Examination of Witnesses (Questions 80
WEDNESDAY 6 MARCH 2002
80. The fact that you are getting 800,000 that
came down, I think, this year, the fact that you are getting 800,000
suggests your penalty regime is not working; do you think it is?
(Mr Banyard) Clearly, it is our aim to help and enable
more people to file on time, and our Taxpayer Filing initiative
was aimed at encouraging people, using the carrot; we are putting
a lot of effort into that, but I do not believe the figures show
the system is not working. Ninety per cent of people file at 31
January. We issue a first penalty automatically if they have not
filed. And another 5 per cent have filed before the issue of the
second penalty, on 31 July; so that first penalty has worked,
in bringing in another 5 per cent of cases.
81. What is the second penalty?
(Mr Banyard) It is a second penalty of £100,
if after 31 July you still have not filed.
82. When do you move on to surcharge and when
do you move on to determination?
(Mr Banyard) If we believe tax is at risk and someone
has not put in their return, we will move on to a determination,
and a determination is where we estimate, to the best of our ability,
what the tax should have been, and that determination can only
be displaced if the person sends in the return. If that does not
produce an effect, we can move on to daily penalties, which is
a further step down the road. What we find is that if we use determinations
they bring in about another 55 per cent of the returns. In fact,
when we move to daily penalties, we do not actually have to issue
them, simply alerting people to the fact that we are moving to
daily penalties brings in the return in 80 per cent of the cases;
and when we go to the Commissioners to get permission to use those
penalties, because we have to, a further 16 per cent come in.
So fully 96 per cent of the cases come in at that point.
83. Just take me through that again. The note
I have got from your paper says 50 per cent of the determinations
you issued resulted in the submission of a return?
(Mr Banyard) That is right.
84. So that is 50; now what do you do with the
other 50 per cent?
(Mr Banyard) With the other 50 per cent, it depends
on whether the determination has been paid. If the determination
has been paid then someone has accepted our figures and still
not submitted a return; and we would think, prima facie,
that that case was high risk, so we would move to daily penalties.
85. If it is paid, you would give them a daily
(Mr Banyard) We would want to get the return, to find
out how much their income was.
86. What is the daily penalty then? They have
paid you an amount of money that you suggested they owed, why
would you pay it, why would you pay the bill, get the second £100
fine, six months later, or so?
(Mr Banyard) Say you were due to pay tax of £50,000
and you had not sent in a return, and we raised the determination
on £25,000 income, because we did not know that you had owed
£50,000, then you are still winning, and, as far as we are
concerned, you are a risk case. So we then have to decide whether
we should move to daily penalties. At that point, we would make
contact with you, because we do not move to penalties or determinations
without first contacting the taxpayer, asking if they need help,
and only then moving on. So we would then say to people, "I
am afraid we're going to move to daily penalties," and at
that point we would expect 80 per cent of the returns then to
87. Right; but that leaves 20 per cent then.
What happens to them?
(Mr Banyard) We go to the Commissioners for permission
to raise those daily penalties, and when the Commissioners have
given permission we again contact the taxpayer and say, "We
have got permission to go with this now." That brings in
another 16 per cent, and that leaves just 4 per cent where we
raise the penalties to get the return. We really are down then
to the very last few.
88. Have you got anybody who still has not sent
(Mr Banyard) We have some; we have some old returns
that we have not yet got in and we have targets for getting them
89. How old are they?
(Mr Banyard) We have a decreasing number for each
of the years of Self-Assessment.
90. So somebody in the first year of Self-Assessment,
was it 1996?
(Mr Banyard) We have a very few cases from 1996-97.
We have a target at the moment to get in 40 per cent of all the
old returns this year, and we are looking to see whether we can
get most of the remaining ones in next year.
91. It sounds rather odd, it sounds as though,
your penalties are not working?
(Mr Banyard) I think it is fair to say, and I think
we brought it out in the minute, that this is an area where we
think we can do better, and we have reviewed the processes and
we are using our penalty regime more effectively now. I would
want to reiterate though that our prime goal is to try to encourage
and enable people to file on time; we do not wish to use penalties
in the first instance.
92. How many taxpayers incur initial and additional
surcharges for unpaid tax, and has the number changed since Self-Assessment?
(Mr Banyard) If you will bear with me for one second;
surcharges, for the tax year 1999-2000, we raised 201,000 first
surcharges, which is only 2 per cent of the population.
93. That is 201,000 people?
(Mr Banyard) Yes, 201,000 people received the surcharge.
The surcharge is on the tax.
94. And how is that from 1995, has it gone up
(Mr Banyard) It has been steady in 1998-99 and 1999-2000,
and that is slightly higher from 1997-98.
95. No, that does not answer my question, does
it. I am asking, before Self-Assessment came along?
(Mr Banyard) Before Self-Assessment, there was a completely
different regime. It is very difficult to compare before Self-Assessment;
but certainly I do not have any comparable figures with me, I
96. Alright; but, if you can, we would welcome
seeing them. Now do you automatically repay penalties received
when they are in excess of the tax due, do you automatically pay
the money back?
(Mr Banyard) Yes, we automatically repay them, either
capping them or reducing them to zero.
97. Now the Scottish accountants, I am pleased
to say, felt that your system caused maximum worry and distress
to many of the weakest members of the community, and, this is
the £100, was of less concern to the well off. What would
you respond to that?
(Mr Banyard) The £100 penalty, to get a return
in, is a simple, flat-rate instrument, which we reduce if the
tax is less. If you are looking at the case of someone with relatively
low income and comparing them with somebody with a relatively
high income, this is where the surcharge makes a difference, because
we do not levy a surcharge unless the tax outstanding is more
than £1,000, and it is a proportion of the tax due. So that
gives you the fairness element that I think you are looking for.
98. Can I ask you, just on that, because the
worry would be pensioners, when you issue a penalty notice, do
you analyse, because you have got Self-Assessment groups, the
proportion of penalty notices which go to each group, and, of
the 1½ million pensioners, how do they stand up, are they
high on the list?
(Mr Banyard) The answer is, I do not know whether
we have analysed it.
99. It would be a good thing to do, would it
(Mr Banyard) I certainly have not got the figures.