Select Committee on Treasury Appendices to the Minutes of Evidence


Memorandum submitted by The Association of Taxation Technicians

  The Association of Taxation Technicians was established in 1989 and its primary objective is to provide an appropriate qualification for individuals who practise in the area of tax compliance, in professional practice, industry, commerce and the public sector.

  This memorandum is compiled by the Technical Committee of the Association based on practical experience and observations by members.


  This Association concludes that the objectives of Self-Assessment have been on the whole well implemented with minimum disruption but it is felt that there are still shortcomings in the operation of the system. Substantial achievements have been made but there is still scope for refinement and improvement.

  1.  It is the opinion of this Association that the operation of Self-Assessment procedures was introduced smoothly and with minimum disruption. The advance workshops for professionals organised by the Revenue were considerate and practically helpful in addressing the new rules and procedures.

  2.  The taxpaying public also responded in a spirit of co-operation but both they and the profession have found it difficult to come to terms with Revenue statements of account for taxpayers which have been designed primarily for meeting collection department procedures rather than for ready understanding by the public.

  3.  Success of the objective of saving cost is indicated by the current cost yield ratio of collection at just over 1 per cent as noted in the Board of Inland Revenue Annual Report.

  4.  A major practical problem arising out of the SA system is the payment of 150 per cent of any increase in tax payable as at 31 January following the end of a fiscal year. This gives the appearance of a top rate of tax of up to 60 per cent to the uninformed taxpayer. For example, a taxpayer with income of £50,000 in 2000-01 and £60,000 in 2001-02, all liable under self-assessment and no changes to tax rates or allowances, would have an increased liability on 31 January 2003 of:

2001-02£10,000 @ 40 per cent =£4,000
2002-03Payment on Account
One half of £10,000 @
40 per cent
Payable on 31 January 2003 =£6,000

plus the liability for previous year giving an effective cash flow cost of 60 per cent of the increased income.

  This leads to intense stress on taxpayers in each January since they are faced with the ultimate filing date of 31 January under pain of penalty, plus payment of any balance of tax from the previous tax year, plus 50 per cent of that previous year liability as an instalment payment on account for the current year.

  5.  Changes in legislation since the introduction of Self-Assessment have exacerbated this problem, particularly in the following instances:

  5.1  The substantial annual increase in Class 4 NIC contributions, which are nothing other than a tax on the self employed. These increases enhance the interim payments on account. Thus in 1999-2000 the maximum was £1,108.20 and in 2000-01 £1,640.45 giving an addition to the tax payable on 31 January 2002 of 150 per cent of £532.25 = £798.37.

  5.2  Reduction of personal pension payments from gross premiums to net of tax premiums results in an increase in the liability on whch interim payments are made. For example, a taxpayer who paid £6,000 to a personal pension in 2000-01 (Gross) would have an increase in liability of:

2001-02£6,000 at 22 per cent =1,320, plus
2002-03Payment on Account
One half of £1,320


£660 giving
Increased liability on 31 January 2003 of

  5.3  Proposed changes in the Childrens' Tax Credit system will also increase the amount of interim payments in 2003-04. This could increase the tax payable on 31 January 2005 by 150 per cent of £520 = £780, or £1,560 if Baby rate applies.

  In all of the above cases the actual liability has not increased as there is a corresponding reduction elsewhere, but the cash flow has become unmanageable for many taxpayers. For example using 5.2 above the taxpayer had a reduction in his pension premiums from 6 April 2001 of £500 at 22 per cent = £110 per month. That is forgotten when the extra tax bill of £1,980 arrives on 31 January 2003.

  The cash flow implications of tax changes should not be overlooked when amending legislation. Otherwise taxpayers will perceive a tax increase where none has occurred.

  6.  A problematic area in the operation of Self-Assessment is that people have found it difficult to get into the system if they are not already listed in Revenue records for issue of a return form; likewise people find it difficult to get out of self-assessment when they arrive at a situation where no return is needed.

  7.  Experience of Self-Assessment indicates that the Revenue put substantial resources into the changeover but not subsequently into training to achieve fully the objectives of increasing enquiry work. This is reflected in a rather uneven approach countrywide to enquiry work, especially in respect of unincorporated taxpayers.

  8.  A particularly adverse aspect of the operation of the new system is the implementation of Call Centres. In recent years the Revenue have adopted an approach of referring to taxpayers as "customers" and in that capacity individuals are far more comfortable with a personalised approach so that they can discuss their tax affairs with someone who is acquainted with their case.

  9.  A professional observation arising from comparison of the new system with the old is that the legislation is heavily weighted in favour of the Inland Revenue and the perception is that there are not as many checks and balances under the SA legislation as there were previously. This leads on occasion to an aggressive and dictatorial tone from the Revenue when demanding information within time limits where both the nature of the information requested and the time within which it is to be provided are by reference to Revenue interpretation of the legislation rather than an impartial interpretation.

  10.  The adverse factors noted have in fact given rise to claims against the Revenue for compensation under the terms of Code of Practice 1 pertaining to errors and mistakes by the Inland Revenue. It is considered that the escalating amounts of compensation are indicative of the extent of problems, common to both sides and that a more sensitive approach to the operation of the SA system in the spirit of "getting it right together" would assist in making it unnecessary for such complaints and claims.

The Association of Taxation Technicians

19 February 2002

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