1. Written evidence from HM Revenue and
Customs
Questions 34-41 (James Wharton, Mr Bacon): The
Committee was keen to understand fully the cost of delaying the
running of the 2008-09 PAYE reconciliation.
If reconciliation had taken place in 2008-09,
HMRC would have incurred the expected annual administrative costs
in handling these cases. In undertaking reconciliation for 2008-009
and 2009-10 in the current financial year, there are additional
costs over and above the expected annual administrative costs
which amount to a total of revenue forgone of £190 million.
These additional costs are due to the increase in
the PAYE underpayment collection tolerance from £50 to £300
(which accounts for £160 million of the costs), and some
of the 2008-09 debt being harder to collect because it is more
prone to write-off (accounting for £30 million of the costs).
INCREASING THE
TOLERANCE
The deferment of the reconciliation for 2008-09
means that the Department has to reconcile two years instead of
one. As a result, the Department has to handle the contact resulting
from two years' worth of reconciliation over a relatively short
timescale.
The temporary increase in the level of the tolerance
was not based on a straight comparison of the cost of dealing
with the individual cases and the yield at stake. It was taken
because of the need for the Department to deal with an exceptional
peak of work in a relatively limited time. Increasing the tolerance
to £300 is expected to save the Department having to issue
about 900,000 tax calculations to taxpayers with an underpayment
and dealing with the bulk of them over a period of three months.
It is expected to reduce customer contacts as result of this exercise
by 40% while reducing tax yield by only 8%, an estimated exchequer
impact of about £160 million.
HARDER DEBT
TO COLLECT
In addition, as the underpayment is a year older
then some of it becomes harder to collect. In particular, there
is an increased likelihood of Extra Statutory Concession A19 applying.
It is difficult to estimate this cost with any precision but our
assessment of it is of the order of £30 million.
OTHER ISSUES
We announced a new process on 15 September 2010
for people with 2008-09 and 2009-10 underpayments that cannot
automatically be paid through their salary deductions. Individuals
in this position will not be charged interest on underpayments
provided they agree to pay their underpayment.
The reduction in interest and penalties for
the two years resulting from this new arrangement has been estimated
to be less than £10 million. This has not been included in
the calculations because it is expected to be a relatively low
figure, and one that is difficult to quantify.
There is a notional resource saving as a result
of the Department no longer having to do further work on the 900,000
cases which have been excluded because of the increase in the
PAYE tolerance. Not doing this work does not, however, produce
an actual saving. HMRC staff are still deployed to manage the
contact and additional work generated by the reconciliation exercise.
Question 100 (Mr Bacon): Dame Lesley, I am keen
to understand the timeline and the chronology of the head of the
IT function because it looks to me like you, for a significant
chunk of this period, did not have a permanent head of IT. Mr
Singh, you said, was an acting Director General; he applied for
the job eventually and did not get it. I remember Steve Lamey
being Chief Information Officer some years ago. I notice he is
still a member of the Board and, indeed, he has been a witness
at this Committee some years ago. Could you send us a chronology
showing a comprehensive timeline over the last 10 years of the
person who was appointed head of the IT function, whether he was
described as Director General or whether he was described as Chief
Information Officer or whether he was both, or whether there were
two people, and whether the person holding that function was acting
or permanent, so we have a comprehensive history going back from
the year 2000 to date. Can you do that?
HMRC CHIEF INFORMATION
OFFICERSeptember 2009 to present:
Phil Pavitt was appointed Chief Information Officer on 2 September
2009 on a three year contract.
June 2009 to September 2009:
Deepak Singh was appointed interim Chief Information Officer on
a three month contract, with key deliverables, whilst the Department
awaited the arrival of new CIO (designate).
October 2007 to June 2009:
Deepak Singh was appointed Acting Chief Information Officer 12
months into a three-year contract.
October 2004 to October 2007:
Steve Lamey was appointed Chief Information Officer for both Inland
Revenue and HM Customs & Excise on a four year contract. Three
years into this contract, in October 2007, he was appointed Chief
Operating Officer and in October 2008 he was appointed Director
General of Benefits and Credits, HMRC.
FORMER DEPARTMENTS'
CIOS OR
EQUIVALENT
Inland Revenue
April 2003 to October 2004:
Helen Ghosh, Director General, with responsibility for Corporate
Services, including e-business and information resources.
1999 to April 2003: Tim
Flesher was Deputy Chairman with responsibility for Corporate
Services, including e-business and information resources.
Customs & Excise
October 2003 to October 2004:
Len Morris became Director of Information and e-Services on 13
October 2003 and Acting Chief Information Officer from April 2004.
He became Acting CIO for both C&E and IR from July 2004 until
October 2004; working to Helen Ghosh.
January 2003 to October 2003:
In January 2003, Information and e-Services became a separate
Directorate headed by David Garlick (Acting Director).
July 2000 to January 2003:
Alex Fraser was appointed as Director Logistics in July 2000 and
left the Department in April 2003.
October 2010
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