SIMPLER TAX ASSESSMENTS FOR LOW-INCOME PENSIONERS (Hansard, 3 July 2002)

§ Mr. Edward Davey
I beg to move, That the clause be read a Second time.
New clause 19 is intended to remove the anxiety felt by many people, especially pensioners, on low incomes when they are sent the full monty, the full self-assessment 361 tax return. They are caused great distress when those returns drop through their letter boxes on to their doormats.
I raised this issue during the debates on a previous Finance Bill, back in 1999. I gave concrete examples to show that many elderly people have been worried sick by receiving those forms. They often have no liability to income tax, but the forms are sent to them because they are triggered by automatic thresholds in the Inland Revenue computers.
I refer hon. Members to my speech, as reported in column 755 of the Official Report for 5 July 1999. [Interruption.] I suggest that hon. Members take that reference and pocket it; or I could repeat that speech at length. By making that reference, I hope to ensure that my remarks are brief.
I shall move from the examples that I cited in that debate to the substance of the point that I wish to make. At the moment, if there is no convenient PAYE source, it is impossible for Revenue officials to assess an individual for tax purposes other than through the self-assessment process. It is ludicrous that those very detailed tax returns, which cover sources of revenue from unit trusts, bonds and a range of different sources, should be filled in by those people on low incomes who would be affected by the new clause.
Using previous legislation from the Taxes Management Act 1970, the new clause would, in effect, give Revenue officials the power to make very simple, back-of-the-envelope assessments, as they used to do under similar legal provisions. That would help the Revenue by cutting its costs and—this is the important point—it would remove a lot of the anxiety felt by those people.
When I raised this issue with the Paymaster General during an Adjournment debate that I initiated in June 2000, she said that she would look at the matter, and I wish to give her and her colleagues another chance to do so.
I should say that, in drafting the new clause, I have been grateful to people from the Chartered Institute of Taxation for their assistance. The hon. Member for Arundel and South Downs (Mr. Flight) referred to that institute. I should also say that the new clause came from the Low Incomes Tax Reform Group, which was set up by the Chartered Institute of Taxation. For the record, I should like to say that that institute promotes the interests of people on low incomes and has been running a very effective campaign.
Because such a responsible and respectable group is behind the technicalities of the new clause and because the Government have indicated their willingness to consider such a measure, I recommend the new clause to the Paymaster General, and I hope that she will be able to accept it.

§ Dawn Primarolo
I shall be brief.
The hon. Member for Kingston and Surbiton (Mr. Davey) campaigns tirelessly on the way that the tax system affects low-income pensioners. He wants to make the requirement to comply with their obligations as easy as possible—an objective that I, the Government and all Labour Members share.
362 The new clause would set a £5,000 limit for people in self-assessment and give an alternative way to check the income of those on low income. In 2002–03, the personal allowance for those aged 65 to 74 is £6,100. If a retired person's previous income is less than their personal allowance, they should not be in the self-assessment system anyway, except in absolutely exceptional circumstances.
When we have debated this previously, I have referred repeatedly, as I share the hon. Gentleman's concerns, to the work that the Government have been undertaking and the amendments that we have been making to the operation of the self-assessment form.
First, we want to remove people from the self-assessment system if they should not be there in the first place, and to look very carefully for pensioners in particular.
Secondly, for those who remain in the self-assessment system whose tax affairs are relatively straightforward but require them to be there, we want to make it as simple as possible.
The problem with the new clause is that it brings more pensioners into the tax system, even if the calculation is simple and quick—one that can be made on the back of a fag packet, as I think the hon. Gentleman said—which is not the direction in which he or I would want the tax system to move. We need to make sure that we require only those people who have information that is pertinent to their tax levels in submitting forms. In fact, the hon. Gentleman's requirements for the £5,000 limit have an unintended side-effect: those who are self-employed who may make a loss would find that the Revenue was now investigating, and will be required to check their position. I am sure that the hon. Gentleman did not intend that.
We, too, want to reduce the requirements of self-assessment on all taxpayers. Despite the changes that we have made to date, I have asked the Revenue to examine the whole system again to see whether further steps can be taken to make it easier for people to meet their obligations under self-assessment, and, whenever possible, remove from the self-assessment system those who find themselves caught in it but who do not need to be there. I am very grateful for the work that is being carried out with groups such as TaxAid, the Low Incomes Tax Reform Group, the working together group and the professional associations that are actively involved in that discussion with the Revenue. Like the hon. Gentleman, I thank those organisations for the constructive way in which they engage with the Government on this issue.
I hope that the hon. Gentleman sees that he is pushing an open door and that he has made progress with his persistence. A proper and full discussion is taking place with all those groups to produce workable solutions. I hope that, now that he has put on record again—about which I am not complaining—his commitment to pursuing this project, he will withdraw the new clause and await the outcome of the work undertaken by all those groups in collaboration with the Revenue.

§ Mr. Davey
At this late hour, it is a joy to be able to welcome the Paymaster General's positive assurances on this point. I shall, in a moment, seek the leave of the 363 House to withdraw the new clause, as she has given such a positive reply— [interruption.] The House gives its blessings to the hon. Member for Arundel and South Downs (Mr. Flight).
I am sure that members of the Low Incomes Tax Reform Group, for example, will read the Paymaster General's words with pleasure. If they can assist her officials in any way, I am sure that they would be delighted to do so.

§ Dawn Primarolo
indicated assent.

§ Mr. Davey
I am grateful to the Paymaster General for nodding her assent. Because of her warm words and promises, I will not quibble with the points that she made against the new clause. I beg to ask leave to withdraw the motion.