Tax Self-Assessment (Hansard, 13 January 2003)

§ Lord McIntosh of Haringey
My Lords, self-assessment is operating successfully. The National Audit Office, in its most recent report on income tax self-assessment in July 2001, said: Our overall conclusion is that self assessment has improved the administration of income and capital gains tax. It has made assessments more straightforward and allowed a more focused approach to compliance work". In July 2002, the House of Commons Treasury Select Committee reported the findings of its review of self-assessment. It made a number of criticisms and recommendations and we have accepted all but one of those recommendations.

§ Lord Russell-Johnston
My Lords, the Minister has given a somewhat un-self-critical answer. Perhaps he would agree that, whatever else, the new system has been an absolute bonanza to accountants, rather less so for those who cannot afford accountants and who are intimidated by complex income tax forms. Will the 5 Minister give some idea of how many people have been paying fines for late presentation? Will he confirm that, generally speaking, those are the people who are less able to pay? Surely it is an endemic weakness in the new system that incompetence is treated as cupidity? Is there any proposal to change the system? How many people nave been paying fines and, in particular, have there been any custodial sentences?

§ Lord McIntosh of Haringey
My Lords, that is a large number of questions. Yes, of course the Inland Revenue keeps these matters under review. I am not especially aware that this is a bonanza for accountants. Certainly I, who used to employ an accountant, can now successfully complete the form on my own and submit it before 30th September. I am therefore saving money, for a start. If that is self-interest, then so be it.
As to the issue of whether the people who can least afford it are being penalised, yes, of course there are fines for late submission. But those fines are capped. If anyone owes less than the amount of the fine, the fine is reduced. The criteria for inclusion in self-assessment is whether the correct amount can be deducted at source; it is not based on total income. However, we are making continued efforts to eliminate from the scheme people on lower incomes who make straightforward returns. We have developed a short return form to achieve that. I am sure that there have been no custodial sentences.

§ Baroness Strange
My Lords, is the Minister aware that although I am fairly stupid I am not entirely stupid and I am quite incapable of filling in the form myself? Therefore, I have to employ accountants. Is he further aware that this year I have had to take out insurance in case they also make a mistake? The accountants must have some brains.

§ Lord McIntosh of Haringey
My Lords, I am always willing to come up to Scotland to help the noble Baroness, Lady Strange, fill in her forms. In a debate on this issue about two years ago, people asked for "idiot's guides". There are no idiots in your Lordships' House.

§ Lord Roberts of Conwy
My Lords, the Minister will be aware that it has been reported that this year a number of self-assessment forms have been lost in the post or elsewhere and taxpayers have been asked to resubmit. Will the Minister give some idea of the extent of the problem?

§ Lord McIntosh of Haringey
My Lords, that is difficult Clearly, there is the possibility of forms being lost in the post, and the possibility that forms may simply be lost. After all, there are millions of forms at tax offices. We do not know the figure for the number of returns at 31st January this year because we have not yet reached that date. However, if I were challenged as to the numbers, there is no reason to suppose that it is different from previous years. In that case, the number is in hundreds rather than thousands.

§ Lord Dubs
My Lords, does my noble friend know how many people do not manage to submit their returns by the end of January? Perhaps I may add, as someone who does not use an accountant, that I have always found Inland Revenue staff incredibly helpful.

§ Lord McIntosh of Haringey
My Lords, I am grateful for the remarks of the noble Lord, Lord Dubs. We do not yet have this year's figure. In previous years, the number of people submitting forms on time—by the end of January—has been approximately 90 per cent.

§ Lord Saatchi
My Lords, speaking of those who can least afford it being penalised, will the Minister confirm that the self-assessment system is enabling the Government to extract £3 billion a year in income tax from people living below the Government's official poverty line?

§ Lord McIntosh of Haringey
My Lords, the self-assessment system does not change the rate or incidence of taxation; it simply affects the way in which it is collected.

§ Lord Barnett
My Lords, I declare an interest, given the remark by the noble Lord, Lord Russell-Johnston. The senior tax partner of my old firm does submit my tax return—on time, I am happy to say. This is not a party political issue. Surely, it should be a matter of the most efficient method in line with the public interest. In those circumstances—I have not read the latest National Audit Office report—what percentage of returns submitted are found to be in error? My noble friend says that some 90 per cent are submitted—although although I am not sure how he can know that, given the tax evasion which, unfortunately, occurs.

§ Lord McIntosh of Haringey
My Lords, I hope that the noble Lord means tax avoidance, not tax evasion—or perhaps he means both. No, I do not know off-hand the number of forms that have to be sent back. I shall have to write to him. The evidence from the National Audit Office and that submitted to the Treasury committee last year by the Chartered Institute of Taxation and the Institute of Chartered Accountants in England and Wales are very supportive of the tax assessment system.

Baroness Sharpies
My Lords, if it is proved that tax offices have lost the forms, will late payers still be fined?

§ Lord McIntosh of Haringey
No, my Lords, certainly not. If it can be found that it is the responsibility of the Inland Revenue, there will be no fine. But, as we know from wider experience, it is very difficult to determine whether a communication has been lost in the post, or whether that is an excuse. "The cheque is in the post" is one of the most famous excuses in the world.