HL Deb 27 January 2003 vol 643 cc909-10

Lord Dubsasked Her Majesty's Government:

In the most recent tax year for which figures are available, what has been the income generated by the Inland Revenue through interest charges for late payment and what has been the corresponding repayment to taxpayers for overpayment.

Lord McIntosh of Haringey

My Lords, in the 12-month period to October 2001, the most recent for which data are available, interest payments received by the Inland Revenue amounted to some £417 million and the Revenue paid out some £397 million in interest.

Lord Dubs

My Lords, I am grateful to my noble friend for that reply. Will he confirm that if the Inland Revenue is owed money by a taxpayer it charges the taxpayer at 6½ per cent interest, whereas if the Inland Revenue owes money to a taxpayer it pays 2½ per cent interest? Will my noble friend justify the difference?

Lord McIntosh of Haringey

My Lords, the first thing to be said is that one person is not being charged interest at a higher rate on what he pays than on what he receives. The rate of interest on late payments does not constitute a penalty; it is designed to cancel any financial advantage for those who pay late. The rate of interest is set to encourage payment on time and to compensate the Exchequer for loss. The rate of interest on overpayments is the average commercial rate for return on deposits. The Inland Revenue is not a source of cheap credit.

Lord McNally

My Lords, does the Minister recall the claim of Ken Dodd that he was a pioneer of self-assessment? Is not the problem now with the Revenue itself? Is the noble Lord aware that some offices are now claiming a three-month delay in processing returns? That is before the big logjam caused by the January rush. Therefore, is not there a case for looking for carrots rather than sticks and giving a positive incentive to those who send in their returns early? I understand that that worked very well in persuading people to submit their tax returns online. There is evidence to suggest that instead of expensive advertising campaigns a little incentive to early payers would work very effectively.

Lord McIntosh of Haringey

My Lords, I refer to the principal incentive for early payment; that is, if you send in your tax return before 30th September, as I am sure the noble Lord, Lord McNally, does, the calculation is done for you rather than a person having to go through the self-assessment procedure. If the noble Lord, Lord McNally, is suggesting that there should be financial benefits from early payment, I believe that those who have more complex tax affairs would find that rather unfair.

Lord Brooke of Sutton Mandeville

My Lords, if the noble Lord, Lord Dubs, is correct in the two rates of interest he mentioned—I must infer that he is, as the Minister did not correct him—is it not the case, therefore, that the Inland Revenue owes the taxpayer a great deal more than the taxpayer owes the Inland Revenue? Will the Minister explain why that is so?

Lord McIntosh of Haringey

My Lords, my original Answer detailed not the interest charged but the payments received. I confirm the figure of 6½ per cent mentioned by the noble Lord, Lord Dubs. Different figures apply for different kinds of tax. Late payment of inheritance tax is charged at only 3 per cent. However, from the figures available to me, I cannot confirm the rate of interest for overpayment.

Lord Saatchi

My Lords, is it any wonder that we have this merry-go-round of over and underpayments of tax when just one branch of Her Majesty's Government now generates 1,185 pages of claim forms relating to taxable benefits, non-taxable benefits, allowances, credits, reliefs, tapers, disregards—an endless list of paper?

Lord McIntosh of Haringey

My Lords, I assume that as the noble Lord, Lord Saatchi, used the phrase "merry-go-round", he assumes that there is a large figure of overpayments and underpayments. In fact, the Inland Revenue collects £215 billion, so the plus or minus £400 million interest on overpayments and late payments is roughly 0.2 per cent of the total. I do not call that a bad figure.

Back to
Forward to