange.
Q44 Mr Davidson: Okay. I have a case
arising in my constituency concerning an overstayer seeking indefinite
leave to remain on the basis of marriage. Obviously they want
to declare that they have enough income to support themselves
and the figure for income that they have produced in relation
to that is vastly different from the figure they have declared
for Tax Credits. Indeed, the figure declared to the Home Office
could be up to £48,000 per year, whereas the 2005-06 Tax
Credits award notice could show both husband and wife as having
a nil income. Would that be picked up?
Mr Gray: I am not sure whether
there is an appropriate gateway for those two sources of information.
I could certainly look at the details of that case, if you want
to let me have them.
Q45 Mr Davidson: I think that we
would want not only that case reviewed, Chairman. Perhaps we could
have a response that indicates whether there is a gateway, and,
if there is not, what is being done to create one.[3]
Does the risk assessment process address any specific
difficulties around migrant workers?
— suspects that a person does not have
leave to enter or remain in the UK, or work in the UK;
— suspects that a person has undertaken
employment in the UK in breach of restrictions or conditions imposed
on them;
— is determining whether an applicant for
British Citizenship is of good character, or
— is applying rules relating to maintenance
and accommodation to an applicant for entry clearance (eg does
a sponsor of someone applying to come to the UK have sufficient
income to support the applicant).
Information may also be disclosed under Section 19
of the Anti Terrorism Crime and Security Act 2001 to the Home
Office if the information would assist them in any criminal investigation
or prosecution. There is also a gateway to allow information held
for former HM Customs & Excise functions to be disclosed for
the Home Office's immigration functions at Section 20 Immigration
and Asylum Act 1999.
Mr Gray: Yes, it does. I might
ask Mr Hartlib to add to this answer. As part of our risk assessment
processes, we have undertaken to look at some categories of migrant
workers, in particular those employed by gangmasters. The results
of that work so far suggest that there are no significant risk
differences between migrant workers and others, but Mr Hartlib
might want to add a bit on the detail of that work.
Mr Hartlib: Yes, the same risk
assessments that are applied to Tax Credit claimants generally
apply to migrant workers. In addition, as Mr Gray said, we have
recently been carrying out a project to look at specific risks,
as we recognise that there is anecdotal evidence that migrant
workers are a particularly risky community.
Q46 Mr Davidson: Okay, can I clarify
whether children who are the subject of Tax Credit claims are
required to be in the United Kingdom?
Mr Gray: It is a rather complicated
position.
Mr Davidson: A simple yes or no would
be sufficient.
Mr Gray: The answer is not a simple
yes or no. In some cases, they are required to be present, but
in other circumstances—if the main earner is working, has
a right to work and is present in the UK—they are not required
to be present.
Q47 Mr Davidson: In circumstances
where it is not necessary for the children to be in the UK, what
steps are taken to verify that they actually exist?
Mr Gray: The claim would go through
all our normal risk assessment processes in relation to children.
I do not know whether Mr Hartlib can add anything.
Mr Hartlib: Nothing further at
this stage.
Mr Davidson: Can you repeat that?
Mr Hartlib: I have nothing to
add to what Mr Gray said.
Mr Davidson: But he referred the matter
to you.
Mr Hartlib: He asked if I had
anything further to add.
Q48 Mr Davidson: I think that that
is sufficiently clear.
Do Tax Credit claims for children require the
same level of proof as Child Benefit claims?
Mr Gray: Yes, they do. Indeed,
we operate data matching arrangements between the two benefits
to seek to add to the verification that is part of the verification
procedures that I referred to earlier.
Q49 Mr Davidson: My understanding
is slightly different. Perhaps that could be pursued subsequently.
Can I clarify what steps are taken to verify details
of a claimant's income and circumstances in a previous period
when they lived outside the UK? If Tax Credits are based on someone's
previous income, what steps are taken in the case of migrant workers
to ensure that the stated circumstances and income are correct?
Mr Gray: We would operate the
normal procedures for all claimants in relation to verification
of income, and if the risk factors suggested a high-risk case
into which we ought to look more deeply, we would make further
inquiries. But we do not operate a distinct regime for migrant
workers because nationality is not a primary consideration for
us.
Q50 Mr Davidson: I understand about
nationality, but someone who has lived abroad and produced details
of previous income and circumstances that cannot be verified would
seem to be fairly high risk. I am disappointed that they are not
checked.
Mr Gray: Obviously, we face that
risk factor in dealing with UK nationals who might previously
have lived abroad.
Q51 Mr Davidson: That is right, but
I suspect that there are not quite as many of them as there are
migrant workers who have come here recently.
Mr Gray: I do not have the precise
figures in my head for UK nationals, but it is worth saying that
the number of claims that we have accepted for child Tax Credit
from migrant workers, based on the Home Office data published
last August, is about 14,000. That compares with more than 430,000
migrant workers who are registered under the workers registration
scheme, so it is important to bear in mind the context.
Mr Davidson: That is right.
Mr Gray: A rather small proportion
of the claims that we have accepted for Child Tax Credit are from
migrant workers. Indeed, there are a number that we have not accepted.
Q52 Mr Davidson: Can you clarify
how many you have not accepted?
Mr Gray: I think we have had claims
for about 21,000, and 14,000 have been accepted.
Q53 Mr Davidson: So a third of the
claims made have been false?
Mr Gray: No, a third have not
been accepted. A number may still be being reviewed.
Mr Davidson: Indeed, but 7,000 of 21,000
have not been accepted at the moment, although they might be in
future. That seems to me to be a fairly high proportion.
Mr Gray: It also indicates, in
relation to your earlier questions, that we are going through
fairly rigorous procedures in reviewing these applications when
they come in.
Mr Hartlib: Mr Davidson, I do
not know whether it would help if I go back to the project that
I mentioned. We thought that this was potentially a higher-risk
area and we wanted to carry out research and investigation to
find out whether that was the case. The project is not yet complete,
but the emerging findings are that the risk associated with migrant
workers is no different from and is at a level comparable to that
for other Tax Credit claimants.
Q54 Mr Davidson: I find that surprising,
because it does not gel with the information that I have been
given, but can we clarify what systems you have in place for circumstances
in which someone is awarded Tax Credit, leaves the country and
then comes back again? As I understand it, there is no mechanism
that would automatically pick that up. The allegation that I have
is that that has been quite widespread.
Mr Gray: There is a general arrangement
that people leaving the country, if that exceeds either eight
or 12 weeks depending on the circumstances, are no longer entitled.
We make it clear to people, whether they are migrant workers or
UK nationals going abroad, that that is the position. We are obviously
aware of press stories and other things that suggest there has
been a problem of the sort that you are referring to, but the
investigations that we have done—again, this relates to
the work Mr Hartlib described—have not led us to conclude
that there is a particular issue here.
Mr Davidson: Okay.
Mr Gray: But we obviously continue
to be vigilant in this area and would take action if we thought
there was an issue.
Q55 Mr Davidson: Yes, how many penalties
have you charged where people have left the UK and not told you?[4]
Mr Gray: I am afraid I have not
got that figure in my head. I can—
Q56 Mr Davidson: Okay, perhaps we
could have that. What action is taken if a member of the public
or someone working for a personnel agency reports to you that
a migrant worker is making a false claim?
Mr Gray: If we got specific information
of that sort, it would be passed to our compliance teams and,
depending on the nature of the information we are given, we would
consider it for investigation.
Q57 Mr Davidson: Would it surprise
you to be told that a member of staff in a personnel agency in
my constituency reported on repeated occasions to the Revenue
office in East Kilbride that false claims were being made and
was told that that was not the responsibility of the people with
whom she was dealing; their responsibility was to get the payments
made, irrespective of whether the claims were false, because their
targets were all about getting the payments out? Repeated complaints
of that sort were made, to no avail.
Mr Gray: I would be disappointed
if that were the case and I would very much wish to know about
those circumstances and look into them.
Q58 Mr Davidson: I think that will
undoubtedly happen. Can you clarify what training is provided
to local staff who are administering Tax Credits in, say, East
Kilbride about exactly who can and cannot claim Tax Credits? Do
you believe that the training they are provided with is sufficient?
Mr Gray: A general level of background
training is provided. What is most relevant in that context is
that all claims are subjected to risk assessment criteria; for
the majority of staff who are dealing with claims, that will be
after the point at which the risk assessment process has been
undertaken.
Q59 Mr Davidson: Would it surprise
you to be told that the staff of the personnel agency with whom
I have been dealing frequently have to draw the rules to the attention
of the staff in East Kilbride? The staff of the personnel agency
know more about the rules than the people who administer them.
Mr Gray: Again, that would surprise
and disappoint me, but if that is the position, Mr Davidson, I
would very much encourage you to let me know personally, so that
I can look into it.
3 Note by witness: There are two statutory
gateways for HMRC to pass Tax Credits information to the Home
Office. Section 130 Nationality, Immigration and Asylum Act 2002
provides lawful authority for information to be disclosed on Tax
Credits and other former Inland Revenue functions when the Home
Office: Back
4
Note by witness: We do not hold that information. Back
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