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Inland Revenue: Income Tax Self Assessment

“The self assessment system is providing an effective framework for managing the risks associated with the assessment and collection of tax. The system has improved the administration of income tax by making assessments more straightforward and by allowing a more focused approach to compliance work.

“However, the Inland Revenue need better management information to assess the effectiveness of the system and to identify areas for improvement as they continue to develop their approach.”

The main findings in the report are as follows.

Identifying potential taxpayers

Individuals have an obligation to notify the Inland Revenue of taxable income and gains. Some will fail to do so, for example ‘ghosts’ and ‘moonlighters’ operating in the hidden economy. The Department’s intelligence work identified some £22 million additional tax in 1999-00 by identifying people not registered for tax.

The Inland Revenue have recently reorganised the way they approach intelligence work. They have set up specialist teams to improve the focus of the work, are increasing the scope and scale of data-matching to identify non-compliance, and are planning to improve the way they collate the results. These changes should also provide the Department with better management information to assess the effectiveness of work at national and local level.

Getting in tax returns

Around 90 per cent of the 9 million tax returns issued each year are filed by the 31 January deadline. The Department estimate that there is potentially between £150 million and £300 million at risk from returns which remain outstanding after automatic £100 penalties have been applied.

The report recommends that the Department should develop their management information to monitor the use of automatic £100 penalties, daily penalties and estimated tax assessments to assess whether these incentives are effective and that they are being used appropriately. The Department are carrying out research into patterns of taxpayer behaviour which should help identify ways in which the current arrangements might be improved.

Carrying out enquiries

The Inland Revenue enquire into tax returns to deter and detect non-compliance. Using new powers, they have carried out enquiries into a random sample of tax returns. The results of this work are providing valuable information about the level and pattern of non-compliance in the taxpayer population as a whole. Results from the first two years, while not providing a definitive view, have, nevertheless, confirmed that substantial sums are at risk.

The self assessment system has enabled the Inland Revenue to introduce a greater uniformity in approach to addressing higher-risk aspects of individuals’ tax affairs and there is now a structured approach to risk assessment and the selection of cases for enquiry. The Department are continuing to develop their approach and in April 2001 introduced specialist teams to carry out risk assessment work. They have also analysed yield from completed enquiries to identify features which will be used to make a central selection of cases for enquiry in 2001-02.

Published:
5 Jul 2001

National Insurance Fund Account 1999-2000

Section 161 of the Social Security Administration Act 1992 requires me to examine and certify the National Insurance Fund Account and this report records the results of my examination of the 1999-2000 account.

Cover of National Insurance Fund Account 1999-2000

National Insurance Fund Account 1999-2000

Section 161 of the Social Security Administration Act 1992 requires me to examine and certify the National Insurance Fund Account and this report records the results of my examination of the 1999-2000 account.

Published:
4 May 2001

Inland Revenue Appropriation Accounts 1999 – 2000

“The Inland Revenue took on significant additional responsibilities during 1999-00 and continues to manage a challenging change programme. New schemes, such as tax credits, have, in general, gone smoothly but the Department should ensure that action is taken to manage risks which have emerged during the implementation of some projects.”

Published:
9 Feb 2001

Departments of the Chancellor of the Exchequer: HM Customs and Excise Appropriation Account 1999 – 2000

The National Audit Office today reported the results of their examination of HM Customs and Excise’s systems to ensure the systems provide an effective check on the assessment, collection and allocation of tax revenue during the year ending 31 March 2000. The report includes details of a serious breakdown of controls in Customs which contributed … Read more

Inland Revenue Appropriation Accounts 1999 – 2000

The Inland Revenue continued to provide an effective check over the assessment, collection and allocation of tax during the year 1999-00, according to the National Audit Office.   A report to Parliament today by Comptroller and Auditor General Sir John Bourn points out that the Inland Revenue collected almost £200 billion tax and national insurance … Read more

Departments of the Chancellor of the Exchequer: HM Customs and Excise Appropriation Account 1999 – 2000

“Because of serious failings by HM Customs and Excise, revenue of over £600 million has been lost from the diversion of alcohol onto the UK market. I am concerned about these substantial losses and I will be making a further report to Parliament on the causes of the diversion fraud, the lessons to be learned and the action planned by Customs.”

In reviewing Customs’ systems, Sir John also reported on the operation of the Landfill Tax Credit Scheme which permits landfill site operators to reclaim contributions towards environmental projects under the Landfill Tax Regulations.

The regulations and the workings of the scheme itself are complex; and payments for projects that fall within the scheme’s rules are not public expenditure because decisions to contribute to environmental projects are made by landfill site operators. This makes external examination of the value-for-money achieved by the scheme difficult for anyone to assess. Sir John concludes among other things that:

In other parts of his report, Sir John recorded the results of his examination of a variety of key systems operated by the Department. Work on import controls highlighted the need to improve checks by Customs at Belfast docks on consignments imported from outside the European Union which ensure that the correct amount of duties has been paid by importers. Sir John concluded that both risk assessment and control over movements were weak, and that significant reliance was placed on importers to pay the correct amount of duty.

Published:
9 Feb 2001
Report cover showing an oil platform

Inland Revenue: Petroleum Revenue Tax

“My report provides a large measure of assurance about the Inland Revenue’s administration of petroleum revenue tax. I endorse the Department’s policy of continuing to develop its risk-based approach to the tax. Closer working with other government agencies and regular assessment of performance will help ensure that resources remain focused on areas of higher risk.”

Published:
14 Dec 2000