Select Committee on Treasury Eighth Report


LIST OF CONCLUSIONS AND RECOMMENDATIONS

    (a)  People receiving Self Assessment tax returns are not told why they are issued, even though once received they are obliged by law to complete and return them. The Inland Revenue do not publish the criteria for issuing Self Assessment tax returns because of the enormous number of situations in which a return is issued. We believe this to be an unsatisfactory state of affairs, which stems from the complexity of the tax system. We note that the Inland Revenue is examining how it can provide greater transparency so that people have a clearer idea of whether they are covered by Self Assessment or not. We wish to see the criteria for issuing Self Assessment returns published in the interests of fairness to taxpayers. (paragraph 7).

    (b)  We are concerned at the Revenue's failure to inform taxpayers who need no longer submit Self Assessment tax returns of this fact, causing unnecessary worry to taxpayers waiting for tax returns that will not arrive. We therefore welcome the Paymaster General's undertaking to the Committee that the Inland Revenue will now write to taxpayers when they are no longer required to submit a return to inform them of this fact (paragraph 10).

    (c)  The Inland Revenue recognises that there are too many people with low incomes, particularly pensioners, in Self Assessment and is looking at ways of taking them out of the system altogether or of making it easier for them to assess. We support these aims and expect the Revenue to make real progress towards achieving them over the next year (paragraph 13).

    (d)  We are disappointed that the Budget contained no measures specifically designed to simplify Income Tax Self Assessment. Given the existing level of complexity, we support the proposition that there should be annual changes to the tax system aimed solely at simplification. We therefore recommend that this be included as one of the Inland Revenue's key performance targets against which the Revenue should report progress annually (paragraph 19).

    (e)  We recognise that the tax return reflects the complexity of the tax regime and the need to obtain sufficient information to calculate their tax liability from taxpayers with different circumstances. But we consider there is scope for a shorter and simpler tax return, particularly for those with relatively straightforward affairs. We therefore recommend that the Revenue continues its efforts to develop a suitable form (paragraph 24).

    (f)  We are concerned that, despite the marginal improvement in the number of taxpayers that filed their tax return on time last year, one in ten taxpayers had not filed by 31 January, the due date. We expect the Revenue to monitor this position closely and review what further steps it can take to encourage people to file on time (paragraph 30).

    (g)  There is a misconception, which the Revenue needs to address, that filing early increases the chance of being selected for enquiry. In fact the reverse is the case. We recommend that the Revenue takes steps to make this clear to agents and taxpayers in its publicity. We also recommend, to encourage early filing and spread filing peaks, that the Revenue considers the possibility of changing the enquiry window to run for twelve months from the date the tax return is received, rather than twelve months from 31 January (paragraph 31).

    (h)  We were very surprised to learn that there are tax returns outstanding from the start of Self Assessment in 1996-97 and for each of the following years. We are concerned that the Revenue has not actioned these cases in a timely manner and recommend urgent action now be taken to resolve this matter (paragraph 35).

    (i)  The potential benefits from Internet filing to both taxpayers and the Revenue are considerable. But take-up of the service in the first two years has been very disappointing and much lower than the Revenue had anticipated. The Revenue will only achieve its ambitious target of 50 per cent take-up by 2005 if it offers a reliable service that meets users' expectations. In this context we are concerned that one in five attempts to file on-line fail and we recommend a review to identify the causes of these failures and remedies for those within the Revenue's control. We also recommend that the Revenue examines what further steps it can take to make its on-line service more attractive to potential users (paragraph 41).

    (j)  We are very concerned that failings in the Revenue's Internet filing service allowed taxpayer confidentiality to be breached and that the service had to be withdrawn for more than a month while remedial action was taken. We note the Revenue's admission that there are lessons to be drawn from this extremely serious incident, including wider issues of Internet security, and that it is working with the e-Envoy's office to ensure that these are shared more widely. We expect the Revenue and the e-Envoy to include in their work a review of the procedures used to test the Revenue's system before it was implemented, and to report on the outcome of their deliberations on the lessons to be shared (paragraph 46).

    (k)  It is too soon to determine what impact this incident has had on the level of Internet filing. We expect the Revenue to monitor this closely, and to examine what additional steps it can take to restore taxpayer confidence in the security of the system should this be necessary (paragraph 47).


    (l)  We note that the Revenue has been testing a scheme to allow taxpayers to pay monthly instalments by direct debit towards their Self Assessment liability. We believe that many taxpayers, particularly the self-employed and those starting a new business, would find such a facility useful. We are therefore concerned that this trial appears to have reached no conclusions after three years. We recommend that the Revenue evaluates and reports on the results of this trial as a matter of urgency (paragraph 52).

    (m)  We agree with the Paymaster General that people should be able to pay tax rapidly and conveniently in various ways, but introducing new payment methods does not appear to be a matter of priority to the Revenue. We recommend that the Revenue pursues this matter with more urgency than hitherto displayed. We also recommend that the cost to the Revenue of providing a facility to pay by credit card be evaluated (paragraph 53).

    (n)  It appears from the evidence we have received that Corporation Tax Self Assessment has been introduced without any significant problems. We note the suggestion that the quarterly instalments large companies are required to pay should be based on prior year figures, rather than on estimates as at present, with a final adjustment based on outturn when known. We recommend that the Revenue examine and report on the costs and benefits of such a change (paragraph 57).


 
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