6. Supplementary written evidence from
HM Revenue and Customs
COMMITTEE OF PUBLIC ACCOUNTS HEARING ON HMRC
2009-10 ACCOUNTS AND C&AG'S REPORT
Following my letter dated 12 November, in which
I provided some additional information about our legacy Pay As
You Earn (PAYE) open cases, I am writing to offer a further update
about the approach we plan to take in order to secure the best
value for the taxpayer in our collection of underpayments for
the year 2007-08. This letter is also to tell you about how we
have managed an issue concerning pensioners and the application
of extra statutory concession (ESC) A19.
At the Committee of Public Accounts Hearing
on 16 November, you asked me how much of the value of the PAYE
underpayments for that year might be recovered. I reserved my
answer, as we needed to conduct a proper analysis of what would
give us the best return for the taxpayer given the resources available
and the trade off with other priorities. In particular I was mindful
of the fact that we get a much better return when we collect more
recent debt than when we go after older debt, and that our focus
in recent months has been the running of the end of year reconciliation
(EoYR) exercise for the years 2008-09 and 2009-10.
Our analysis shows that the best and most reliable
way of recovering underpayments of less than £2,000 is to
collect the money through PAYE. The collect 2007-08 underpayments
by adjusting the tax code which will apply for the tax year 2011-12,
we need to process these cases now as we only have until late
March to do this work. We will prioritise cases which represent
larger amounts to maximise value for money given our limited resources.
As the Committee is aware, we decided not to
collect underpayments of less than £300 to deal with the
operational impact of the 2008-09 and 2009-10 EOYR exercise. This
allowed us to remove high volumes of customers with lower value
underpayments from the process, thereby protecting service levels
for customers generally, with minimum impact on revenue foregone.
For 2007-08, concentrating on cases worth £300
or more leaves in scope around 25% of the cases to deal with by
volume, but those contain around 80% of the value. The Commissioners
of HMRC have therefore decided, using our Collection and Management
powers, that the £300 tolerance should also apply to the
2007-08 year in order to allow the work to get the underpayments
into codes to start as soon as possible.
I wanted also to update you on a decision the
commissioners have taken concerning the application of extra statutory
concession (ESC) A19 to some pensioner cases as part of the EoYR
exercise for 2008-09. In about 250,000 cases the customer had
received state pension but that had not been included in their
tax code for 2008-09 and 2009-10, and because they have other
income this is likely to result in an underpayment of tax. These
cases may have built up over several years and only surfaced now
because national Insurance and PAYE System (NPS) allows us to
pick up cases where an individual is over state pension age and
does not have that state pension income included on their NPS
record.
Of this population of 250,000 who might have
been liable, we considered most would have a good claim for the
tax to be foregone by HMRC under the terms of ESC A19. Without
issuing notices of underpayment to each relevant customer we cannot
identify in advance which of these customers would be eligible
for ESC A19 to be applied. On the basis that the vast majority
would, if they contacted us, be eligible for concession the Commissioners
have therefore decided that the department should not seek individual
claims.
Finally I am pleased to report that by the end
of the calendar year we completed 90% of the cases where HMRC
had received all the relevant information for the years 2008-09
and 2009-10. We are now working heard to complete the process
for the remaining cases.
January 2011
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