PAYE Contributions

Stephen Timms Excerpts

Wednesday 8th September 2010 Commons Chamber

[Mr Gauke]

My hon. Friend is absolutely right. As the Government, we are seeking to address the short-term issue, which is the overpayments and underpayments. We cannot just brush them to one side or park them for another year; we need to address them. However, we must also look at the longer-term solution, and that, as my hon. Friend rightly says, means moving towards a much more up-to-date system so that the information is more up-to-date and we are able to respond accordingly.

[Stephen Timms (East Ham) (Lab)]

I understand that tax experts were briefed last week and told that a small number of notifications would be sent out in the next few weeks as the start of a process over the coming months, so why was the House not told, still less the public, what was intended? Why did HMRC’s website initially say absolutely nothing at all? Why has that arrangement, which was set out to a few experts last week, apparently now been abandoned and replaced, if we are to believe the reports over the weekend, with a headlong rush, whereby 6 million new calculations will be sent out in the next few weeks? Where is the plan for handling that huge exercise?

The Minister will have seen the questions that I tabled yesterday, but let me put four of them to him specifically. He has told us that HMRC will consider writing off demands when taxpayers can demonstrate that they provided all the necessary information to calculate their tax correctly. What exactly will they have to show, and how can they do so? If a problem arises because the employer, rather than the employee, has made a mistake, can he confirm that the employer will be held liable for the tax that is due?

Crucially, if people are required to pay more tax for a past year, their net income for that year will be reduced. In many cases, that will mean that they would have been entitled to more benefits—pension credit, housing benefit and council tax benefit—than they were actually paid. Can the Minister confirm that the rule will be changed so that those higher amounts will be paid to those individuals or offset against the extra tax that is due?

Anecdotal evidence suggests that HMRC call-response times have become much worse over the past few months, with many more people not being able to get through. Can the Minister confirm that the deadline for tax credit renewals has been extended from 31 August as a result? Clearly, sending out all those notifications will hugely increase the demand on those call centres, so how will that extra demand be managed? The press reports all refer to tax paid over the past two years. Does the Minister intend that, in due course, HMRC will look at earlier periods as well, or is the exercise limited to those two years?

Of course, it is a good thing that the previous Government’s investment has provided a system that is better able, in particular, to keep track of tax obligations, when people change their jobs or have multiple sources of income, but it is the Minister’s job now to ensure that the extra information that he has is used fairly.

[Mr Gauke]

I think we now know why Labour Members did not table an urgent question on this matter.

The right hon. Gentleman asked many questions—although there was not a word of apology for a tax system that is clearly encountering some difficulties—and I will endeavour to answer them all. First, there has been no change of plan. We have pursued the same proposal all along, namely to write to 45,000 to 50,000 taxpayers. We will use the information and the lessons learned from this relatively small sample to guide how correspondence will be undertaken with the remaining taxpayers affected. Let me reassure him that his fears about that are wrong. He also expressed concern about the public not being informed about the exercise, but we made great efforts to inform them over the weekend immediately after the decision was taken to proceed with writing those first letters to affected taxpayers.

The right hon. Gentleman referred to a concession that may be available, and he may recall that the A19 concession is available in circumstances where all the information has been provided to HMRC and it has had the opportunity to address it. We have looked into this. The A19 concession, which is well established—he will remember it from his time in the Treasury—does not apply that often in practice, and I do not want people to build up their hopes that it will offer some kind of panacea; that would be unfair on taxpayers.

The right hon. Gentleman questioned whether employers have made mistakes. In some circumstances, employers will have made the mistake that caused the overpayment or underpayment, but the principle remains the same—we have to collect the right amount of tax.

The right hon. Gentleman asked about means-tested benefits. In some cases, because net income was higher in a previous year, certain means-tested benefits would not have been available in that year, so sums are now having to be paid back. In those particular cases where tax underpayments are being recovered through the tax coding system, the corresponding fall in the net income for the taxpayer will increase the availability of means-tested benefits in that relevant year.

The right hon. Gentleman asked about the extension of tax credit renewals’ deadline, and I can confirm that it has been extended to provide additional time for claims. I have to point out to him, however, that the idea that call centres are under strain and that it is difficult to get through to HMRC is not entirely a new phenomenon: it is a long-standing problem. Let me take this opportunity to say to taxpayers who are understandably concerned about their position that they should wait until they receive a letter before contacting HMRC, as only then will it be able to deal effectively and efficiently with their concerns. Nevertheless, he raises a legitimate issue about call centres. We are providing additional staff—there is additional capacity now and there will be after the tax credit renewal process has been completed. We are taking steps to ensure that HMRC is able to deal effectively with those calling in with concerns.