HM Revenue and Customs: Improving the Processing and Collection of Tax: Income Tax, Corporation Tax, Stamp Duty Land Tax and Tax Credits - Public Accounts Committee Contents

Examination of Witnesses (Questions 40-59)


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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