2. Supplementary written evidence from
HM Revenue & Customs
1. Questions 212-216: The Committee wanted
to know how much HMRC is spending on staff resource to deal with
the open cases from 2007-08 and an estimate of the amounts of
tax involved.
From more recent sampling we now believe that
the notional value of 2007-08 underpayments is around £780
million, but we know that because of elapsed time significant
numbers of cases will prove unworkable or untraceable, and in
addition there will be ESC A19 concessions, so the net amount
finally recoverable is expected to reduce to a range £100
million to £200 million. We estimate the costs of recovery
to be around £30 million, but with increasing cost and diminishing
rate of return as the value of worked cases falls.
2. Q235 Mr Bacon: "How many associates
or former associates of Mr Pavitt have been employed on temporary
or permanent contracts by HMRC?"
HMRC employs one person who is a previous associate
of Mr Pavitt. This person was appointed by the Chief Finance Officer
in December 2009 on a fixed term contract until November 2011
and reported to the Chief Finance Officer. Following a recent
restructuring of the role and the IT organisation, the line management
has changed to become a dual reporting line to the Chief Finance
Officer and the Chief Information Officer.
3. Q252: Margaret Hodge: "How many companies
are there that HMRC views at present as owing more than £250
million, and with which you're in discussions through to litigation?"
As at 31 October 2010, there were in HMRC as
a whole, 22 businesses where the total value of tax under consideration
in respect of all issues on those businesses, was greater than
£250 million. All of these are businesses dealt with by the
Large Business Service.
NOTES:
1. It is important to note that the tax under
consideration for a specific issue does not necessarily reflect
HMRC's final view of a customer's liability. Initially, it will
represent the maximum amount of tax potentially at risk from the
issue in dispute, making no allowance for losses, reliefs or different
legal interpretations. The tax under consideration can and does
change as the facts of the issue are discussed with the customer
and the legal issues are examined;
2. the businesses referred to above are at different
stages in the process of reaching resolution. Some are at the
early fact finding stages while others are closer to final resolution.
Some of the issues are in litigation;
3. the total value of the tax under consideration
for the 22 businesses, referred to above, is £14.9 billion,
of which, £10.2 billion relates to 371 issues that are not
in litigation and where we have not yet reached a final view of
the correct tax liability. Of the remainder, £4.7 billion
relates to 89 issues that are in the litigation process, or where
the issue in dispute is the same as one of the issues currently
in litigation, and where we expect the court's decisions to determine
the outcomes;
4. the majority of disputes that do arise are
resolved by agreement between HMRC and the taxpayer, rather than
through the courts, as the most effective way of ensuring that
tax due under the law is established and paid. Around 90% of issues
relating to the largest businesses are settled in this way. HMRC's
approach to the resolution of civil tax disputes, whether by agreement
with the taxpayer or through litigation in the courts, was published
on HMRC's website in 2007 as the Litigation and Settlement Strategy
(LSS). The LSS is presently under review but the basic principles
will not change;
5. for the largest businesses decisions on matters
where the tax under consideration is greater than £100 million
or where the issue is otherwise significant are generally made
by the High Risk Corporates Programme Board. This is chaired by
the Director of the Large Business Service and includes Directors
of the main business areas, tax regime owners, and Solicitors.
For all cases where the tax under consideration is more than £250
million, settlement proposals are required to be agreed by two
Commissioners;
6. this data is extracted from HMRC's management
information systems as at 31 October 2010.
4. Q299: Mr Bacon: Could you say how many
forms P800, these are the statements of reconciliation for overpayment
and underpayment of Income tax, HMRC has issued in the last five
years?" ... "How many have you issued in the last five
years, and how many are you anticipating issuing between the beginning
of September and Christmas this year?"
THE NUMBERS OF FORM P800 ISSUED IN THE LAST
5 YEARS
| Estimated number of P800s*
| |
| Year ** | Number
(millions)
|
| 2005-06 | 3.2 |
| 2006-07 | 4.0 |
| 2007-08 | 3.8 |
| 2008-09 | 3.2 |
| 2009-10*** | 1.4 |
Notes
* measured by number of mailings to customers, including copies
to their agents. Numbers do not therefore equate to the number
of individuals whose accounts are reconciled with an under or
overpayment.
** Number issued in the relevant year. These can be in respect
of a number of previous tax years.
*** There was no end of year reconciliation exercise during
2009-10.
September to December 2010-11:
We estimate that we will issue notices about under or overpayments
to around 5.7 million people by the end of March 2011 as part
of the current exercise covering 2008-09 and 2009-10, completing
90% (c.5.1 million) by the end of December. Taking into account
copies for Agents and that some people receive more than one notice,
we expect to have mailed 6.3 million P800s by the end of December.
As at 12 November we have mailed 3.9 million.
5. Q270:Mr Bacon: "On the basis that your CFC specialists
believed that you could get more money than you did. My question
is about forward agreements on tax treatment. They are unlawful,
aren't they?"
Mr Bacon asked whether HMRC enters into forward agreements of
the sort held to be unlawful in the Al Fayed case. In particular,
he referred to Vodafone's press release which he seemed to suggest
indicated that such an agreement was entered into as part of the
recent settlement. It would not be appropriate to comment any
further on Vodafone itself. However, the Committee can be reassured
that it is not HMRC policy to enter into agreements of this kind,
which would preclude the Department from taking account of material
changes to relevant facts.
November 2010
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