Income Tax: Self-assessment (Hansard, 16 September 2004)

§ The Parliamentary Under-Secretary of State, Department for Culture, Media and Sport (Lord McIntosh of Haringey)
My Lords, the Inland Revenue continuously tries to make self-assessment as easy as possible. It has made changes recently which will give more than 2 million taxpayers an easier task. Many will no longer be required to complete a return, and others will be able to use a short tax return. The Inland Revenue has also enhanced the online system to offer taxpayers a wider range of services. Those who file electronically benefit from online help to prevent obvious mistakes in their returns.

§ Lord Dubs
My Lords, I welcome the Answer given by my noble friend. It shows that online self-assessment is a very efficient method for the taxpayer and for the Inland Revenue. Why then are there certain categories of individuals who are not allowed do their self-assessment online, which include Members of this House and of the other place?

§ Lord McIntosh of Haringey
My Lords, I am not allowed to do my return over the Internet and nor is my noble friend Lord Dubs. This is not a secret; I have discussed it with him. The reason is that there are special handling arrangements for those whose links with their employer apparently ought not to be disclosed for security reasons. However, it is true that a number of Members of this House are not able to file electronically and it is the intention of the Inland Revenue to reduce that number as far as possible and to make arrangements so that all Members can file over the Internet.

§ Baroness Noakes
My Lords, the last set of public service agreements had a 50 per cent target for electronic filing. That was subsequently refined—I think that is the term to 25 per cent for self-assessment. Will the Minister explain why the latest public service agreements 1293 contain no target for such filing? Is it because all the evidence points to the fact that these targets would simply not be met?

§ Lord McIntosh of Haringey
My Lords, the number of people who file electronically is increasing every year. There were over 1 million at the end of January this year; 1,080,000, I think. The total number of self-assessments is 9.5 million out of 30 million. My understanding is that Inland Revenue targets have been met in previous years.

§ Lord Sheldon
My Lords, I welcome the use of the Internet for making tax returns. Can my noble friend tell me how many taxpayers pay through the Internet and how many taxpayers receive statements of account via the Internet when it is requested by them?

§ Lord McIntosh of Haringey
My Lords, I do not have that figure. Clearly, the people who file via the Internet—I have already given a figure of over 1 million—must be given an opportunity to pay over the Internet when they have to pay. Of course, the number of people who pay other than by PAYE is a very small proportion of all taxpayers.

§ Lord Mackie of Benshie
My Lords, can the Minister tell us whether the Inland Revenue is gaining or losing by self-assessment?

§ Lord McIntosh of Haringey
My Lords, both taxpayers and the Inland Revenue are gaining by self-assessment. Taxpayers are gaining because they have less work to do and the Inland Revenue is gaining because the costs are less. I should add that when a return is filed over the Internet, it is analysed electronically. It does not have to return to paper and pencil in order to be calculated.

§ Lord Ezra
My Lords, is the Minister aware that there is evidence that the number of tax inquiries launched by the Inland Revenue has dramatically increased in recent times? Is this something that is due to the introduction of self-assessment or is it due to some other reason?

§ Lord McIntosh of Haringey
My Lords, I am not sure that I understand what the noble Lord, Lord Ezra, means by "tax inquiries". If they are the checks carried out by the Inland Revenue on discrepancies, then I am not sure that that is the case. But it could also mean checks that are made when there is a suspicion of a filing being deliberately inaccurate. In view of that ambiguity, I would rather write to the noble Lord, Lord Ezra, about that point.

§ Lord Dubs
My Lords, given my noble friend's Answer, and given that filing online is a purely voluntary activity, so that those who might have security concerns would obviously not do it that way, why can the Government not make an immediate decision and allow us all to file online right away? Is it because governments do not make immediate decisions?

§ Lord McIntosh of Haringey
My Lords, I am sure that that is part of the reason. The history of online 1294 filing is a little more complicated than that. There are two types of online filing. One is the original, which was introduced about 10 years ago and was mainly designed for advisers. The second is the Internet filing provision for individual taxpayers, which was introduced three or four years ago. To reconcile those, in order to make online filing possible for everybody, is a little more complicated than might appear.

§ Lord Newby
My Lords, in terms of the credibility of the system, will the Minister raise with the Inland Revenue the possibility of introducing de minimis limits in terms of fines for late payments? At present, if one submits a late claim for a repayment, one can get a demand for a fine of £0.00. This clearly brings the system into disrepute. Will the Minister consider that point?

§ Lord McIntosh of Haringey
My Lords, my understanding is that there are special arrangements for anything less that £2,000. I may be out of date on that. It sounds a sensible point and I shall look into it.

Lord Brook of Sutton Mandeville
My Lords, as we have a moment to spare, may I commend to the Treasury Bench a novel system of self-assessment? When my late noble kinsman was Financial Secretary to the Treasury, 50 years ago, he received a letter from an anonymous taxpayer. It said that he had been losing much sleep and had come to the conclusion that the loss of sleep was caused by his inaccurate tax reporting. He enclosed a banker's draft for £50,000 and added a postscript saying that if he continued to lose sleep, he would send some more.

§ Lord McIntosh of Haringey
What can I say, my Lords?