Press Release - HM Revenue and Customs: Filing of Income Tax
Self Assessment Returns
22 June 2005
The Department has stemmed the fall in the percentage of people
filing their tax returns by the deadline, so that just over 90 per
cent file their returns by the end of January each year, according
to the National Audit Office.
However, an estimated £1.1 billion of income tax was outstanding
from 1.1 million overdue tax returns at July 2004. The Department
prioritises pursuit of taxpayers whom it considers highest risk.
Over 260,000 taxpayers had more than one return outstanding and
over 12,000 taxpayers had six or more years’ returns outstanding. A
significant proportion of outstanding returns were from taxpayers
whom the Department could not trace, who were living abroad or who
were insolvent.
The Department has a target to increase the percentage of
returns filed on time to 93 per cent by January 2008. To achieve
that target, the Department is focusing its efforts on groups with
the lowest performance of filing returns on time. These include
young males, those new to filing returns, those with no further tax
to pay, those in the Construction Industry Scheme and taxpayers in
parts of London. It is also simplifying the tax forms and
guidance.
The Department has arranged for around one million taxpayers
with very simple financial affairs not to have to file Self
Assessment returns. Today’s report points out that, since these
taxpayers have a better record of filing on time, this will make
the new target harder to achieve. The Department has also moved
around a further 1.5 million taxpayers on to a short tax return to
make it quicker and easier for people with simple tax affairs to
complete. These measures should reduce compliance costs for
taxpayers and the Department, but there is also scope to improve
communications with taxpayers to help them submit prompt and
accurate returns.
There has been increased use of financial penalties to penalize
late filers and encourage them to file their returns. A wider HM
Revenue and Customs review of sanctions currently underway provides
an opportunity to improve the effectiveness of the penalty regime.
The penalties for not filing by the deadline are limited by law to
£100 or the amount of tax owed, if less; and many people who file
late do not incur a penalty because they have no outstanding tax to
pay. In some countries, penalties for late filing are a percentage
of the tax owed or are ranged according to the taxpayer’s net
income. There are also significant numbers of people with two or
more returns outstanding who have not yet had daily penalties
imposed. According to estimates by the Department, 32 per cent of
tax returns filed by taxpayers contain errors and around £2.8
billion of tax a year is at risk from inaccurate returns, ranging
from simple mistakes through to fraudulent under- or
non-declaration of income. It carries out checks during processing
to identify and correct errors made by taxpayers on filed returns
and may conduct more detailed enquiries on some returns.
The Department is taking steps to improve its accuracy in
processing tax returns, and determining people’s tax codes. In
2003-04, it made errors in processing six per cent of returns
resulting in £70 million undercharges and £50 million overcharges
of tax. Improving on its accuracy rate of 71 per cent in
calculating people’s tax codes will be essential to the success of
the initiatives underway to reduce the reporting obligations of
those with simpler tax affairs. The report also highlights the
importance of accurately logging returns received to reduce the
number of penalties incorrectly imposed on taxpayers who have filed
returns by the deadline; and of ensuring that, for those affected,
the penalty is cancelled.
Operating Self Assessment costs HM Revenue and Customs £220
million a year or £22 per return issued. Processing can be made
more efficient by further increases in the use of online filing and
by rationalising the numerous centres inputting the data from
returns. Exploring the possibility of introducing differential
filing dates for paper and electronic returns could bring a number
of benefits including smoothing the peak flows of work associated
with paper returns. Taxpayers currently have 10 months to file
their returns. By contrast, some tax authorities overseas may give
taxpayers only three to four months to file returns.
Head of the National Audit Office Sir John Bourn said
today:
"The changes being made by HM Revenue and Customs to
simplify income tax self assessment returns should ease the burden
for many taxpayers in completing their returns and reduce costs for
the Department. It is essential that these changes go hand in hand
with more accurate processing of people’s tax affairs by the
Department. No less important is that those who persistently fail
to submit their tax returns be brought to book. Today’s report is
designed to help achieve this as well as improvements in the
efficiency of the Department’s operations. "
Notes for Editors
- Until April 2005, responsibility for operating Income Tax Self
Assessment was vested in the Inland Revenue. The Commissioners for
Revenue and Customs Act 2005 received Royal Assent on 7 April 2005.
The Act provided the legal basis for the new integrated Department,
HM Revenue and Customs, which was launched on 18th April 2005. HM
Revenue and Customs exercises the functions previously vested in
the Inland Revenue and HM Customs and Excise.
- HM Revenue and Customs collects £16 billion a year from Income
Tax Self Assessment net of repayments. The average net amount of
Income Tax assessed as due is around £1,600 per return. Out of
nearly 35 million Income Taxpayers, nearly 10 million had to file
Self Assessment returns in 2003-04. Around one in six returns (17
per cent) are now filed electronically and the Department has
targets to increase this to 25 per cent by 2005-06 and to 35 per
cent by 2007-08.
- The number of returns outstanding for six months or more,
including those for the 2003-04 tax year which were required by 31
January 2005, will be available in August 2005
- Press notices and reports are available from the date of
publication on the NAO website,
which is at www.nao.org.uk. Hard copies can be
obtained from The Stationery Office
on 0845 702 3474.
- The Comptroller and Auditor General, Sir John Bourn, is the
head of the National Audit Office which employs some 800 staff. He
and the NAO are totally independent of Government. He certifies the
accounts of all Government departments and a wide range of other
public sector bodies; and he has statutory authority to report to
Parliament on the economy, efficiency and effectiveness with which
departments and other bodies have used their resources.
Press Notice 42/05
All enquiries to Barry Lester, NAO Press Office:
Tel: 020 7798 7937
Mobile: 07748 181692