Memorandum submitted by HM Revenue and
Supplementary material requested at the evidence
session on 22 November 2006.
The Committee asked about the effectiveness of
the Customs function. Will closing offices on remote areas like
Shetland and Orkney, and relying on mobile teams, degrade the
service we provide? [Q 50]
We currently have two frontline Detection officers
permanently based on Shetland and intend to maintain that presence
for the foreseeable future.
We deploy to risk on the other islands around
Scotland by deploying mobile mainland Scottish based or Strike
Force officers as required. Aberdeen based staff have the prime
responsibility for Detection work across the Highlands and Islands
of Scotland. Again we intend to maintain that presence for the
The Committee asked about the differential yield
outcomes of different kinds of activities. [Qq 5759]
Cost of Collection (pence per £ collected)
|Petroleum Revenue Tax||0.2
|Capital Gains Tax||1.44
|National Insurance Contributions (NICs)
|Insurance Premium Tax||
|Air Passenger Duty||
|Overall Cost (pence per £ collected)
|Tax Credits (pence per £ paid)||2.53
|Child Benefit & Child Trust Fund||
1 From 2001-02 ratios are now based on Resource spend
rather than Cash.
2 Excludes costs of preparing for new tax credits, if
these are included, the ratio rises to 4.58 pence per £ paid.
3 2003-04 ratios have been revised following a more accurate
reallocation of some costs.
4 2004-04 ratio was affected by temporary manual processing
prior to the introduction of automated processing of SDLT forms.
5 Includes the combined ratios for Income Tax PAYE &
Income Tax SAseparately, the ratios are IT PAYE 1.25 and
The House of Lords Judgement in the Deutsche Morgan Grenfell
case. Are there other major group litigation cases going on against
HMRC that will be affected by this judgment? [Q 91]
The DMG judgment potentially affects the Franked Investment
Income (FII) Group Litigation Order (GLO) and classes 3 and 4
of the Advance Corporation Tax (ACT) GLO. We do not currently
consider it affects any other litigation.
You will of course be aware that in the Pre budget Report,
the Government announced its intention to legislate in order to
ensure that the limitation period for recovery of tax paid by
mistake is six years from the date of payment.
Number of bankruptcies for non payment of VAT. What procedures
are there if there are mistakes? [Qq 102-107]
HMRC does not petition for Administration, but it does petition
for Bankruptcy and winding up. In 2005-2006 HMRC made 1321 Bankruptcy
Orders for non-payment of VAT and Excise Duties.
An individual can apply at any time for a Bankruptcy Order
to be cancelled, known as an annulment. This could be for a number
of reasons including when full payment of the debt is made or
where an agreement is reached by all creditors under a voluntary
If there has been an error by HMRC an application for an
annulment can be made by either party and the Bankruptcy Order
is cancelled. During 2005-06 there were 92 annulments, not all
relating to actions taken in 2005-06, for the cancellation of
Bankruptcy Orders relating to non-payment of VAT and Excise Duties.
We do not have a detailed breakdown of the reason for the cancellation.
Constituency case concerning a company called Water Craft.
[Q 108] 
A recent case in this name is not recognised. A suitable
response can be given if further information can be provided.
The PSA target to reduce the underpayment of indirect taxes
and NIC by at least £3.5 billion per year. Which taxes have
contributed most to the achievement of the previous and this target?
Where will the effort be focussed for the current target? [Qq
The yield achieved in 2005-06 reflect the proportions set
out below and given the focus of current work it is our best estimate
that in achieving in the required figures for 2007-08 those proportions
will not be materially different.
|IT (SA & PAYE) and including CGT||40%
|Other (IHT, Stamps etc)||5%
In attempting to achieve the additional yields required by
this target HMRC are focusing on areas where the potential of
tax loss to the exchequer is greatest and not on specific regimes
or heads of duty. For instance we have a key focus on tackling
avoidance schemes related to both employment income (PAYE and
NICs) and business profits (CT, IT & CGT). In addition it
is very difficult to predict with complete certainty when settlements
will be achieved as many will depend on the outcome of litigation
or other legal processes. As many settlements can be for significant
sums this means the proportion of yield by regime can differ considerably
depending on exactly the timing of those settlements.
One of our 2002 targets was to ensure that by 2005 100% of
our services were offered electronically, and our answer to that
in this report is that 97% of transactions are available online.
Is that sleight of hand? What is the percentage of transactions
that is actually represented as a percentage of services? [Qq
While the target prescribed that 100% of services were to
be offered electronically, the target technical note interprets
the PSA target as services measured by volume of transactions.
This reflects the very large volume of services in the former
C&E, but also that most of the transactions occur through
six major services.
Of the 14 key services six are available online (VAT payments
and repayments, International Trade imports and exports, VAT European
Sales lists and Rebated Fuels) and this equates to 43% of the
14 services, but 97% of the total transactions. The services that
are not available are used by a low number of customers (43,000)
with the majority as one off transactions. It was decided that
to deliver online services to achieve the final 3% of transactions
electronically would not provide the taxpayer with value for money.
The ones not available were:
Trader Accounts Payment system,
Child Trust Fund. The areas of research being carried out into
the take up of CTF and areas planned. How the Department aims
to target the most vulnerable groups who are in most need? [Q141]
More detailed information about the Child Trust Fund will
be published next year. Firstly, we will have constituency level
information about the number of vouchers issued and the number
of accounts opened by parents. Secondly, we will be doing a detailed
distributional analysis of the data, looking at take up of the
Child Trust Fund by income group. This will help us to decide
who best to target for help with the Child Trust Fund. Following
the provider annual returns next year we will also be able to
assess the relative characteristics of parents that have and have
not come forward as registered contacts for those accounts which
have been allocated by HMRC.
We are continuing in our marketing activity to raise awareness
of the CTF and encourage parents both to open their child's account,
and to contribute to it once they have done so.
We plan to continue with communications activity targeting
new and expectant parents. For example, we provide information
in Bounty packs (given out to new mums in hospital) and advertise
in natal clinics, parenting magazines and on selected parenting
websites. We are also in the process of introducing a direct mail
reminder to parents who are late in using their CTF voucher.
From 15-20 January we will be holding CTF Week, led by celebrity
mum Sheree Murphy. This aims to raise awareness of the CTF and
support parents to engage with their children's accounts. It will
include activity in partnership with the Voluntary and Community
Sector, a burst of radio advertising and targeted press advertising.
To target harder to reach groups we are working in partnership
with voluntary and community organisations and developing links
to make information available to those parents who need extra
support with the CTF.
We continue to evaluate our marketing activity and the information
provided to parents. We have revised the Child Trust Fund information
pack and website following feedback from parents to make them
easier to understand and use.
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