Self-assessment causes chaos at Inland Revenue

Confidential papers reveal that with less than six weeks to go before the introduction of self-assessment of tax the Inland Revenue faces a massive backlog of work, with staff in open rebellion over a proposed agreement to deal with the new system.

Internal figures show the department has already received 500,000 more letters than last year and 1 million more telephone inquiries in the run- up to launch day on 4 November. Post unanswered for more than a month has increased by more than 200,000 items. A pounds 200m computer system has been unable to cope with test-runs for what ministers insist will be a simplified process.

As the Revenue attempts to deal with a huge increase in workload, staff has been cut by up to 1,000 over the past year and another 2,000 are set to go in the next 12 months. Some 75 rural tax offices are to close.

The looming crisis could mean complete chaos, with the PTC, the biggest Whitehall union, considering industrial action over a pay deal worth nearly twice the inflation rate, but tied to an agreement to work longers when necessary to cope with self-assessment.

Despite a recommendation by the union's national executive, employees have rejected the 4.4-per-cent package by an unprecedented two to one. Only once before has a deal endorsed by the union been rejected by tax officers and then only by a wafer-thin majority.

Senior Revenue officials admit the department is facing an avalanche of extra work. An extra 9 million phone calls are expected next year after tax returns are sent out in April and an additional 300,000 visits by taxpayers to Revenue offices.

Jim McAuslan, deputy general secretary of the PTC, said the Inland Revenue had spent pounds 25m on advertisements to persuade taxpayers to be ready for self-assessment by keeping their own records. "The truth of the matter however is that the Revenue itself is far from ready for self-assessment." He said his members were "frustrated and angry" over the pressure of work and knew the burden was bound to get heavier.

Ministers said they expected the new method to be introduced on time but staff believe colleagues will be moved from other departments, including those chasing unpaid tax, to ensure the deadline is met. While ministers argued that self-assessment would make the lives of taxpayers easier, Mr McAuslan pointed out that an explanatory leaflet to be sent out with returns is 40 pages long.

The Revenue's most experienced staff had left during the past year and they were the people needed to smooth over the transition to the new system. One of the local tax offices due to close is in John Major's Huntingdon constituency, Mr McAuslan said.

A Revenue spokeswoman said managers always expected an increased workload because of self-assessment but it would be a "one-off" as the new system was introduced. "There may be some temporary reduction in customer service in particular turnaround times" but officials were monitoring the situation and trying to minimise delays, she said.