Administration and expenditure of the Chancellor's departments, 2008-09 - Treasury Contents

Examination of Witnesses (Questions 180 - 199)



  Q180  Mr Breed: We have had evidence here that clever firms of accountants and clever departments of banks are utilising the complexity of the tax code to devise ever more ingenious ways of selling a particular product to customers and clients in order for them to avoid paying tax, and that one of their ploys is that they actually come down to you and get a seal of approval before they go and sell it in the market. How much are you aware of that and what are you doing to actually counteract it?

  Ms Strathie: We are absolutely aware that avoidance schemes are there, that avoidance is legal and that schemes need to be registered with us. Where at any point we believe that there is aggressive selling of avoidance, or indeed that any avoidance is on the borders of legality, our first test is always the policy intent: what was the tax policy designed to do and is this deliberately against the intent? Then we take measures pretty quickly to address that in legislation.

  Q181  Mr Breed: You are aware, for instance, that agency workers for a variety of organisations are now being registered in the Isle of Man so they need not pay tax and national insurance?

  Ms Strathie: We have issued quite a lot on avoidance, we have got lots of evidence to show that our anti-avoidance strategy is working and it is a constant, as you will see in each Finance Bill, to address any areas where we think it is absolutely outside the policy intent.

  Q182  Mr Breed: What are you doing to ensure that more people, particularly older people, actually pay the right amount of tax?

  Ms Strathie: This is an area that the NAO have just looked at and indeed we signed off our report. This week in a very phased way once again we are contacting our pensioner population with a tax back campaign to target those people who may have savings interest where they have paid tax at 20% where 10% would apply, so we are trying to encourage customers to come to us so that we can make sure they have paid the right amount.

  Q183  Mr Breed: How will you know whether that has worked or not?

  Ms Strathie: We will measure it like any campaign, what is the response we get. The lives of pensioners have become pretty complex over the years with state pension, multiple occupational pensions and savings, and if you consider that many, many pensioners have just been in PAYE or the benefits system before they become pensioners, there is then a whole new world into self assessment. We are working closely with DWP and other partners to try to look at the whole end-to-end system and improve it.

  Q184  Mr Breed: Just a couple of questions on VAT, how do you think business has been affected by the reduction in VAT to 15%?

  Ms Strathie: Most businesses would say this was just a huge administrative burden and it does not make any difference, and I can appreciate it was an administrative burden. Other people will judge in the fullness of time whether it had an impact or not but I do sense that people do not feel the same when you add 2.5% to the rate of tax as they do when you take it away, and of course that rate will be returned, I believe, at midnight on 31 December, so time will tell.

  Q185  Mr Breed: Is that a good date to return?

  Ms Strathie: I do not set that date and many people have made representations that it is a difficult time.

  Q186  Mr Breed: Would you agree with them?

  Ms Strathie: When you have to reorganise all your systems it is an additional chore. If there is going to be any change on that the Chancellor will announce it.

  Q187  Mr Breed: If the Government suddenly had a bout of commonsense and changed it to, say, the end of January, would that cause a great deal of problem to you?

  Ms Strathie: This is a business issue.

  Q188  Mr Breed: Would it make any difference to you?

  Ms Strathie: Clearly it would make a difference to the overall receipts if spending levels on VAT-rated products remained the same.

  Q189  Mr Breed: But not administratively.

  Ms Strathie: The administration is on business with the increase here.

  Q190  Mr Breed: Has there been a huge administrative burden on HMRC for the change in the VAT?

  Ms Strathie: No, the huge burden for us was the speed at which we had to implement that change, and again we did a fantastic job to reach 2,000 businesses and the media and everybody else in the industry to make sure people were in shape to do it. It is really important that we understand here that product maintenance is for HMRC but we are the non-ministerial departmental collectors of tax.

  Q191  Mr Breed: Changing the VAT change-back to, say, 31 January, would not cause you any great administrative problems or expense—you the Department.

  Ms Strathie: Me personally, no.

  Q192  John Thurso: Can we turn to departmental strategic objectives and DSO1. There are four indicators for DSO1 and I understand that only one of those has been assessed; why is that?

  Ms Strathie: Can you tell me, in terms of being assessed?

  Q193  John Thurso: For example, if I take indicator one, which is by 2011 to increase tax and national insurance contributions actually received relative to the amounts that should be received, achieving over 2008-09 to 2010-11 at least the levels set out in the public service agreement targets for 2007-08. The assessment is that it is too early to give us an assessment but provisional estimates will be published in the Autumn Performance Report—as an example.

  Mr Bowles: In this situation it is early days on that particular indicator. We will be publishing, as you say, in the Autumn Performance Report when we will give a fuller indication of that performance.

  Q194  John Thurso: You are assessing three of the other indicators in 2010; indicator four, the latest figures available are for 2006-07, our next measurement is in spring 2010. What I am asking is, is that adequate? Given that you have got a strategic departmental objective should we not have an annual assessment thereof?

  Ms Strathie: I can say very broadly here that we are clear about the strategic objectives and we are clear about the outcomes in terms of each of those pieces of work to do. What we have been developing very clearly are the performance measures that will deliver the outcome because you cannot manage to an outcome base. A lot of these are statistics that will eventually be validated and revised and there is a considerable lag, so as we set all the objectives and the 21 new indicators we have been building the performance measures and then the key management indicators that go behind. It is not a do-nothing, it is just when we publish robust series of data.

  Q195  John Thurso: What I am really aiming at is that departmental strategic objectives are what a private business would call its core objectives that it is seeking to achieve. In most businesses that might run over three or five years but will be a part of each year's business plan and there will be a series of actions to indicate that you are on track, there will be mileposts.

  Ms Strathie: Yes.

  Q196  John Thurso: It seems a little odd to me that there do not appear to be mileposts; I was just wondering if you have them and if you are making an assessment.

  Ms Strathie: We have an annual assessment and we have a number of indicators. If I think of what we do as an executive team in HMRC, we have the data flows once a month where we take a view from those measures whether we think we are on course or not. If we are looking at the £7 billion target we have over a number of years to close the tax gap then that is clearly something where we measure our performance and take a judgment of the volatility and, month by month, whether that is telling us we are on target or not.

  Q197  John Thurso: Do you think you have sufficient ways of measuring and sufficient measurements taken to be able to monitor those activities to give you a clear idea?

  Ms Strathie: I think we do. If I give you an example at the moment, the volatility month by month in each of the separate heads of duty means you can read very little into a month but we can immediately look at what is coming in against each of those management indicators to say whether that is on course or not. So on DSO1 at the moment we have moved month by month towards there could be another challenge of a billion and we need to have more action to we are about 0.2% ahead at the moment, but the level of tax due, the number of rebates—because clearly people are not due to pay the same tax in the current economic conditions—makes some of that looking like for like over other years more difficult to judge.

  Q198  John Thurso: Can we turn to your number two which is related to improving customer experiences; how do you measure customer satisfaction?

  Ms Strathie: We have a measure, we have an ongoing survey, and it covers the totality of our business and as the sample comes in each month and builds the information then if we are going according to target that is great and we learn from that, we celebrate it, where we dip below we then go back and do much more in depth questioning to find out where we have gone wrong[2]. Currently at the moment we have had great news in our tax credit space, we have gone through the summer renewals and we took a lot of action to make sure that we moved resources around to be able to manage that smoothly while we landed our new service for PAYE and national insurance. We have some impacts in our business tax area, with less satisfaction, we have seen some impact amongst agents with less satisfaction and we are drilling down to understand whether it was something we did and could have avoided or it was as we prioritised things that were there perhaps some people who felt they got less of a service.

  Q199  John Thurso: Is your survey system something that is an internal system that you have constructed or is it one that is external and would meet some of the ISO requirements?

  Ms Strathie: No, it is external but we do have a customer unit in the department and the customer unit leads on all of this, working with the whole supply chain—agents, third parties, welfare, policies et cetera—to build up what is really important to the customer and then to test our actions and their satisfaction. We will be launching quite soon our HMRC charter which sets out very, very clearly at the end of our consultation what people can expect from us in standard and what we expect from the people who have to deal with us in return. That will be led by Dave Hartnett, the second permanent secretary to the department and our most senior tax professional, and this will be independent in judging the standards for each of our lines of business.

2   Note by witness: The HMRC Customer Survey is conducted quarterly, covering nationally representative samples of 2000 individuals, 2000 SMEs and 1750 agents. Latest results were in September 2009-The Benefits and Credits and SME business customer groups are currently at or above the 2011 target. Back

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