HL Deb 31 March 1998 vol 588 cc149-52

3.1 p.m.

Lord Williams of Elvel

asked Her Majesty's Government:

Whether they believe that the Inland Revenue has adequate resources to administer an income tax system based on self-assessment.

Lord McIntosh of Haringey

Yes, my Lords, the implementation of self-assessment has been carefully planned to ensure that adequate numbers of trained people, supported by a good quality computer system, are in place.

Lord Williams of Elvel

My Lords, I am most grateful to my noble friend for that Answer. Has he had an opportunity to read an article in the Evening Standard for Monday 16th March, under the headline: Tax dream scheme is 'red-tape nightmare'", in which it is stated: Tax experts are warning that the new system of self-assessment is turning into a bureaucratic nightmare … now the Revenue has issued 670,000 fines. Tax experts believe more than 100,000 may be incorrect"? If, as my noble friend says, the Inland Revenue is adequately resourced, are we then talking about a question of competence?

Lord McIntosh of Haringey

My Lords, I am interested that my noble friend refers to a press cutting on the subject. I have had a search made of press cuttings; I asked officials whether there was a slew of horror stories about the introduction of self-assessment. The search came up nearly blank, although it did include the reference that my noble friend has given from the Evening Standard—in other words, there are very few horror stories. There are very few examples such as that quoted. My noble friend is right in that 670,000 penalty notices—not fines—were sent out at the end of January. However, he may be relieved to discover that, by 22nd March, only 75,000 appeals had been made.

Lord Avebury

My Lords, can the noble Lord say why free software is issued to professional accountants and tax advisers but not to private individuals? Would it not help enormously if tax inspectors made the same software available to private taxpayers as they do to professionals?

Lord McIntosh of Haringey

My Lords, that is an interesting suggestion which, frankly, I had not thought of. I shall think about it and write to the noble Lord.

Lord Barnett

My Lords, does my noble friend accept that some innocent taxpayers—I am not declaring an interest, I hasten to add!—may well have been paying more tax than they should under the new system of self-assessment? In those circumstances, is the Inland Revenue recommending that innocent taxpayers use accountants to help them—perhaps I should declare a past interest now—in which case, does the Inland Revenue have a list of recommended accountants and, if so, when somebody chooses one, does the Inland Revenue get commission?

Lord McIntosh of Haringey

My Lords, the answers to my noble friend's last questions are, of course, no and no. In his earlier questions my noble friend seemed to suggest that the introduction of self-assessment will lead to an increasing number of overpayments. I rather doubt that. I am not sure that it can be correlated with the use of professional advisers. As I told the House on the previous occasion when this matter arose, my own self-assessment, which I did myself, was a penny out, while my wife, who has an adviser, overpaid by !800.

Lord Mackay of Ardbrecknish

My Lords, would it not have been wise to allow self-assessment to settle down before the Chancellor, in his Budget, made significant changes to the tax system, bringing inside the tax system some of the payments that were once in the social security system?

Lord McIntosh of Haringey

My Lords, I thought that the Opposition Front Bench in another place rather pooh-poohed the suggestion that there were significant changes to the tax system. They seemed to think that the changes were not as significant as the Chancellor claimed. Changes and improvements to the Inland Revenue system of tax collection have to be made in some years, and in any year there will always be changes to the tax system.

Lord Peston

My Lords, am I right in saying that the purpose of introducing self-assessment was to raise the efficiency of the system, either by getting more revenue in for the same effort, or by getting the same revenue in for less effort? Are the Government monitoring that process? If they are to monitor the process, as part of their investigation will they carry out a sample survey to calculate the cost to taxpayers of their efforts to administer the new system?

Lord McIntosh of Haringey

My Lords, speaking as a former survey researcher, I am sure that a sample survey would be welcome. We have always recognised that in the first year of the introduction of self-assessment there will be some additional burdens on taxpayers. On the other hand, in the longer term, as we shall be getting away from the confrontational process of claims, appeals and counter-appeals, the burden on taxpayers ought to be reduced.

Lord Newby

My Lords, how many self-assessment tax returns remain unpaid? What steps is the Inland Revenue contemplating to reduce the number of late payments in the current tax year?

Lord McIntosh of Haringey

My Lords, as I said in response to an earlier question, 670,000 penalty notices were sent out at the end of January, the date by which all returns should have been received. The process of dealing with those penalty notices will not be completed until the end of March. Therefore, we do not have a final figure relating to the number of returns unpaid. The experience over the past nine months has been that the percentage of returns is greater than in previous years.

Baroness Lockwood

My Lords, what proportion of taxpayers are not required to submit a tax return on the basis that their income is so low or so stable that it is not necessary for them to do so? Is it not likely that the people to whom the noble Lord, Lord Mackay, referred would be in the category of not having to complete a tax return?

Lord McIntosh of Haringey

My Lords, my noble friend has asked two questions. One relates to the number of people who are excluded because their income is too low for them to pay tax. I am afraid that I do not have the figure available at the moment. On the question of those whose income is, as my noble friend put it, more "stable", the answer is that two-thirds of taxpayers do not have to submit tax returns. Tax returns are required from directors of companies, the self-employed and those such as pensioners or others with complex financial arrangements.

Lord Brooke of Alverthorpe

My Lords, is my noble friend aware that the staff do not share his view that staffing is adequate to cope with self-assessments? Is he also aware that, today, staff representatives are meeting at a special conference in London to complain about their inadequate numbers and the service that they give to taxpayers generally? Does my noble friend share my view that in the circumstances the Government's decision to reduce the number of staff by 1,500 next year should be reviewed before they proceed down that route?

Lord McIntosh of Haringey

My Lords, my noble friend is not quite correct. It is not a decision to reduce the number of staff, but an estimate that fewer staff will be needed at that time. One of the objectives of the self-assessment programme is, quietly rightly, cost savings. We estimate that there will be savings of approximately !70 million in due course. As to consultation with the staff and the trade unions, my noble friend is right: we must continue to consult.