Examination of Witnesses (Questions 40-59)
HM REVENUE AND
CUSTOMS
14 OCTOBER 2009
Q40 Don Touhig: Those smaller amounts
are roughly around 6%; with those smaller figures do you have
a process whereby you make two or three attempts and then maybe
say "We have spent hundreds of pounds in order to recover
£250"?
Ms Strathie: At the moment we
are separating this into those who are currently in award, in
which case then we will pursue deduction from existing award,
those who are out of award and how many of those are in gainful
employment or how many of those are perhaps in the welfare system
which is why we are looking across DWP as well.
Q41 Don Touhig: We also see in figure
30 that you are having more success recovering overpayments from
ongoing awards. You are already setting that up, are you?
Ms Strathie: It is a lot easier
for many of our customers that we take the money before they receive
it.
Q42 Don Touhig: How many cases of
overpayment where the claimant says it is your fault get referred
to the Parliamentary Ombudsman?
Mr Summersgill: I am afraid I
do not have that with me. It is a very small number indeed.
Q43 Don Touhig: Could you let us
have that, please?
Mr Summersgill: I can let you
have that, yes.[3]
Q44 Don Touhig: That would be very helpful
indeed.
Ms Strathie: It is important to
remember that we have the Adjudicator as the step in between which
is why we have so few.
Q45 Don Touhig: You are on first
name terms.
Ms Strathie: We are on first name
terms, yes.
Q46 Don Touhig: We are constantly
told that overpayments occur because claimants have failed to
complete paperwork correctly, but have you looked at that from
the point of view of trying to simplify the information? A case
which you may be familiar with that I dealt with some while ago
was where a constituent had to fill in the box that said "Are
you in receipt of Income Support?" and the constituent had
said, "Yes", but underneath had stated that this had
ended on XYZ date, and your system could not scan that in, so
we have ended up with a couple of years of correspondence because
the system just was not capable of dealing with that.
Mr Summersgill: Through our tax
credit transformation programme we are doing an awful lot to improve
our forms, our public notices, our guidance and the help we give
people, including looking at simplifying forms. Most recently
we have issued a new form of claims pack with much more simple
guidance in it. The specific problem to which you relate, it is
still possible for that to occur because, as you say, the form
is computer-scanned. What we are doing more routinely now is face
vetting those claims to see if there are manuscript additions
that we need to take account of and making sure that those are
recognised. We are also looking at whether there are some opportunities
to change the whole of that process and actually have more manual
intervention at the time the claim form is scanned and input to
the computer.
Don Touhig: Thank you for that.
Q47 Angela Browning: Could I just
begin with tax credits? I see that you are recovering £413
million under time to pay arrangements; I wonder what analysis
you have made—given that unemployment is rising—of
the ability of people who come to those arrangements if their
jobs finish. Have you made any analysis of the impact of unemployment
on your debt in this area?
Ms Strathie: We have done quite
a lot in terms of the effects of the recession. We have governance
around trying to look ahead at different impacts and time to pay
in all of our regimes has been focused on, understanding that
it is a difficult time, a very difficult time in this particular
type of recession and where it has started, and in bringing people
into compliant regimes. That means having a conversation with
customers about what the issues are. One of the things we have
done very successfully in partnership with Jobcentre Plus is that
in each redundancy situation where there are redundancies of over
20 Jobcentre Plus provides a rapid response service to the employer
and the employees and HMRC has joined that rapid response force.
There is opportunity there for people coming out of work who could
fall into the category that you have talked about, but also for
others who become eligible for credits. We are trying to work
in a very proactive way to help people do things right.
Q48 Angela Browning: I know we have
talked in this Committee before about tax credits, about the system
as it is that you are working with and that you advertise and
encourage people to make sure they are aware that on an annual
basis they have to get in touch with you.
Ms Strathie: Yes.
Q49 Angela Browning: But of course
the circumstances, which are many and varied, change throughout
that tax year, and I would just like to clarify because it applies
to some of the case work I am doing at the moment exactly how
you handle the change of circumstances midway through the tax
year. I can think of one case where I have notified your office
that somebody had married, only for them to receive a letter saying
that at the end of that year it would either be a plus or a minus
situation. It does seem to me that you are storing up problems
for yourself if, when there is a significant change of circumstance,
which they have taken the trouble to notify you of, somehow a
long period is going to pass before that is then assessed in terms
of the reality of it. Why do you work to such a system, why can
you not asses that change of circumstance at the time?
Mr Summersgill: When a change
of circumstances is reported it will be processed and would immediately
affect the award. I obviously do not know the circumstances but
if by marrying two single households have become one then they
would need to enter into a new claim with us so there would be
a new award for the remainder of the year.
Q50 Angela Browning: Why have they
been told that there will then be a plus or minus at the end of
the year? It looked like a standard letter that had gone out.
Mr Summersgill: That sounds quite
unusual. If you would like to send it up.
Q51 Angela Browning: I may well send
it to you.
Ms Strathie: Please do. We all
know the history of the tax credits system and the difficulties
around it and one of the real challenges for us is that we have
a system where the letters are hard-coded into the system which
makes everything much more difficult to change and much more expensive
to change. We take away the point that people should be able to
tell us a change and we should be able to reassess them and tell
them what they are entitled to, absolutely, and we will take that
particular case away.
Q52 Angela Browning: That does seem
to be a problem. Even so you mentioned to the Chairman that you
were pleased that you had recovered more debt, but in terms of
tax credits as of March 2009 you had £4.4 billion. It seems
to be just flat-plaining, this ability to recover a debt.
Ms Strathie: That is absolutely
right, we have seen a serious increase in tax credit debt which
is part of the reason, but not all of it, why we have completely
revamped our approach to recovery. Just to remind ourselves though,
we have gone through a point where people were complaining that
they could not get their tax credits, people had difficulty getting
through to us. We have put in a number of steps that have allowed
more people to receive their benefits and this year's renewal
process during the summer was our most successful yet. Once you
actually get on top of paying the money out and servicing your
customers then you have to get back to the other things that perhaps
were not at the top of the priority list whilst we brought that
around.
Q53 Angela Browning: It is a lot
of money, just not to be eating into, making any difference.
Ms Strathie: Yes, but there are
limitations and in fact we do not use the same set of levers on
tax credit debtors that we would on others—distraint, for
example. We would not use the courts in the same way, we would
not send the bailiffs in in the same way and I do not think that
that is what people would want us to do.
Chairman: We will have to break for a
division now I am afraid.
The Committee suspended from 4.21 pm to
4.28 pm for a division in the House.
Q54 Angela Browning: I just have two
minutes, so perhaps we could have two quick questions and answers
on income tax. There is an 82,000 backlog of cases where self-assessed
taxpayers have appealed to the department. That trend seems to
be going up. Is it the case that the word is getting around and
people are working the system; in other words, that they are putting
in more bogus appeals to delay the day of judgment?
Ms Strathie: I do not think we
have evidence of that.
Mr Harra: I do not think there
is evidence of that. It is unlikely, because if they postpone
tax which ultimately they have to pay then they will have to pay
interest on that. If they are in genuine difficulty and are unable
to pay, it is much more beneficial for them to go to our business
support service and get help that way.
Q55 Angela Browning: Finally, could
you give us an update on the position as far as bringing together
individual's employment and pension incomes. I declare an interest,
Chairman, as I have both now. We understand from page R5, paragraph
1.2, that this is something that you were working towards. Could
you tell us what the progress is? It is quite complex. People
have different pots of money and they are dealing with the Revenue.
I get three different codings at the beginning of the year before
it finally all comes together in the melting pot. Surely that
system drains your resources, does it not?
Ms Strathie: The issue is that
people live very different lives from those of single employer
straight over to single pension. We have worked with some customers
on this—actually working with pensioners—and with
our colleagues in DWP and with my people on processing at one
of our largest sites in Cardiff, and we have redesigned the process.
We have redesigned the help sheet, which we have tested with all
of our pension customers, and it will now go on national roll-out.
We have made it much easier for people there. We also mandated
employers to provide occupational pension information and we are
now working with DWP to look at creating a safe gateway to move
information on state pensions between the departments. All of
this in an effort so that we could efficiently and more speedily
help people get the right coding. We do recognise that pension
customers move in many cases from a very simple straightforward
PAYE environment into a self-assessment environment and multiple
occupational pensions, so it is an area of focus and will be for
quite some time in how we can take the customer inside and make
the whole process work better.
Q56 Angela Browning: This will continue.
People do not work for one employer all their life and just end
up with one pension.
Ms Strathie: No.
Q57 Angela Browning: It is complex.
Ms Strathie: It is very complex.
It is complex for the customer and it is complex for us.
Chairman: Thank you very much. Austin
Mitchell.
Q58 Mr Mitchell: Is there any estimate
of the effect of greater use of tax avoidance schemes, many of
them purchased from the big accountancy houses—say fiddling
finance and profits through tax havens? How much of the fall in
tax revenues is due to increased use of its schemes?
Ms Strathie: We have pretty comprehensive
avoidance strategy which has brought in some £11 billion
that would have been at risk otherwise, but I will bring in Mr
Harra to talk more about this.
Q59 Mr Mitchell: Can you just talk
about this comprehensive strategy. What is that? I have been going
with delegations to the Revenue for many years saying that this
is the amount of money being fiddled through tax havens, and they
have all expressed great interest and nothing has happened. Why
are you suddenly able to deal with?
Mr Harra: The department has a
robust anti-avoidance strategy which includes a disclosure regime[4]
requiring the scheme promoters to disclose the schemes to us.
Since 2005, as Lesley says, that has protected revenues, we estimate,
of £11 billion that might otherwise have been lost, so we
believe that we are making good ground on that. As far as the
use of tax havens is concerned, at the moment there is an environment
where there is good international co-operation on that and, therefore,
we are able to make a lot more headway than perhaps we have in
the past. The story on avoidance is that we are pushing it back.
3 Ev 14 Back
4
Note by witness: The disclosure regime referred to is the Disclosure
of Tax Avoidance Schemes (DOTAS) regime, which was introduced
in 2004. HMRC has used information from these disclosures to block
off over £11bn of avoidance opportunities. Back
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