Examination of Witnesses (Questions 60-79)
16 MAY 2007
HM REVENUE AND
CUSTOMS
Q60 Mr Wright: And you think that
is compatible with efficiency savings and the tens of thousands
of job losses that HMRC have carried out and will be carrying
out in future years to meet the 5% real savings year on year?
Mr Gray: It is not only consistent
it is actually a rather important enabler.
Q61 Mr Wright: But that loss of collective
memory on a regional basis is surely an important factor?
Mr Gray: The direction in which
we are going is seeking to make sure that our memory and intelligence
from whatever source is captured and codified in our systems.
That is going to be a lot more effective than it just resting
in individuals' heads. We are obviously seeking to make sure,
as numbers in the organisation do decline, that we do all we possibly
can to capture and retain that memory and then systematise it
better.
Q62 Mr Wright: May I draw your attention
to page 7 (i) "Getting tax returns in on time"? The
NAO seems to have made a perfectly reasonable recommendation about
identifying the risk factors by sector. In the Report it seems
to happen with regards to VAT; paragraph 1.7 seems to say there
are certain traits of relatively poor filing performance, but
that is not the case with company tax. Have you hazarded a guess
as to which sectors are poor in terms of corporation tax?
Mr Gray: What the Report was saying
in relation to both taxes is that we ought to be developing and
improving our risk assessment not just by sector but by a range
of other characteristics. What emerges from the work we have done
so far, but we are putting more effort into that, is that particular
sectors often are not a primary driver of relative risk. We are
obviously always on the look-out to see whether there are particular
sectors, and what we are looking at in particular now is whether
there is a correlation between lateness and particular sectors
and a correlation in which lateness in one sector seems to be
a major cause of non-compliance. The results so far suggest that
is not the case in most sectors.
Q63 Mr Wright: Is there any correlation
between regions, say the North West might be slow at paying compared
with the South East? Do any enhancements take place with regard
to that?
Mr Gray: I am not sure we do give
a lot of weight to that.
Q64 Mr Wright: Does any analysis
take place with regards to that?
Mr Lloyd: The key correlation
we are finding is between the size of the business and, as the
Report says in paragraph 1.10, the sectoral cut and looking at
large business we are seeing very much a reduced level of risk.
Q65 Mr Wright: But would you know
whether it was a regional basis or not? On page 7 it says: "The
Department did not, in 2005-06, monitor whether individual Area
Officers met targets for processing returns promptly and accurately".
I would have thought that would have been a key performance indicator,
but that does not seem to be the case.
Mr Gray: I would accept that that
is a past deficiency that we ought to be putting right; we talked
earlier about deficiencies in management information. What we
are now looking to do though is potentially streamline significantly
the way in which we do the processing. As the Report brings out,
there is a very sharp difference at the moment between the way
in which filing is done for VAT, where it is all done in a single
centre in Southend in the former Customs site and corporation
tax, where it was traditionally done in a large number of network
offices around the country and was not done as a specialist task.
It was often done alongside compliance work and other things and
we are now definitely looking to put in place the more rigorous
information you are talking about and there is a presumption over
time that we will probably move to more specialised, more centralised
areas in order to improve that very control point.
Q66 Mr Wright: Page 10, figure 2.
There has been a virtual doubling of assessments in terms of VAT
returns outstanding at mid-October 2006 not replaced by a late
return. I may have misunderstood that but that is quite disturbing.
Is there a significant loss to the Revenue because of that? Table
2, between 2004-05 83,000 assessments and 2005-06 150,000 assessments
which were not replaced by a late return. Is that a disturbing
trend or have I just misunderstood that?
Mr Lloyd: The simple answer to
that is because we are talking about an earlier period where they
have had longer to be replaced by a return. Less time has elapsed
since the figure of 150,000 for 2005-06 for a return to be issued
and for it to be replaced.
Q67 Mr Khan: You mentioned earlier
on your issues of priority and in answer to a question you explained
that a certain issue was not an issue of priority. How much of
a priority is customer service to you?
Mr Gray: A very high priority.
Q68 Mr Khan: The biggest demand businesses
have is a single point of contact. How are you meeting that request?
Mr Gray: Over the course of the
next two to three years that is a very big priority for us as
an organisation. Again, it was something that was discussed in
the hearing a few weeks ago.
Q69 Mr Khan: How soon before a business
has a single point of contact? It is 2007 now.
Mr Gray: It is likely to be 2010
or 2011.
Q70 Mr Khan: So another four years
before their desire to have a single point of contact has meant
that customer service is your highest priority. How high a priority
is reducing cost for businesses?
Mr Gray: Again, that is a very
significant priority.
Q71 Mr Khan: As high as customer
service or below customer service?
Mr Gray: Broadly balanced between
the two. I have explicit targets for both and I am seeking to
meet both in parallel.
Q72 Mr Khan: 30% of the total burden
of dealing with VAT is the administrative burden of preparing
and filing VAT returns. The Chancellor of the Exchequer has imposed
a target upon you of reducing that by 10% over five years from
2006. You are going to meet that target presumably.
Mr Gray: I very much hope I am
going to exceed it.
Q73 Mr Khan: 50% of the total burden
of dealing with corporation tax is the administrative burden of
filing and preparing corporation tax returns. How much are you
going to reduce that by?
Mr Gray: That is covered by the
same target of 10% because that 10% target was not specific to
a particular tax regime.
Q74 Mr Khan: We know the Chancellor
of the Exchequer has assisted you in that goal by imposing this
target upon you. The NAO have also tried to help you and have
given you some ideas on how you can reduce the cost to business.
Idea number one is to remove the requirement to file returns from
those businesses with no tax liability. The Chairman referred
to this in his opening questions and your answer was no.
Mr Gray: My answer was that that
was a proposition that we put forward that we are perfectly happy,
indeed keen, to pursue and in response to reaction from our customers
we concluded that if they do not want it, we will not force it
on them.
Q75 Mr Khan: Mr Gray, you have used
42 words to say no. You are not going to go ahead with that recommendation
are you?
Mr Gray: At this stage, no.
Q76 Mr Khan: Right. The second thing
the NAO recommended is to simplify the tax systems and returns;
paragraph 3.5 of their Report alludes to this. What is your response
to that recommendation to try to reduce the cost to businesses?
Mr Gray: We are very keen to respond
to that and are looking to see how we can best meet that.
Q77 Mr Khan: The third recommendation
they make in broad terms is that you could align the dates for
payment of corporation tax, the filing of accounts to Companies
House and the filing of the company tax return, which would reduce
the cost to business. What is your response to that recommendation?
Mr Lloyd: We are looking to allow
joint filing for Companies House and for HMRC in parallel with
the mandation of CT online in 2011.
Q78 Mr Khan: Also 2011. The other
recommendation they make is to introduce better interventions
rather than costly inspection inquiries to help businesses comply.
What is your response to that one?
Mr Gray: Yes.
Q79 Mr Khan: Yes; you agree with
that. Also 2011?
Mr Gray: I hope we can do that
more quickly than that and progressively roll that out over time.
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