Written evidence from HM Revenue and Customs

Q34: Chair: A copy of HMRC’s response to the Work and Pensions Committee concerning undeclared partners

We are unable to trace a commitment to provide the Work and pensions Committee with a response on undeclared partners, however a letter on the issue (copy attached) was sent by the FST to Fiona McTaggart MP on 26.10.16

Q77: Caroline Flint: How is the data that HMRC holds used to good effect in day to day work? 

• HMRC collects, integrates and analyses one of the largest and most diverse aggregations of data and intelligence in the world. Once we have gathered the information, we use our award-winning strategic risking tool Connect.
• Connect is a powerful risking engine, containing more than 22 bn lines of data, which helps HMRC to more easily identify tax evaders and avoiders. Connect works by making it easier to see patterns, links and networks that would be impossible for the human eye to see among the mass of data arriving at HMRC each month. It can help HMRC staff find anomalies between such things as bank interest, property income and other lifestyle indicators and tax liabilities. Using sophisticated analytical techniques, HMRC’s people can then build a profile for people and businesses who look like they are failing to pay the right tax. Since its introduction in 2010, Connect has generated more than £3bn in additional revenue.
• Connect now delivers 95% of cases for operational compliance teams, including enhancing criminal cases for our Fraud Investigation Service. In 2015-/16 this amounted to approximately 1m cases.
• New data-sets such as Land Registry and Merchant Acquirer have helped more than double the size of Connect in recent years. For example in one month Connect analysed more than 800m Merchant Acquirer transactions representing about £40bn in credit and debit card spending. In one case a large restaurant was found to have declared sales that didn’t tally with its expected cash, credit and debit card transactions – pointing towards large scale evasion. After an enquiry led by one of HMRC’s local fraud enquiry teams this case is heading towards a tax settlement in excess of £4 m.
• The use of Connect in identifying hidden economy cases using this Merchant Acquirers data has increased strike rates by 20% and increased average yield per case by more than £2,000.
• Connect is not the sole deciding factor to begin a tax investigation though. Connect is a powerful tool that enables lots of different data sources to be brought together that will inform an overall risk picture. Other factors are brought into the risk picture including human insight to make the final judgment. HMRC runs specialist recruitment exercises to attract highly skilled people and we have developed a Connect Academy to provide expert users with bespoke training.
• Connect has also helped in cross-government bulk data analysis – for example successfully identifying over 80,000 foreign students in breach of their visa restrictions and over 6000 migrants with strict visa requirements who had absconded.

Q77: Caroline Flint: An invitation to the Committee to have a demonstration of the "Connect" system

We would like to formally invite the Committee to have a demonstration of Connect and how HMRC are able to use it to identify non-compliance. This could be hosted in one of our London sites.

Q96: Caroline Flint: Does Norway have to comply with the EU Framework on VAT?

Norway is a signatory to the Agreement on the European Economic Area and so has access to the EU single market (which includes free movement of goods, services and people).  However, that agreement does not cover VAT.

Q127 - 129:  Chair: The number of cases upheld by the Adjudicators office?

The following table compares the number of cases upheld by the Adjudicator’s office from 2014-15 to 2016-17.

In 2016-17, we have resolved 98.4% of complaints within the two internal HMRC complaints tiers.  Of these, 48.9% of the complaints were upheld (down from 50.1% in 2015-16).

HMRC continues to focus on driving out error and fraud and robustly pursuing outstanding debt, inevitably, this attracts increased customer contact, which is probably why complaints numbers are higher.

HMRC has upheld fewer complaints and this may have resulted in a small increase (+1.7% from 15-16 to 16-17)  in cases referred to the Adjudicator’s office, but we find it reassuring that the Adjudicator has agreed with HMRC’s decisions in increasing numbers over the last 3 years, as shown in the following graph.  The percentage of cases upheld by the Adjudicator has reduced significantly in 2016-17.  The blue line reflects the 2016-17 year to date information.  The full year’s data will be published in the annual reports in summer 2017.

Q129: Chair:   A short readout on the "Don't waste complaints" session on 27th October, 2016

Since 2014, HMRC has held two complaints events each year, a senior leaders’ event to set direction and drive performance and then an operational event to address implementation across quality, consistency and prioritisation. These events are linked into continuous improvement plans.

Senior Leaders’ Event on 27 October

The event focussed on how HMRC continues to transform and the fundamental premise that it must demonstrate to customers its ability to improve services, in line with Charter commitments, at the same time. This included a short film providing customer, staff and managerial feedback on the complaints iForm pilot.  Delegates were advised that 92% of customers found the iForm easy to use.

Delegates were from across HMRC but also included the Charter Committee, made up of external members and Non-Executive directors, the Adjudicator, The Chief Executive of the Parliamentary & Health Service Ombudsman, the Chair of the Administrative Justice Forum, and the Chair of the Cross Government Complaints Forum.

Q&A and interactive sessions provided opportunities to challenge ambition and pace, share good practice and provide steers building on improving quality and accessibility through digital services, discussing both customer and business perspectives

Q136: Caroline Flint: A Breakdown of the subject areas that MP's are writing to HMRC about?

The table below shows the lines of business that have dealt with the most MP correspondence so far this calendar year:

Q136:  Caroline Flint: Having gone through the MP process how many complaints are upheld?

Of the complaints that MPs have raised with us so far this calendar year, 20% were upheld and another 14% were partially upheld.

Q138 and 141: Chris Evans: The number of complaints that require a personal visit?

HMRC conducted face-to-face meetings to discuss complaints on eight occasions within the last 12 months.

In addition HMRC carried out the following home or venue “Needs Enhanced Support” (NES) visits as a result of complaints made:

2014-15:           31

2015-16:           55

2016 to Oct :     31

Q139 and 141:  Chris Evans: The number of bankruptcies that HMRC stimulate?

HMRC always endeavours to engage sympathetically with individuals and businesses that are experiencing genuine short term difficulties in paying the tax they owe. In such cases HMRC will aim to come to an arrangement and give time to pay and so avoid taking action. In cases where there is evidence that an individual or company will not pay, and/or continues to trade whilst insolvent, to collect the tax owed and in fairness to the vast majority of those who pay their tax on time, HMRC will use its powers as a creditor and will petition the court to make a bankruptcy order or in the case of a company, an order winding up that company.

Figures for the bankruptcy and winding up petitions that HMRC has presented to the court for the financial year 2015-16 and the financial year to date:

Petitions filed at Court – UK total

Bankruptcy / Winding up Orders obtained

The amount of money HMRC has recovered from these orders:

Q166 : Caroline Flint: An analysis of the number of employees who were not being paid the NMW, where they were working and in what circumstances?

HMRC ensures that every complaint made by a worker is assessed for National Minimum Wage and National Living Wage compliance, as well as actively carrying out risk-based targeted enforcement campaigns in high risk sectors to protect workers and see that they are paid what they are legally entitled to. High-risk sectors are identified by BEIS as part of HMRC’s annual Service Level Agreement on NMW enforcement activity. For 2015-16 this included social care and hairdressing and a specific focus on interns and apprentices.  These sectors were all represented in the 2667 businesses that we investigated in 2015-16, enabling us to recover £10.3 m of underpaid wages for 58,080 workers.  Other prominent sectors included retail and hospitality.  77% of the workers we helped in 2015-16 worked for larger employers who had underpaid 1,000 or more workers. 

Q176 - 180:  Chair: Does HMRC have any staff on Minimum Hours contracts?

• HMRC does not use zero hours contracts
• Some posts require flexible patterns of attendance to provide the expected levels of customer service. These might include working until 20.00, 5/7 working or shift working patterns of attendance. The requirement for this is made clear in the advert, the letter of appointment and the terms of employment.
• Staff can request flexible working patterns on a statutory or informal basis. These are considered in the light of business needs and agreed where it is possible to do so.

Q176 - 180: Chair: Does HMRC employ any companies who use minimum hours contracts, if so, is there a protocol?

HMRC engages a range of companies who use minimum hours contracts, from expert witnesses, to catering services. Our approach is in line with other government departments.  The procurement rules do not allow disqualification of companies bidding to provide goods and services to HMRC using minimum hour contracts.  As part of the annual supply chain sustainability survey, data on companies using minimum hours contracts is reported.  The current survey has been sent to 52 companies, representing 95% of our total spend.  The findings from this survey will be available in December 2016.    

8 November 2016