§ Mr. Beaumont-Darkasked the Chancellor of the Exchequer whether there has been any further review of the Inland Revenue's practice about remitting arrears of tax which have arisen in consequence of official error.
§ Mr. Peter ReesYes. I have discussed the practice with the Inland Revenue in the light of the recommendations in the First Report of the Select Committee on the PCA, Session 1979–80 (HC 406).
As a result of revisions—the last in November 1979—of the income limits in the White Paper of July 1971 (Cmnd 4729) by which the Inland Revenue's practice in these cases was established, the current practice is that where the taxpayer's gross income is less than £4,000 a year, no attempt is made to recover the arrears of tax. Where it is £4,000 or more but less than £6,000 only one-quarter of the arrears is collected; if £6,000 or more but less than £8,000 one-half of the arrears is collected; and if £8,000 or more but less than £10,000 three-quarters of the arrears is collected. Where the taxpayer's gross income is £10,000 or more there is normally no remission.
The new arrangements will raise the income limits generally so as further to smooth the taper at the top of the 196W range and will, as a new feature, provide more generously for those who are elderly or dependent on pensions. In other respects the arrangements will continue to operate within the framework of the 1971 White Paper.
Under these arrangements, the rule for normal cases will be that if the taxpayer's gross income is not more than £6,000 no attempt will be made to recover the arrear of tax. Where it is over £6,000 but not more than £8,000, only one-quarter of the arrears will be collected; if more than £8,000 but not more than £10,000, one-half of the arrear will be collected; if more than £10,000 but not more than £12,500, three-quarters of the arrears will be collected; if more than £12,50 but not more than £17,500, nine-tenths of the arrears will be collected. Where the taxpayer's gross income is above £17,500 there will normally be no remission.
A special scale of remission will be allowed to a tax payer who has arrears of tax and who at the crucial date is at least 65 years of age or is in receipt of a national retirement or a widow's pension. In cases qualifying under those conditions, each of the limits above will be £2,000 greater, with the result that there will be total remission if the taxpayer's gross income is £8,000 or less and some remission will be allowable on gross incomes of up to £19,500.
The practice altered in the ways I have just described will apply to arrears, the actual or likely amount of which is first notified to the taxpayer or his agent on or after today. The date of that notification will also be the date for testing eligibility for the higher scale.