Call to simplify tax system

Self assessment was a big shake up in the system

The system of tax self-assessment needs to be simplified if eligible taxpayers are to be encouraged to pay up, an influential Commons committee has said.

In its latest report, the Public Accounts Committee said it was impossible to assess just how much tax was not being paid because of problems with the way the information was collected.

It is clear that the forms and guidance are still not as straightforward as they should be

Edward Leigh

There were "substantial" sums at risk from taxpayers not completing their self-assessment forms.

An estimated £3bn in 1996-7 and an estimated £1.8bn in 1997-98.

The self-assessment system was not straightforward enough for either businesses or members of the public to understand, the committee said.

The report also suggested that the Inland Revenue should estimate the sums at risk or actually lost in specific taxes and then assess their performance in reducing those levels.

Hector was the first 'person' to front the Inland Revenue advertising drive

Committee chairman Edward Leigh said: "The Revenue must make it as easy as possible for people and businesses to understand and comply with their obligations.

"It is clear that the forms and guidance are still not as straightforward as they should be.

"Their objective of making year-on-year reductions in compliance costs for small business is welcome but they need to work more closely with their customers to get direct evidence of these kind of cost reductions."

Shake-up

When the Inland Revenue introduced self-assessment in 1996 it was one of the biggest shake-ups in the tax system for years.

It applies to income and capital gains tax and affects more than 8m self-employed and higher rate PAYE (pay as you earn) taxpayers, as well as 700,000 partnerships and 300,000 trusts.

In 1999-2000 they paid more than £55bn in income tax, national insurance contributions and capital gains tax of which £40bn was collected through PAYE and other forms of deduction.