Scottish Income Tax operation by HMRC: service level agreement

Annex A: operation of Scottish Income Tax - HMRCperformance measures

Requirements

1. Identify and maintain an accurate and robust record of the Scottish taxpayer population.

HMRC measure

HMRC annually provide an assessment of risk and planned approach, based on Scottish Strategic Picture of Risk, to Scottish taxpayer identification as a bespoke element of income tax compliance activity. Additionally provide an annual report on the outcome of that compliance activity once it has been undertaken.

Delivery and reporting schedule

Strategic picture of risk provided to the Scottish Government in August each year; annual compliance assessment and plan to address provided to Scottish Government by July each year; summary of the compliance plan and outcome of activity report in HMRC’s annual SIT report published in September.

HMRC measure

HMRC address data maintenance: (1) comparison of HMRC UK-wide data set with third party data sets eg the Scottish Electoral Register and credit reference agencies, to corroborate address held by HMRC;

(2) where individual addresses not corroborated by step one comparison exercises using street/town association and postcode data with other third party and internal data sources, to establish likely Scottish taxpayer status;

(3) where corroboration of Scottish taxpayer status not achieved by steps one and two and identify and communication sent to target individuals (PTA/email/letter) – ie potential Scottish taxpayers where HMRC holds an address outside of Scotland but third party data indicated a potential address in Scotland; and individuals for whom HMRC hold a Scottish correspondence address but a main address elsewhere in the UK;

(4) monitoring response to communications and resulting changes in taxpayer address.

Delivery and reporting schedule

Timeframe for each third party comparison exercise to be agreed by HMRC and Scottish Government; Scottish Government updated, in year, of outcome of comparison exercise and any resulting further actions and timescales; detail and outcome of activity reported in HMRC’s annual SIT report. It is expected that this exercise will take place at least once every two years.

HMRC measure

Identification and correction of corrupted or blank addresses within the potential Scottish taxpayer population: cleansing incomplete or corrupt postcodes identified from comparison exercise utilising Ordinance Survey and Royal Mail; updating records with corrupt or blank addresses using third party data; identifying and correcting customer records with a Scottish address but a blank and/or incomplete postcode.

Delivery and reporting schedule

Timeframe for address cleansing exercises to be agreed annually by HMRC and Scottish Government; Scottish Government updated, in year, on the outcome of address cleansing exercises and any resulting further actions and timescales, in year; detail and outcome of activity reported in HMRC’s annual SIT report.

HMRC measure

In-year changes to Scottish Address Flag status (monthly)

Delivery and reporting schedule

Monthly breakdown provided in Quarterly Business Intelligence Reports (July, October, January, April); annual Business Intelligence Report provided in May and published in HMRC’s annual SIT report.

HMRC measure

Conservation of accuracy of ‘S’ code application on records with Scottish/English Borders postcodes.

Delivery and reporting schedule

Timeframe for border post code accuracy exercise to be agreed annually by HMRC and Scottish Government by the start of the tax year; Scottish Government updated, in year, on outcome of conservation exercise and any resulting further actions and timescales; detail and outcome of activity reported in HMRC’s annual SIT report.

HMRC measure

HMRC measure

Delivery and reporting schedule

Delivery and reporting schedule

HMRC measure

Ongoing process to ensure accuracy of ‘S’ codes on Scottish taxpayers under Section 80D(4) of Scotland Act.

Delivery and reporting schedule

Confirmation of activity and outcome in HMRC’s annual SIT report.

HMRC measure

Quality Management checks on postcode data supporting the identification of Scottish taxpayers.

Delivery and reporting schedule

Timeframe for post code quality management check to be agreed annually by HMRC and the Scottish Government by the start of the tax year; detail and outcome of activity reports in HMRC’s annual SIT report.

HMRC measure

Ongoing process to provide taxpayers’ residency statuses to Pensions Providers for Relief At Source (RAS) pensions.

Delivery and reporting schedule

Update provided to the Scottish Government following key business events.

2. Collect and account for SIT revenues at SIT rates.

HMRC measure

Publication of SIT receipts in HMRC Annual Accounts (published in July of each year and audited by the National Audit Office). Publication of Rest of UK (rUK) Income Tax receipts (equivalent non-savings, non-dividends) in the HMRC SIT statistics publication.

Delivery and reporting schedule

HMRC Annual Report in July, reported in HMRC SIT statistics publication and HMRC’s annual SIT report; HMRC SIT statistics publication, expected to be published following HMRC Annual Accounts, within 4 weeks.

HMRC measure

HMRC measure

Delivery and reporting schedule

Delivery and reporting schedule

HMRC measure

Extract of HMRC Accounts and HMRC SIT statistics publication provided to Scottish Parliament.

Delivery and reporting schedule

Provided annually, after Scottish Parliament’s summer recess with HMRC’s annual SIT report in September.

3. Apply the same level of customer service, support and transparency to SIT payers as is applied to income tax payers in the rest of the UK.

HMRC measure

Telephony (monthly)^[1]: total Calls = number of calls received via the designated SIT telephone line; IVR (ITA) % deflected; answered, total number answered by an HMRC advisor; average Queue time of Answered call; abandoned in Queue, total number of calls; average Wait Before Abandoned; overall SIT calls %handled.

Delivery and reporting schedule

Monthly breakdown provided in Quarterly Business Intelligence Reports (July, October, January, April); Summary of current and previous years provided in annual Business Intelligence Report issued in May and published in HMRC’s annual SIT report.

HMRC measure

Complaints (monthly): number of SIT complaints received; number of SIT complaints answered; complaint category; complaint status.

Delivery and reporting schedule

Monthly breakdown provided in Quarterly Business Intelligence Reports (July, October, January, April). Summary of current and previous years provided in annual Business Intelligence Report issued in May and published in HMRC’s annual SIT report.

HMRC measure

Online calculators which rely on income tax rates and thresholds are accurate for Scottish taxpayers.

Delivery and reporting schedule

Reviewed annually and updated, as required, for start of tax year. Detail and outcome of activity reported in HMRC’s annual SIT report.

HMRC measure

Tax tables issued to digitally exempt employers reflect Scottish rates and thresholds.

Delivery and reporting schedule

Annual exercise following confirmation of Scottish rate and thresholds – activity and outcome reported in HMRC’s annual SIT report.

HMRC measure

Outputs to individual Scottish taxpayers (ie P2 coding notices and Annual Tax Summary) accurately reflect SIT.

Delivery and reporting schedule

Ongoing assurance processes undertaken with activity and outcomes reported in HMRC’s annual SIT report.

HMRC measure

HMRC small business payroll tools amended for SIT.

Delivery and reporting schedule

Annual exercise, following confirmation of Scottish rate and thresholds – activity and outcome reported in HMRC’s annual SIT report.

HMRC measure

Personal taxation guidance available to a Scottish taxpayer on GOV.UK is commensurate to that available to a taxpayer in the rest of the UK.

Delivery and reporting schedule

Reviewed annually and updated, as required, for start of tax year: Scottish Government updated, in year, of actions taken; detail and outcome of activity reported in HMRC’s annual SIT report.

4. Provide the Scottish Government with sufficient relevant and timely information and data for rate-setting and forecasting for SIT.

HMRC measure

Provision of Public Use Tape income tax data for CY(-2).

Delivery and reporting schedule

Public Use Tape delivered annually - the delivery date will be agreed by the end of January each year (the expectation for normal delivery is by mid to late April); detail and outcome of activity reported in HMRC’s annual SIT report.

5. Provide the Scottish Government with sufficient relevant and timely information and data to discharge its duties in respect of cash management due to any change between forecast and collected amounts of SIT.

HMRC measure

Monthly liabilities reported by employers for Scottish taxpayers in employment (ie those within the PAYE system with ‘S’ code identifier at that point in time).

Delivery and reporting schedule

Monthly provision (and from September 2017, HMRC publication) of previous month’s liabilities synchronised to publication of monthly UK Income Tax receipts data. Monthly RTI data; liabilities included in the SIT statistics publication following HMRC Annual Report; detail of activity reported in HMRC’s annual SIT report.

HMRC measure

Scottish Government and HMRC will also: explore further how outturn SIT receipts may vary from both forecast and reported in year liabilities; and periodically review data provided to Scottish Government to check whether monthly employer RTI data on Scottish taxpayer liabilities remains the best way to meet Scottish Government real time data needs.

Delivery and reporting schedule

Ongoing engagement between Scottish Government and HMRC through the analytical working group; detail of activity and outcomes reporting in HMRC’s annual SIT report.

6. Provide the Scottish Government with sufficient relevant and timely information for assurance purposes and to budget effectively for any net additional administrative costs to be recharged to the Scottish Government.

HMRC measure

Rechargeable costs framework kept up to date to cover all identified and anticipated administrative costs.

Delivery and reporting schedule

Ongoing engagement between the Scottish Government and HMRC; detail of activity and outcomes reporting in HMRC’s annual SIT report.

7. Apply risk based compliance activity to the collection of SIT in the same way as is applied to the collection of income tax from taxpayers in the rest of the UK (this is additional to specific Scottish taxpayer population activity listed under requirement 1).

HMRC measure

HMRC’s approach to enforcement and compliance will be applied across all income tax collection, including SIT: promote – designing our processes and taxpayer products to stop careless errors. Helping customers get things right first time eg pre-population of forms with address data; prevent – exploiting our digital services using our data to identify risks as they arise and giving customers the opportunity to correct their mistakes before they reach HMRC eg pop-up information boxes on Self Assessment returns; respond – intervening to address specific compliance risks through:

(1) employer level activity (real time information, submitted by employers, is monitored to ensure correct tax codes and tax tables are used – discrepancies identified are subject to further investigation); (2) agent compliance (agents represent 8m customers – HMRC therefore engages extensively with agents to impact their clients’ behaviour and promote voluntary compliance); (3) enquiries into Self Assessment returns; (4) dedicated teams to analyse risk related to High Net Worth and Affluent taxpayers. The effectiveness of this work will be reported at the UK level, as the same standards are being applied to both Scottish and rUK Income Tax liabilities.

Delivery and reporting schedule

Annual compliance assessment and plan to address provided to Scottish Government by July each year; summary of compliance plan activity and outcomes reported in HMRC’s annual SIT report published in September.

Summary of publications/products for Scottish Government

Name of publication

HMRC Annual Report into Scottish Income Tax

Product/ publication covers

Reports on HMRC activity relating to:

1. Identification and assurance 2. Compliance 3. Collecting and accounting for Scottish Income Tax 4. Data for Scottish Income Tax rate setting and forecasting 5. Customer Service and Support 6. Recharging of HMRC costs

Frequency

Annually in September.

Name of publication

Scottish Income Tax Outturn Statistics

Product/ publication covers

Growth between CY(-3) and CY(-2); number of Income Tax payers by type; amount of Income Tax paid by type; number of taxpayers for NSND income bands; number of taxpayers for NSND income bands – year on year change; tax band thresholds: Scottish and Rest of UK Income Tax systems for NSND income; tax band rates: Scottish and Rest of UK Income Tax systems for NSND income; background and commentary on statistics.

Frequency

Annually in July.

Name of publication

Monthly RTI data

Product/ publication covers

Monthly provision of previous month’s liabilities synchronised to publication of monthly UK Income Tax receipts data.

Frequency

Monthly to Scottish Government

Name of publication

Public Use Tape

Product/ publication covers

Anonymised Income Tax data from CY(-2). Income Tax liabilities by band and by marginal rate, Scottish and non-Scottish Income Tax payers.

Frequency

Agreed annually in April.

Name of publication

Annual Business Intelligence Report

Product/ publication covers

Metrics detail: customer contact by telephone; complaints handled; web hits.

Frequency

Annex to Annual Report.

Name of publication

Compliance Assessment and Plan

Product/ publication covers

HMRC’s approach to enforcement and compliance will be applied across all income tax collection, including SIT. Annual report on the outcome of compliance activity once it has been undertaken. HMRC does not publish this for operational reasons. A summary is included in the Annual Report.

Frequency

Annually in July.

Name of publication

Scottish extract of Strategic Picture of Risk

Product/ publication covers

A subset of a UK-wide exercise to establish overall risk to liabilities, focussing on compliance with Scottish Income Tax. This extract is provided to Scottish Government. HMRC do not publish this for operational reasons

Frequency

Eight weeks after publication of the SIT Outturn Statistics

Glossary of terms and abbreviations

Digitally exempt: The vast majority of employers must send their payroll data to HMRC online. However, a small number of ‘digitally exempt’ employers have the option of sending payroll submissions to HMRC either online or on paper. You can see guidance on who is eligible.

Pay As You Earn: The Pay As You Earn (PAYE) system is a method of paying Income Tax and National Insurance contributions (NICs). Employers deduct, and pass to HMRC, tax and NICs from their employees’ wages or occupational pension, before the wages or pensions are paid.

Self Assessment: Self Assessment is a system of collecting taxes from those who do not contribute through PAYE, or who earn additional income apart from their main employment. Taxpayers self assess their tax liability and complete a tax return detailing the taxes due to HMRC and any reliefs that may apply to them.

‘S’ code: To enable the PAYE system to operate correctly, HMRC sends employers an individual code made up of letters and numbers for every UK employee. These codes enable employers to deduct the right levels of Income Tax and National Insurance contributions for each employee. A code prefixed by an ‘S’ (an S-code) tells the employer that the employee is a Scottish taxpayer so Income Tax should be deducted from earnings using the rates and thresholds set by the Scottish Parliament.

Scottish Address Flag Status: Whether or not an individual is a Scottish taxpayer is decided by place of residence. Where it holds a Scottish address for an individual, HMRC therefore electronically marks (Scottish Address Flag) that record as Scottish - the mark/flag being removed or added if the individual moves into or out of Scotland. If present and the individual is in employment, the mark/flag enables HMRC IT systems to automatically issue a PAYE ‘S Code’ letting the employer know that the employee is a Scottish taxpayer, so Income Tax should be deducted from earnings using the rates and thresholds set by the Scottish Parliament.

Survey of Personal Incomes: The Survey of Personal Incomes (SPI) is a set of Income Tax data, produced annually by HMRC from the information it holds on a large sample group of UK individuals. The SPI is used assess the potential impact of proposed changes to tax rates and thresholds in order to inform ministerial decisions on tax policy. It is also used to provide summary information for the National Accounts that are prepared by the Office for National Statistics, in addition to provide information to MPs, other government departments (OGDs), companies, organisations and individuals.

Public Use Tape income tax data for CY(-2): The Public Use Tape is an anonymised dataset based on the SPI, amended to ensure taxpayer confidentiality. HMRC makes the Public Use Tape publicly available to enable statistical research by organisations and individuals outside of HMRC. The SPI and therefore the Public Use Tape, are always drawn from the latest year for which HMRC has a full set of income tax data – in any given year this will always be the data from 2 tax years earlier (CY-2). This is due to the timeframe in which HMRC receives information from taxpayers (eg self-employed individuals do not have to make return of their income for a year until 31 January the following year).

Real Time Information: Real Time Information (RTI) is the system through which employers send employee payroll information to HMRC at the same time as the employee is paid, usually monthly, rather than at the end of the tax year.