Select Committee on Treasury Minutes of Evidence

Memorandum submitted by the Inland Revenue







    3.  Self Assessment for income tax and capital gains tax was introduced on 6 April 1996.

Around 9 million people out of approximately 26 million taxpayers are required to fill in a tax return each year. These include:

    —  self employed;

    —  business partners;

    —  company directors;

    —  others from whom we need additional information to collect the right amount of tax, typically Pay As You Earn (PAYE) higher rate taxpayers and some pensioners.

  4.  The introduction of ITSA represented a major change in tax administration, with new and advanced Information Technology support. It was the biggest change since the introduction of Pay As You Earn (PAYE) over 50 years earlier, and was brought in on time. But it did not introduce any new liability to tax.

  5.  ITSA also brought a much clearer timetable for making tax returns and paying any tax due.


  6.  The key objectives of ITSA were to:

    —  give taxpayers greater responsibility for their tax affairs;

    —  establish a fixed timetable for returns and payment; and to

    —  bring in a new enquiry process with clear procedures setting out the rights and responsibilities of taxpayers and the Revenue.

  7.  But stemming from the key objectives were more detailed aims identified at the introduction of ITSA and which sought to bring about specific improvements. These included:

    —  simplification and streamlining of procedures, giving rise to some administrative savings;

    —  eliminating the historic and costly regime of dealing with an annual cycle of;

    —  estimated assessments and appeals;

    —  establishing a less confrontational system;

    —  making greater use of information technology.


ITSA Tax Returns

  8.  We issue around nine million tax returns each year. However, we keep the ITSA population under regular review to make sure that only those people who need to complete a tax return get one, and the people who don't need one can have their tax affairs processed each year with the minimum amount of contact with us. For example:

    —  Up to 400,000 people, around half of them pensioners, were taken out of the Self Assessment system in 1999.

Details of ITSA tax returns issued at the start of the tax year, ie main return issue only:

Non Resident Company Landlords
Total paper Returns
* SA316 Notice to Complete a Tax Return

  * (SA316 Notice to Complete a Tax Return is issued when we received the return electronically or were sent a substitute paper return for the previous year).

  9.  The ITSA tax return has been developed with customer input and testing. It comprises a core of questions appropriate to most people and sets of additional questions (for example, relating to self employment) that will not apply to all. The computer system automatically selects the additional sets of questions to accompany the core tax return based on the taxpayer's last completed tax return. For people with new sources to be taxed, for example, capital gains, we give clear advice which explains that they need to ask us for the appropriate additional set of questions.

Help Available to ITSA Filers

  10.  Help is available at the time people need it and not just during office hours. We have:

    —  a dedicated Helpline—open seven days a week from eight am until eight pm—to give help in completing ITSA returns;

    —  an Orderline—open seven days a week from eight am until 10 pm—which deals with requests for additional supplementary return pages;

    —  Business Support Teams who help the newly self employed and provide ITSA advice;

    —  help and support available from our 300 Inland Revenue Enquiry Centres (IRECs) in all major cities and towns. These are open from 8.30 am until 5 pm (and some now open on Saturday and in the evenings to coincide with late night shopping) and see people without appointment;

    —  an Inland Revenue Website at;

    —  a variety of leaflets and guides.

Late Filing Penalties and Surcharge

  11.  There are automatic penalties on those who do not file their returns on time. The penalties are £100 (but the penalty is capped at the amount of tax ultimately due if that figure is less). The first penalty takes effect after the 31 January filing deadline and the second penalty takes effect six months later.

  12.  When people miss the payment and filing deadlines, we make quick initial contact with them. Since last year we have done that by sending them an automated reminder letter followed by a phone call from our new outbound telephone centre and, if needed, contact from our network of local recovery offices.

  13.  Late payments of tax incur interest and surcharge. We charge interest on all SA liabilities (except on interest itself) from the date on which the liability should be paid until the liability is paid.

  14.  Surcharge is imposed in two stages: an initial surcharge on any tax unpaid more than 29 days after it was due, and an additional surcharge on any tax still unpaid more than six months after the due date. Both initial and additional surcharges are for 5 per cent of the tax due. We send taxpayers a formal notice of surcharge against which they have 30 days to appeal.

ITSA Return Processing

  15.  ITSA introduced a clear timetable for submitting tax returns and making tax payments. The filing date of 31 January after the end of the tax year gives nearly 10 months for taxpayers to assemble information and submit their returns.

  This is an improvement on the old system under which:

    —  the filing period was very short and depended on when the return was issued;

    —  payment dates were different for different types of tax; eg tax on rents, business profits and capital gains had different payment dates.

  16.  Under ITSA taxpayers have consistently sent in around 90 per cent of tax returns by the 31 January deadline, although this has slipped slightly each year. However, the result is much better than under the previous system. Then, only around 50 per cent of the information needed was received by the date for making assessments and the outstanding information had to be pursued through a complex process of estimated assessments, appeals and postponement applications. That complex and costly system has been eliminated.

An initiative was introduced in 2001 to try to understand the cause(s) of the slight but persistent reduction in the percentage of returns filed before 31 January each year, and to reverse that trend. The results of that initiative will be reflected in the percentage of returns filed before 31 January 2002.

TSA total return statistics, ie those in the main start-of-year issue and those issued subsequently in-year:[1]

Returns issued
at 31 October
Returns issued
in Year
received at
30 September
per cent
received at
31 January
per cent
Filing failure
Penalties issued
per cent
per cent

  * Final figures will be available shortly.

  17.  The Self Assessment return is at the core of the ITSA regime and the processing of returns is, therefore, central to its operation.

Returns received undergo a process of:—Logging; Correction (where necessary); and Capture.

Pre-capture checks are carried out to see that the return is signed, supplementary pages have been attached and that the return is generally complete. If not the return will be sent back to the taxpayer/agent. Satisfactory returns are date stamped and logged onto the computer system to show the date of receipt.

Because our aim, where possible, is to capture the Self Assessment return made by the taxpayer and input that information onto our computer system, we "correct" any obvious errors or mistakes using information supplied with or on the tax return. This avoids having to send returns back to taxpayers for them to correct obvious errors.

Validation checks are carried out by the computer system as the return is captured. "Warning" and "error" messages alert staff to possible problems or mistakes.


  18.  We have a quality monitoring system under which we carry out an annual review of ITSA processing work.

Returns are reviewed for processing accuracy against nine pre-defined quality criteria. These cover all the actions taken once we receive an ITSA return from, for example, recording the information provided on the return to making a repayment and revising a PAYE tax code. Three of those criteria cover all of the areas which affect the tax bill. The remaining six, whilst having no tax consequence, nonetheless monitor important areas of ITSA processing work.

The tests for accuracy are, therefore, extremely stringent. Any case will fail if a single error is identified in any of the nine pre-defined quality criteria—whether or not that error has a tax consequence—even if that error has subsequently been corrected. Consequently, the accuracy target is a particularly demanding one to both manage and attain.

  19.  National Quality Assessment/Quality Control (QA/QC) was launched in March 2000. This is a mandatory system, designed specifically to raise standards, by ensuring national consistency in all our Network offices, with a commitment to improve both equity and quality of service. It is therefore challenging both performance and culture, and is supported by a major education programme which gives knowledge and direction on how to address Quality.

Phase 1 of that training programme was completed by 31 March 2001 and was followed by Phase two this year, involving both managers and staff. Currently, the QA/QC modules that measure quality have been specifically targeted where we have the most concern, and are in the following work areas:

    —  Receivables—eight work areas;

    —  Processing—four work areas;

    —  National Insurance (Operations)—four work areas.

Each work area has checks to be carried out to a published timetable, with a clear reporting structure to enable monitoring and audits to be carried out.

We have an ongoing commitment to develop further modules where these are most needed.


  20.  If we do not receive a return we can issue a "determination" of the amount of tax due. Taxpayers must pay the amount determined or send in their return. If taxpayers do not make a Self Assessment return to overturn the determination we can use enforcement procedures, such as court action, to collect the tax due as determined.

  21.  Determinations allow us to:

    —  recover tax at risk;

    —  prompt taxpayers to send in their returns; and

    —  set up payments on account for the next year.

The determination procedure is straightforward and does not require a costly appeals process, in contrast with the previous tax regime.

  22.  A special exercise carried out for the National Audit Office looked at determinations issued for two years 1996-97 and 1997-98 and the first three months of 1998-99. It showed that 40 per cent of the 104,000 determinations issued over that period resulted in the submissions of returns.

Details obtained subsequently for the whole period up to March 2001 show that since the start of ITSA we have issued 210,000 determinations of which 105,000 (50 per cent) have resulted in the submission of the return.

But we also recognise a need to step-up the use of our powers, such as the imposition of daily penalties, in appropriate cases to get in outstanding returns.

Computer Support

  23.  The computer system supporting ITSA comprises:

    —  the Local Data Capture system, which is a data processing system used to capture the information from ITSA tax returns;

    —  the ITSA mainframe computer and database which is used to store, view and update customer records; and

    —  a management accounting system.

  24.  The Local Data Capture system (used for processing tax returns) has to be rewritten each year to reflect changes in the underlying tax system. In 2000 there were problems with late delivery of the software resulting in delays in processing ITSA returns. We have learned a number of lessons from this and the Local Data Capture system was delivered on time in April 2001 for the processing of 2000-01 tax returns. The system has worked very well. Over the last 12 months we have averaged 99.63 per cent availability. This has consistently exceeded the target of 98.5 per cent.

Mainframe response times have also improved over this period and in November 2001 we were able to speed up the on-line calculation.

  25.  A continuous programme of developments is in place to improve system performance and reliability and to introduce functional enhancements.

Electronic Filing

  26.  The facility to file ITSA tax returns over the Internet was introduced on 3 July 2000 and allows most individual taxpayers to send their own tax return to us over the Internet. It was extended in August 2001 so that agents can file individual clients' returns on their behalf. So far, more than 1,000 Agents have registered to send their clients' ITSA returns over the Internet.

In the first filing period to 31 January 2001 38,981 individuals filed their returns over the Internet. This number increased by 94 per cent to 75,449 for the equivalent filing period to 31 January 2002.

We recognise that this is a slow start but customer inertia is a phenomenon experienced by many organisations in the early years of persuading customers to move to conducting transactions electronically. But we are working to improve the levels of electronic filing.

  27.  The Internet service is safe and secure and offers significant advantages over the traditional paper Self Assessment tax return: For example:

    —  taxpayers get an online acknowledgement when their return is received;

    —  there is automatic calculation of the tax as the return is completed so that taxpayers do not have to self calculate;

    —  repayments of tax to taxpayers are dealt with more quickly;

    —  Internet returns are processed faster and there is no keying of data by staff eliminating the scope for keying errors.

  28.  We have started Internet returns with a simple product that does not cover all circumstances, although it is suitable for a large number of taxpayers. But in response to customer feedback we are redesigning and extending "SA Online" beyond the core tax return, employment, and self employment pages offered last year to include land and property, and partnership pages.

"SA Online" is also being improved to make it more user-friendly by improving the screen layout and navigation between screens, as well as expanding and improving the online help.

  29.  Additionally, we are changing the registration process to allow new users (whether they choose to use "SA Online" or third-party software) to complete and send a tax return over the Internet in a single session. Up to now they have been required to wait for their "User ID" to arrive through the post before the transaction could be completed.

We expect in these ways, and through encouraging people to "try it out", that take-up will increase significantly in the next few years.

Electronic Lodgement Service

  30.  The Electronic Lodgement Service (ELS), which allows agents to send in their clients' tax returns electronically and receive statements over a dedicated secure dial up connection, was introduced in 1997. Usage has grown steadily since then. There are currently 2,939 agents registered to use the service and they submitted a total of 335,187 tax returns in the period from 6 April 2001 to 31 January 2002, an increase of 17.5 per cent over the corresponding period to 31 January 2001.

Tax Calculation & Calculation Guides

  31.  If a tax return is sent in by 30 September we calculate the tax due in order for payment to be made on 31 January. After 30 September we will still calculate tax but cannot guarantee to do it in time for a calculation to go out to the taxpayer for the payment date of 31 January.

If for any reason we fail to calculate the tax due for a return received by 30 September in time for payment to be made by 31 January, we allow extra time to pay and cancel any interest or surcharge up to that extended payment date.

  32.  The six-step standard Tax Calculation Guide is sent to all unrepresented taxpayers receiving a paper return. It can be used by taxpayers who have reasonably straightforward tax affairs and who want to work out their tax bill themselves.

  33.  The Comprehensive Tax Calculation Guide is only available on request from the telephone Orderline. People with more complicated financial affairs (for example, double taxation relief or capital gains) need to work through the Comprehensive Tax Calculation Guide if they wish to work out their tax bill. But many of these will be represented by agents.

  34.  So, in summary, taxpayers have the options of:

    —  A guarantee that that we will do the tax calculation for them if they send in their returns by 30 September;

    —  Using our Internet Service which allows them to complete their tax returns using our new Internet application, called "SA Online", or third-party software. This will automatically calculate the tax for them whether before or after 30 September;

    —  Asking any of our offices for help by calling in at the local Enquiry Centre;

    —  Contacting the Self Assessment Helpline on 0845 9000 444.

Statements of Account

  35.  Statements of account are essentially a summary of the taxpayer's payment position showing:

    —  amounts due;

    —  amounts paid; and

    —  amounts outstanding.

  36.  In the early years of ITSA there was concern from agents and taxpayers that the statement of account was complicated and difficult to understand. So in recent years we have made considerable effort to improve it. For example we have made changes to the layout and to the customer service messages, in response to feedback from taxpayers to make the messages clearer and more user-friendly.

We have made real progress in this but recognise there is more to be done and the statements improvement programme is a continuous process. We continue to invite and listen to feedback on statements and consult with agents and taxpayers. Changes were made in 2000 in response to feedback received which improved the general format of statements.

  37.  Twice a year we send agents details of all transactions on their clients' Self Assessment accounts. In future we hope to be able to provide agents with electronic copies of their clients' Statements of Account.

SA Filing & Payment Reminders

  38.  These have been redesigned to help taxpayers understand the action they need to take and by when. We now issue a customer focused set of reminders.

  39.  We have ongoing consultation with accountants and taxpayers to identify ways that we can improve ITSA forms. Most recent changes have been the improvements to the statement of account and the shorter six-step tax calculation guide.

ITSA Compliance

  40.  "Compliance" in this context describes the work we do to encourage people to submit returns that are correct and complete, and to detect and put right returns that are not correct and complete. To encourage people to submit timely and correct returns, we provide help and guidance through the Internet, local tax offices, contact centres and the SA Helpline. We use the procedures described at paragraphs 11 to 14 to follow up cases where returns are late, and we check a proportion of all returns we receive using risk-based enquiry procedures.

  41.  Whilst we accept the vast majority of ITSA returns as they stand, we risk assess them all and make enquiries into a proportion of the returns we receive to check their accuracy and veracity.

  42.  Compliance activity under ITSA is more focussed than before because we have a clear enquiry process set out in legislation.

  It is clear to everyone:

    —  when they must file their tax return;

    —  when they must pay their tax; and

    —  the time limit that we have for opening an enquiry.

ITSA changed the tax system fundamentally by removing the need for the Revenue to make assessments. As a result, the structure of the way we looked into tax returns in detail also changed. ITSA brought in a new enquiry procedure which provides for:

    —  a set time by which an enquiry must be opened;

    —  a formal opening letter; and

    —  a formal closing letter.

  43.  Before the introduction of ITSA, individual Inspectors carried out a compliance risk assessment of each return and set of accounts, contemporaneously, as they were received. The returned figures either had to be agreed or a decision made to question or investigate the return/accounts.

That approach had the potential for inconsistency. It made the time that could be allocated to compliance risk assessment too susceptible to fluctuations in daily work-flows.

  44.  The need to make a contemporaneous decision as to whether or not to agree the figures meant that the relative compliance risk in returns/accounts received only days apart could not be compared.

That piece-meal methodology for identifying compliance risk, driven by the flow of the receipt of returns/accounts locally and the need to decide quickly whether to agree them, made forming a national strategy for compliance risk assessment very difficult.

  45.  ITSA introduced what is commonly termed an "enquiry window". Unlike the system before ITSA, Inspectors do not have to decide the relative compliance risk of returns as they are received. Instead, the ITSA legislation gives us a longer period of time, (the "enquiry window"), usually 12 months from the statutory filing date, in which to open an enquiry. That allows the Department to risk assess all returns and to select for enquiry those which present the greatest risk.

  46.  Self Assessment legislation gives the Inland Revenue the power to enquire into any return. But in order to focus enquiry work at the right level and ensure that we deploy our resources effectively we classify ITSA enquiries into "full" and "aspect".

  47.  "Full" enquiries consider the fundamental veracity, completeness and accuracy of the whole of the return.

"Aspect" enquiries typically focus on a small number of elements of the return, often turning on technical (question of law) issues.

  48.  A small proportion of returns is selected randomly for enquiry. Randomly selected (full) enquiries were introduced with ITSA to ensure that any return could potentially be selected for enquiry. This approach aims to deter those who might otherwise suppose that they could avoid enquiry by manipulating their figures to present what they suppose is an apparently low risk.

In addition, random enquiries have given us, for the first time, valuable data about the extent of non-compliance amongst different groups of SA taxpayers. We are using this information to inform future risk assessment.

We are learning about patterns of behaviour and risk among different groups of people and we are feeding that information back into our risk assessment profiles so that we continue to target our resources towards the greatest risks and develop appropriate responses.

  49.  Compliance risk assessment is undertaken through:

    —  a head office risk team; and

    —  a network of local offices with specialist risk assessment teams (RIATs).

The head office team undertakes research and analysis on a national basis to identify national business and other trends that present particular risk to the Exchequer.

Locally based RIATs work in partnership with the other operational teams in an Area, to undertake compliance risk assessment and identify returns for both "full" and "aspect" enquiry.

At both national and local levels compliance risk assessment involves sharing information and expertise with HM Customs & Excise.

ITSA Summary

  50.  The implementation of ITSA was a huge task which required:

    —  complex legislation in three successive Finance Acts;

    —  the design and construction of one of the world's largest computer systems;

    —  management of a budget of £800 million, significant risks, and a large number;

    —  of activities and inter-dependencies;

    —  delivery of a significant staff training programme, and an agent/employer;

    —  education programme;

    —  adherence to an implementation date set in statute.

  51.  Both the Chartered Institute of Taxation and the Institute of Chartered Accountants have welcomed the main findings of the National Audit Office report on Income Tax Self Assessment, which said:

    "Our overall conclusion is that self assessment has improved the administration of income and capital gains tax. It has made assessments more straightforward and allowed a more focused approach to compliance work."

  52.  Nevertheless, we recognise that there are a number of areas where we need to improve and these include:

    —  minimising the number of people who are asked to make an ITSA return;

    —  developing a better understanding of the problems experienced and perceived by taxpayers, especially those which impact on taxpayer behaviour;

    —  improving our accuracy;

    —  simplifying ITSA for taxpayers and our staff;

    —  improving the rate of timely filing;

    —  encouraging and simplifying electronic filing;

    —  making further and real improvements to our forms and statements;

    —  improving our IT systems.

  We are working with business representatives, accountants and others to see how we can address the issues and problems arising in the day to day operation of ITSA. "Working Together", our liaison with the accountancy bodies, is essential to improving performance; it operates centrally and across a national network of contacts.



  53.  The introduction of Self Assessment for companies completed the Self Assessment reforms by extending the principles of ITSA to company tax returns.

  54.  CTSA is governed by separate legislation, which, while broadly parallel to the ITSA legislation, has some important differences.

Corporation Tax is levied by reference to a company's accounting period, which can vary in length and end on any day of the year; ITSA by contrast has a fixed annual cycle common to all taxpayers, based on the tax year 6 April to 5 April.

  55.  CTSA applies to accounting periods ending on or after 1 July 1999. In an extreme case, a company's first CTSA accounting period may not have ended until June 2000. Normally, the return due dates for such a company's first CTSA period would be in June 2001 but it could be as late as December 2001.

This means that it is too early to draw firm conclusions about the impact and effectiveness of the CTSA regime. We are only now starting to build up a picture of outcomes for the first annual cycle. The regime is too immature to provide a reliable statistical base for such conclusions.

  56.  Companies normally have to file their returns 12 months after the end of an accounting period. But unlike ITSA, the date when tax has to be paid is not the same as the date for filing. For most companies, corporation tax has to be paid nine months after the end of the accounting period. So a company which has not filed its return by the due date for payment of tax will have to pay an estimate of its tax liability.

The position for companies paying very large amounts of tax is more complex. These companies have to make quarterly payments of their estimated tax liability, with the first payment due half way through the taxable period and based on a projection of the current period's profits.

  57.  The introduction of CTSA was a less radical change for companies than ITSA was for individuals. Company taxation had since 1993 been governed by the Pay and File rules, which introduced many of the main planks of Self Assessment, such as:

    —  a computational style return form, requiring the company to work out its own tax bill;

    —  the requirement to pay on a current year basis before the tax liability is established by self assessment;

    —  a mirror-image interest regime, operating (both in relation to under—and over-payments of tax) broadly on a principle of commercial restitution for loss of the use of money.

  58.  The Pay and File system had, though, retained most of the features of the old enquiry system that had applied to both IT and CT before the introduction of ITSA. The introduction of CTSA therefore brought to enquiry work involving companies the same kind of clarity that ITSA had delivered for individuals.


  59.  The business case for the implementation of CTSA was based primarily on:

    "the need for the Department to have the best available system and tools to enable it to undertake its enquiry and technical review work more effectively and efficiently and in a manner more commensurate with the increasing complexity of the CT sector".

  60.  The broad objectives of CTSA are:

    —  to give taxpayers greater responsibility for their tax affairs;

    —  to reduce operating costs founded on a business process of "process now, check later" backed up by better information powers and discretionary enquiry powers.

  61.  Whilst the overall objectives are broadly the same for both IT and CT, there are some important differences which need to be recognised:

    —  the taxpayers covered by CT are predominantly experienced in tax matters; and

    —  the running-cost savings available from streamlining the CT system were taken on the introduction of Pay and File in 1993.

  62.  So, the reasons for introducing Self Assessment for CT were more focused on compliance—particularly bearing in mind that CT covers the largest sector of economic activity in the country and a sector in which tax planning is at its most sophisticated.


The Company Tax Computer System (COTAX)

  63.  COTAX is the new Inland Revenue computer system brought in on 8 November 1999 to replace the CTPF (CT Pay and File) system. It supports both CTSA (periods ending on or after 1 July 1999) and the Pay and File regime which applies to earlier periods. COTAX was enhanced in April 2000 to support quarterly instalment payments and group payment arrangements for the largest companies. There have been another five significant software enhancement releases into the system since then.

  64.  Over more than two years of live operation, COTAX has proved to be an exceptionally robust and stable system. The average system availability has exceeded 99.9 per cent. There have been no instances of functional loss in this time, and no significant operational problems.

  65.  Some 20-25 per cent of the Inland Revenue tax take is administered through COTAX. Some 1,600 Revenue staff, from basic grade clerical staff to senior tax specialists, use the system daily, in local offices and large business offices, local Receivables offices and the two IR Accounts Offices, as well as some specialist offices like the Oil Taxation Office and the Special Compliance Office. It is one of the three or four most complex computer systems we run.

  66.  The screen design and general structure of COTAX is closely based upon CTPF, so it was not a big change for our staff. But it is much more stable and reliable than CTPF, which was not well regarded. COTAX, by contrast, has provided a very firm operational platform for IR staff who administer CTSA.

The CTSA Return Form

  67.  The CTSA Return Form (Form CT600) comprises a core form of 12 pages. Every company obliged to file a return must complete this core. Its heart is a computation of tax liability, and companies can choose between a short and a detailed calculation depending upon the complexity of their affairs.

There are seven supplements, applicable only to companies with certain specific liabilities or activities.

  68.  Whist the core form is shorter than the ITSA return the apparent difference masks the complexity of the CTSA form. Specialist knowledge is required to complete it in any but the most straightforward of cases, since Corporation tax is complex. In practice, over 90 per cent of company returns are submitted by a professional tax agent. The return generally has to be accompanied by a full set of accounts and detailed tax computations.

Payment Arrangements for Large Businesses

  69.  Most businesses which are large enough to need to pay by quarterly instalments are groups of companies. For such entities, we operate Group payment arrangements to make the administration of tax payments more straightforward. Over 2,000 groups have signed up, involving some 25,000 companies. Rather more than half the total amount paid under quarterly instalment payments was paid through a group payment arrangement.

Electronic Filing

  70.  We are currently developing a range of Internet services for companies. These were the first to be collaboratively designed with customers, their agents and others such as software developers. In line with customer wishes the first service provides a secure, personalised website for companies to view details of their account with Inland Revenue. That service is currently being trialled by 20 volunteer companies. It will be followed by similar services for agents and groups and new services such as e-filing. We would be happy to give the Committee a demonstration if they wished.

CTSA Compliance

  71.  The comments at paragraphs 40 to 49 inclusive all apply to CTSA. As with ITSA, this has provided an opportunity to consider over time company return/accounts and to be more systematic in our risk assessment.

  72.  There are, though, some differences in the way work is organised. Most of the largest corporate entities are handled by the Large Business Office (LBO), with oil companies being the responsibility of the Energy Group in Revenue Policy. Both those offices operate comprehensive procedures for risk assessment of all their cases annually. The LBO also makes use of a sector-based approach to ensure that work on industries such as pharmaceuticals, utilities, banking and insurance is informed by shared knowledge of issues which in those particular businesses give rise to particularly complex tax problems. A "minimum standard" for exchanging information with Customs and Excise applies, and in a number of cases joint working with Customs is being operated.

  73.  Across the whole field of CTSA, internal information systems have been supplemented by using commercial databases such as FAME (Financial Accounting Made Easy) and DASH (Directors and Shareholders). Bringing together sources of information in this way is expected to develop greater national consistency and enable risk assessment methodologies to be refined. Outside the LBO, approximately 10 per cent of full enquiry cases were in 2001-02 centrally selected using information available to the Head Office risk team.

  74.  Both in the LBO and Energy Group, and in the CTSA enquiry work done in local tax offices, enquiry work is quality assessed to consider, for example, whether we avoided undue delays, and whether we concluded the enquiry with a fair and proper outcome. Because of its importance, this work is targeted. A new range of performance indicators is being introduced from April 2002 which measure other important outcomes such as the extent to which companies have been helped to comply with their obligations.

CTSA Summary

  75.  The CTSA regime is still too young to say a lot about its operational success. However, the business processes are very similar to Pay and File and there is no indication of—or reason to anticipate—significant problems.

Inland Revenue

14 February 2002

1   See Ev 11. Back

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