Examination of Witnesses (Questions 80-99)
16 MAY 2007
HM REVENUE AND
CUSTOMS
Q80 Mr Khan: Roughly when?
Mr Gray: We are already on that
road.
Q81 Mr Khan: Okay. The other recommendation
is to provide a single financial account to give a view of the
business's financial position across the range of taxes.
Mr Gray: Which is essentially
the first point we were talking about.
Q82 Mr Khan: I suspect the biggest
complaint that businesses have that file both a VAT return and
a corporation tax return is that they have to do two. Is that
just the nature of the beast that they will have to do the two
because it is inconceivable to have one form because it would
be too complicated?
Mr Gray: No, it is not the nature
of the beast. It reflects the way in which both the former revenue
departments had structured their business on essentially a tax-specific
basis and the business processes and the supporting IT systems
are on that basis. What we are looking to do, and I am afraid
this is the reason that all these single view things are going
to take a number of years, is turn round the whole structure of
the business so that we are able to take a single view across
a company. Does that mean companies will be able to fill in just
one simple form to collect all their taxes? Probably not. What
we will be able to avoid is a duplication of basic information
where at the moment, because they are separate processes, companies
are having to give us some of the same basic information.
Q83 Mr Khan: How easy would it be
for a company to provide one set of figures on a form for VAT
liability with corporation tax liability still to be worked out,
rather than providing figures on two separate forms for those
two liabilities?
Mr Gray: VAT and corporation tax
are very different types of tax. One is a contemporaneous consumption
tax—
Q84 Mr Khan: That was my "nature
of the beast" point.
Mr Gray: —and corporation
tax is profits after the event. My point about the benefits to
business is that there is a lot of rather basic information about
a company that is common to both those taxes. At the moment, because
our systems are separate, companies have to duplicate that. The
deeper you get into the specific characteristics of the tax in
question inevitably the information we need is going to be rather
different. When we get into a position in which we are looking
at those things in parallel rather than separately, it will provide
very significant benefits for business and us, because taking
a single view of what is going on in a company is going to be
more effective and efficient for us too.
Q85 Mr Khan: You have dealt with
issues about customer service and reducing the cost of business
and I have taken on board your points. If we look at the actual
figures, 85% of VAT tax returns are submitted on time. Should
we not just accept that?
Mr Gray: Should we?
Q86 Mr Khan: Yes. Is it not just
inevitable that there will always be some businesses who fail
to return their VAT forms in time? How much of a priority of yours
is it to try to increase that figure or have you come to accept
it?
Mr Gray: As I have said to some
of your colleagues earlier, relatively low on the basis of our
assessment that timeliness as such is not the most important issue
in ensuring we collect the right amount of tax. If our analysis—and
we are doing more analysis following the NAO's recommendations—were
ever to point to the fact that the 15% of VAT coming in late was
having a serious impact on our ability to collect the right tax,
then we focus on it, but that is not the view we are currently
taking.
Q87 Mr Khan: What about corporation
tax? If 77% to 79% are on time, is that acceptable?
Mr Gray: At the moment it is because
it is actually slightly above the target we have been set. There
is a target for corporation tax but not for VAT. We are slightly
above the target and our view, and it is supported by the figures
the NAO brought out, is that there is relatively little tax in
doubt or at risk from those who do not file on time, predominantly
because a very large proportion of those non-filers quite quickly
are not in business.
Q88 Mr Khan: Do you have any analysis
of the size of the businesses that are filing VAT or corporation
tax late? Are they small businesses?
Mr Gray: They are predominantly
small. If we looked at it in terms of the proportion of tax take
rather than just weighting every business, a very much higher
proportion is being filed and paid on time.
Q89 Mr Khan: If you are going to
be crude and do a cost benefit analysis of the money, time, effort,
energy, resources it takes to chase these companies and the tax
you could recuperate, assuming they did not go under and all the
rest of it, presumably the calculation has been made that it is
not worth it.
Mr Gray: Yes. That has been a
key bit of the calculations why—the answer I gave to some
of your colleagues earlier—this is not the top of our priority
list.
Q90 Mr Khan: Can you go to figure
3 and paragraph 1.2, the corresponding paragraph? It says that
you raised 450,000 penalties for late filing of company tax in
2005-06 but you are not sure of the overall value of the penalties
you have imposed. Have I misunderstood that?
Mr Gray: No, you have not. You
have correctly understood what I said in response to one of your
colleagues earlier.
Q91 Mr Khan: You impose 10 fines,
for argument's sake, and you have no idea that each fine, if you
add them together, comes to £200. I am making up the figures
obviously.
Mr Gray: As I have acknowledged
already, it is a deficiency in our management information at the
moment. What we are talking about for the nature of the penalties
is that some are flat rate and therefore it is very easy to do
the sums but others are percentage ones and that is what underlies
the deficiency in our management information at the moment and
why we cannot—
Q92 Mr Khan: That will be sorted
out by . . . ?
Mr Gray: I do not have a precise
target date for that and although this is a deficiency, it does
not feel to me like the most important thing I need to fix in
the organisation.
Q93 Mr Khan: You have made a conscious
decision that that is not one of your priorities.
Mr Gray: Yes.
Q94 Mr Khan: My final question is
on the issue of online filing. Mr Dunne spent quite a bit of time
on this. The mandatory online filing for VAT has been deferred
to 2010 with company tax returns 2011 and we rehearsed the reasons
why there are advantages on both sides for it to be done online.
What work are you doing before then to ensure that companies who
I suspect, if we were to stereotype and generalise, may not be
the ones who want to do that or have the skills to do that, are
ready to do that in 2010-11?
Mr Gray: One of the key things
in our education and guidance activity, particularly around relatively
new businesses, is to try to help them generally to comply with
their obligations. Over the next couple of years there is scope
for us to get a lot better and a lot smarter at pointing to them
the particular advantages and what they need to do.
Q95 Mr Khan: How do you do that?
Do you do workshops during the day when they are working? When
do you do that?
Mr Gray: No. We have done some
workshops during the day and the evenings; increasingly we are
looking to provide guidance in more modern and smarter ways.
Q96 Mr Khan: A lot of these smaller
businesses may be husband and wife and sons working in the business
who cannot afford for a third of the workforce to go to a workshop.
Mr Gray: No, so we are increasingly
using online guidance, we are working with tax agents, other intermediaries,
organisations who support new businesses and trying to use our
education through those channels. I am sure there is scope for
us to do a lot better on that over the next few years.
Q97 Mr Khan: What we do not want
to happen is to come back here in 2011 or 2012 and discover that
the mandatory online VAT/corporation tax system has only got a
take-up rate of a percentage lower than you would expect, if you
see what I mean.
Mr Gray: I certainly do not want
to come back in that position.
Q98 Mr Williams: Just a piece of
arithmetical clarity. We talk about a target of cutting by at
least a third the business costs incurred with VAT and corporation
tax. In paragraph 3.8 we are told that the VAT cost is £170
a year, the corporation tax cost is £70 a year and then there
is this additional tax, the self-assessment one to be included.
Just 10% of those figures is peanuts, absolute peanuts, is it
not? What difference is it going to make?
Mr Gray: It is 10% of those numbers.
I have been set a target that says reduce them by 10%. I very
much hope I can exceed those targets. I am certainly not, once
I have hit 10%, going to say I am not going to try any harder.
Q99 Mr Williams: In terms of reducing
a burden, £19 a year does not exactly strike one as the most
massive of burdens, does it, so the relief is not all that great?
Mr Gray: No, and that is why I
am keen not to be limited by the targets that I have set. If I
can get the 20%, 30%, 40%, that would be great.
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