Public Service Agreement 2005-06 to 2007-08 Technical Notes Objective 2

Objective 2 - improve customer experience, support business and reduce the compliance burden.

Contents

• Target 5
• Target 6
• Target 7

Technical Notes

The following notes have been updated and amended, in particular showing changes to the baseline and reporting for Key Indicator 2 and new measures for Key Indicator 4. They also include clarification of reporting processes for each of the other Key Indicators.

Validation

The Department's data systems are subject to validation by the National Audit Office every two years. Updates to this Technical Note have been made in response to recommendations from their most recent validation report in 2007. Specific data systems and results are also reviewed by the Department's Internal Audit Office as part of their annual programme, as agreed by the Departmental Audit Committee following a risk based planning / prioritisation exercise.

Target 5 - Respond accurately and completely to customers’ requests for advice.

Key Indicator 1

By 2007-08, increase to at least 80 per cent the proportion of customers who said they achieved success at first point of contact.

Scope/nature of KI

This covers contact customers make with us through post, phones, website, face to face and other potential emerging channels, in respect of help, advice and support. We measure the indicator through an annual Customer Service Survey, focusing on customers’ actual experience of contact over the previous 12 months. The survey asks customers, in respect of their last contact with us, whether they got the help or information they were looking for the first time they contacted us about that most recent issue, or if they needed further contact.

The target covers 13 key HMRC customer groups with each customer group being surveyed separately. The customer groups include:

• business customers – employers, corporates, self-employed, VAT traders, agents, Construction Industry Scheme, Excise customers and international traders
• individuals – employees (PAYE and Self Assessment), pensioners, Tax Credit and Child Benefit recipients

Construction of measure

(a) Annual sampling

We take a random sample of customers from Departmental information systems (for 10 customer groups) and commercial databases (for the remaining three groups). The surveys use quota sampling, setting interviewing quotas on key variables to ensure good coverage of key subgroups. The survey data within each customer group is then weighted so that the survey results at customer group level reflect the true profile of the wider population in respect of the quota variable. For PAYE non-SA and Agents a simple quota is set for the target number of interviews to be achieved across the group as a whole. The number of interviews achieved is sufficient (around 8000 in total for Indicator 1) to provide reliable results for each customer group. The use of a quota sampling approach means that the results are indicative rather than accurate to a known precision, but quota sampling is considered appropriate in view of the large changes in customer perception of HMRC performance required over the period in order to achieve the target for this Indicator.

(b) Survey methodology

The annual surveys are carried out by telephone. An independent research agency is commissioned to carry out the surveys and reports the results back to HMRC. The annual survey takes place in October-November, and reports in the fourth quarter each year.

(c) Production of results against target

We analyse the survey results for the proportion of each customer group that got the help or information they were looking for the first time they contacted HMRC about that most recent issue. These results are combined to produce an overall result for this Indicator across all 13 customer groups. The weightings used to bring sub-group results together to produce group results are based on estimates of populations contacting HMRC over the previous 12 months, which in turn are based on survey results and estimates of total populations. These weightings are calculated from current data and are therefore updated over time. The weighting used to bring the group results together is based on an estimate of the amount of HMRC budget devoted to dealing with customer contact for each group and is fixed for the Public Service Agreement period. Raw weightings are adjusted (using a standard mathematical transformation) so that no single group receives a weighting below 1 per cent or more than 15 per cent.

Reporting

The customer surveys are undertaken annually and the latest available result for the Indicator is reported in the Department’s Spring and Autumn Reports. The Autumn Performance Report carries forward the results previously reported in the Spring Report.

Data

Survey data is collected by a research agency commissioned by HMRC to carry out the telephone survey.

Data on the amount of HMRC budget devoted to dealing with customer contact are taken from Departmental management information systems. This is used to weight results together across customer groups. The data used is from the financial years 2003-04 and 2004-05 (to September 2004).

Baseline

The baseline is 71.7 per cent, from the customer service survey carried out during October and November 2004.

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Key Indicator 2

By 2007/08 increase to at least 90 per cent the accuracy and completeness of advice given and actions taken in respect of customer contact.

Scope/nature of KI 2

This target covers contacts made by the public who telephoned HMRC contact centres, and those who wrote to HMRC. These two channels handle the major part of current customer contact with HMRC.

Contact centres are equipped with specialised telephony equipment and centrally administered as part of HMRC’s Customer Contact Directorate.

All post (that is, correspondence and certain external forms from the customer) received in its main operational processing units which is estimated to cover around 90 per cent of total post received in the Department. The measure does not include post received and handled in the department’s Debt Management business which operates a different system of quality monitoring based on overall case management. Debt Management represents less than 10 per cent of postal enquiries. Validated results for Debt Management will be published alongside this indicator at the end of the period.

Construction of measure

This is measured from a sample of telephone calls and post extracted by two separate, annual quality monitoring exercises. The selection of telephone calls and items of post is closely defined (eg calls are selected by business line) and then selected randomly within quotas identified for specific offices.

We aim to maintain broad comparability from one performance year to the next but quotas may be adjusted to match changes in the quality strategy of the business or changes to the office infrastructure and lines of business handled by the department.

Post

(a) Post sampling

A sample of post is taken one day per month in each HMRC area. The items sampled include external post (ie customer correspondence) and certain forms. However, the sample does not cover tax returns (which have their own handling targets) or employee in-year maintenance forms, such as P45s, which are also separately targeted. The sample taken is intended to be large enough to produce a result that is accurate to +/- 0.5 per cent at the national level. Staff are not aware which items have been selected in the sample, so that they cannot give these items preferential treatment.

(b) Post review process

The sample is reviewed by HMRC Quality Monitoring staff to establish the extent to which any advice given and any actions taken meet the accuracy and completeness tests:

• Post is assessed as being dealt with completely if all points raised by the customer were dealt with and all required actions were carried out in full.
• Post is assessed as being dealt with accurately if all actions taken were correct.
• Post must be dealt with both completely and accurately for it to pass the quality assessment check.

(c) Production of national results

The results from those parts of HMRC undertaking post sampling are weighted to reflect the volumes of post handled by each area or business stream and brought together to produce one national, annual result.

Contact Centre Telephony

(a) Sampling

A random sample of recorded telephone calls from each contact centre is taken each month. These are then assessed against a basket of quality measures designed to give an overall view of the quality, correctness and completeness of the specific telephone contact.

(b) Review process

The sample is reviewed by HMRC Quality Monitoring staff to establish the extent to which any advice given and any actions taken meet the relevant correctness and completeness tests:

• A call is assessed as handled ‘correctly’ if all information provided during the call and all relevant follow up action was correct as measured against internal HMRC processes and the relevant guidance to advisers current at the time the advice or information was given.
• A call is assessed as handled ‘completely’ if relevant questions were asked; all points raised by the caller were answered in full and all appropriate follow up actions were taken.
• Telephone calls are only assessed as complete and accurate if they pass both the completeness and correctness assessments.

(c) National results

The results from each contact centre are brought together, to produce one national, annual result with a margin of error expected to be within (95 per cent confidence intervals) +/- 0.5 per cent.

Combined result for Post and Contact Centres

The national results from the separate post and contact centre sampling exercises are weighted to reflect relevant volumes of contact and brought together to produce one combined national, annual result for this indicator. Margins of error (95 per cent confidence intervals) for this combined result are expected to be within +/- 0.5 per cent.

Reporting

Progress against this indicator is reported in the Department’s Spring and Autumn Reports.

Data

Data on completeness and accuracy of handling is collected by HMRC Quality Monitoring staff, who enter this into Departmental management information systems. This data represents approximately 90 per cent of postal enquiry volumes received in HMRC. Data on volumes of telephone calls are taken from Departmental telephony systems.

Baseline

The baseline is 90 per cent based on the combined post and telephony data for 2004-05.

It should be noted that the Spending Review 2004 (SR04) targets were originally set based on 2003-04 assumptions, but when the new measure for the SR04 period was established (in 2004-05) it was found that improvements had already produced the target level the Department’s aim then became to maintain or improve on this standard over the SR04 period.

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Target 6 - Provide simple processes that enable individuals and businesses to meet their responsibilities and claim their entitlements easily and at minimum cost. 

Key Indicator 3

By 2007-08, increase to at least 90 per cent the proportion of small businesses that find it easy to complete their tax returns.

Scope/nature of KI 3

This covers three main tax returns: Self-Assessment, PAYE and VAT and is restricted to small businesses defined as:

• all self employed Individuals (as the survey which measures this Indicator encompasses very few larger businesses)
• employers with fewer than 10 employees
• VAT traders with less than £1million turnover.

Those who do not complete their own tax returns (i.e. because they use an agent for this) are excluded.

We measure this through surveys, focusing on customers’ actual experience of dealing with HMRC over the past 12 months. Each group is surveyed separately and customers are asked whether they found completion of their returns:

1. Very easy.
2. Fairly easy.
3. Not at all easy to achieve.
4. Don't know.

Construction of Measure

(a) Annual sampling

We take random samples of customers from Departmental information systems (for self employed and VAT customers) and commercial databases (for Employers). The surveys use quota sampling, setting interviewing quotas on key variables to ensure good coverage of key subgroups. The data within each customer group is then weighted back to naturally occurring proportions in the quota variable, with the aim of making the figures reflect the profile of the wider population. The number of interviews achieved is sufficient (around 1400-1600 in total for Indicator 3) to provide reliable results for each customer group. The use of a quota sampling approach means that the results are indicative rather accurate to a known precision.

(b) Survey methodology

The annual surveys are carried out by telephone. An independent research agency is commissioned to carry out the surveys and reports the results back to HMRC. The annual survey takes place in October-November, and reports in the fourth quarter each year.

Production of results against target

The results from the three customer groups (self employed, VAT and employers) are weighted together to produce an overall score for this Indicator. The weighting is based on the numbers of customers in each group who deal with their own tax affairs. The number of customers completing their own returns is estimated from the Customer Service Surveys (CSS) and Departmental Management Information Systems. These weightings are calculated from baseline data and are fixed for the Public Service Agreement period.

Reporting

The latest available results for the Indicator are reported in the Department’s Spring and Autumn Reports. The Autumn Performance Report carries forward the results previously reported in the Spring report.

Data

Survey data is collected by a research agency commissioned by HMRC to carry out the telephone survey. The number of customers completing their returns is estimated from the Customer Service Surveys (CSS) and Departmental management information systems. This estimate is used to weight results together across customer groups.

Baseline

The baseline is 87.6 per cent, provided by the Customer Service Survey carried out during October and November 2004.

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Key Indicator 4

By 2007/08 demonstrate a measurable improvement in new and growing businesses’ ability to deal correctly with their tax affairs. This will include increasing the proportion of applications for VAT registration that are complete and accurate to at least 50 per cent .

Scope/nature of KI 4

This measure reflects the benefits of the integrated HMRC in improving the ability of a key customer group to comply with their tax obligations.

Construction of Measure

The ‘new and growing’ businesses population is identified from analysis of three specific touch points with HMRC systems:

• When all new businesses register with HMRC for National Insurance purposes within 3 months of start-up which leads to submission of their first Income Tax Self-Assessment (ITSA) return.
• When a new or growing business takes on its first employee, registers a new Pay-As-You-Earn (PAYE) scheme and first submits a year-end return.
• When a new or growing business seeks either a Value Added Tax (VAT) registration number or exemption from registration and must submit an application form, VAT1.

Data

Information from Departmental systems identifies submission of Income Tax Self-Assessment returns and PAYE End of Year returns by businesses doing so for the first time in any year. Businesses which submit returns on time which are then assessed as complete (having passed a quality assessment) are considered to have dealt correctly with their tax affairs.

• For ITSA, where the filing date is 31 January, ‘on time’ is normally taken as close of play on 1 February after which penalties can be imposed.
• For PAYE, ‘on time’ is based on the statutory filing date.

The proportion of applications for VAT registration that are complete and accurate is assessed from a sample of internal Departmental information each month. An application is deemed complete and accurate if processing staff do not need to contact the applicant to obtain further clarification. Staff will make contact if:

• the application form has key items of data missing
• data provided on or with the application is anomalous or unclear
• accompanying data is not provided or is inadequate
• the application is complex (eg a group registration) and requires clarification.

Contact made as a result of pre-registration risk assessment is excluded. Significant improvements in the ability of businesses to provide complete and accurate VAT registration applications have resulted from a review of the criteria for complete VAT registration applications and a revised registration application form and guidance introduced in December 2006.

Baseline

The baseline is 69 per cent based on the years 2004-05 and 2005-06 (ITSA filing for January 2005, PAYE filing for May 2006 and VAT processing for the year to March 2005).

Data for PAYE End of Year Returns received for 2004-05 is inflated due to on-line filing incentives that led to a much larger new employer population for that year which is, therefore, not comparable to the population in other years. The baseline for PAYE is therefore set at year 2005-06.

Targets

The target for Key Indicator 4 is 74 per cent by 2008 and includes increasing the proportion of applications for VAT registration that are complete and accurate to at least 50 per cent by 31 March 2008. The final measurements will be ITSA filing for January 2008, PAYE filing for May 2008 and VAT processing in the year to March 2008.

Overall result/weighting

The weights used for ITSA, PAYE & VAT are 0.522, 0.405 and 0.074 respectively. This indexing is used to establish the baseline, targets and in-year measures for the indicator as a whole, which are then reported to the nearest whole percentage point. This indicator will be considered only ‘partially met’ if the target is achieved but the VAT element is not. Margins of error (95 per cent confidence intervals) are expected to be +/-5 per cent for VAT year-to-date registration data, +/-0.4 per cent for ITSA, zero for PAYE, and +/-0.3 per cent combined.

Reporting

Information from Departmental systems which capture ITSA and PAYE filing and VAT applications is used to assess performance. Progress on VAT will be monitored and reported internally on a monthly basis. Progress against the Key Indicator is reported in the Department’s Spring and Autumn Reports, separately identifying the VAT element.

Validation

In 2005 the NAO conducted a review of VAT registration, which examined the effectiveness of the processes and systems in place to facilitate VAT registration highlighting the effect that incomplete applications have on the work of the National Registration Service, and recommending ways in which HMRC could increase the number of complete applications received. The NAO also conducted a Value For Money study on helping newly registered businesses comply with their tax obligations. It is a forward looking study building on the good work of the two previous departments and the opportunities that the new HMRC brings. The study began in January 2005 and the NAO published a report in December 2006 which was subject to a hearing by the Public Accounts Committee in April 2007.

After a sampling exercise in early 2006 to establish the baseline for VAT, we introduced a new sample based measure to reduce the chance of error. Subsequent results demonstrating a large increase in performance may include a small increase resulting from the changed methodology.

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Key Indicator 5

By 2007-08, to increase to at least 85 per cent the proportion of individuals who find their SA Statements of Account, PAYE Coding Notices and Tax Credit Award Notices easy to understand.

Scope/nature of KI 5

The Indicator covers individual taxpayers (including the self employed) who receive a Self-Assessment statement of account, a PAYE Coding Notice, or a Tax Credit Award Notice. We measure the Indicator through annual surveys, focusing on customers’ actual experience of dealing with HMRC over the past 12 months. The surveys ask customers how easy they found it to understand the Statement of Account/ the information on the Award Notice/ the figures on the Coding Notice form and provides for the following responses:

1. Very easy.
2. Fairly easy.
3. Not at all easy to understand
4. Don’t know.

Construction of Measure

(a) Annual sampling

We take random samples of customers from Departmental information systems. The surveys use quota sampling, setting interviewing quotas on key variables to ensure good coverage of key subgroups.

The data within each customer group is then weighted back to naturally occurring proportions in the quota variable, with the aim of making the figures reflect the profile of the wider population (except for PAYE non-SA where a simple quota is set for the target number of interviews to be achieved across the group as a whole).

The number of interviews achieved is sufficient (around 6,000 in total for Indicator 5), and structured to provide reliable results for each statement/notice. The use of a quota sampling approach means that the results are indicative rather than accurate to a known precision.

(b) Survey methodology

The annual surveys are carried out by telephone. An independent research agency is commissioned to carry out the surveys and reports the results back to HMRC. The annual survey takes place in October-November, and reports in the fourth quarter each year.

Production of results against target

The results from customer groups are weighted together to produce an overall result for this Indicator. The weighting is based on the numbers of customers who receive at least one notice/statement within the year. These weightings are calculated from baseline data and are fixed for the Public Service Agreement period.

Reporting

The latest available results for the Indicator are reported in the Department’s Spring and Autumn Reports. The Autumn Performance Report carries forward the results previously reported in the Spring report.

Data

Survey data is collected by a research agency commissioned by HMRC to carry out the telephone survey. Estimates of populations receiving notices and statements are used to weight results together across customer groups.

Baseline

The baseline figure is 77.6 per cent, provided by the Customer Service Survey carried out during October and November 2004.

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Target 7 - by 2007-08, increase to 35 per cent the percentage of Self Assessment tax returns received online so that levels of contact are kept to a minimum

Key Indicator 6

By 2007-08 increase to at least 95 per cent the rate of accuracy achieved by HMRC in administering Self-Assessment, PAYE, Tax Credits, and National Insurance Contributions.

Scope/Nature of KI 6

This measure focuses on the Department’s accuracy and completeness of handling information provided by customers to HMRC in respect of the four processes within the target, with a particular focus on manual intervention and whole case working.

VAT returns are not included as there is a highly automated process for returns and remittances in the VAT system.

Results from each work area are weighted together using the amount of HMRC budget devoted to the administration of those areas, to provide consistency over the life of the target.

Construction of Measure

1. Self-assessment and PAYE

For Self-Assessment and PAYE taxpayers, accuracy is measured through the SA and PAYE Quality Monitoring Exercises (QME). Samples representative of our business are selected by HMRC Quality Monitoring Officers from a list of cases randomly pre-selected from Departmental management information systems.

Quality Monitoring officers assess the quality of work carried out on these cases, assessing the accuracy of work done against pre-defined quality criteria, which cover all those areas of work that affect the tax payable.
The QME had been undertaken annually, but we moved to monthly reviews and reporting at the end of 2005 and this is reflected in the results for 2005-06.

In PAYE QME, the accuracy is monitored on a sample of cases where there has been manual intervention by staff (i.e. worked cases), and accuracy is assessed on the full range of activities staff undertake on those cases. For SA QME, accuracy is monitored on a sample of all cases.

For both PAYE and SA the processing accuracy standard is extremely stringent: any tax effect error in excess of £1 is treated as a failed case.

2. Tax credits

For Tax Credits the Indicator covers the accuracy of processing claims, renewals and changes of circumstance. Random samples of these are taken from Departmental management information systems and HMRC quality monitoring staff review the accuracy of all work done. Cases that are found to be inaccurate by £1 or more per week are deemed to be inaccurate.

Separate samples are taken for claims, renewals and changes of circumstances and results are aggregated together using the overall volumes received.

Monitoring of this target had been on an annual basis in 2004-05, but moved to monitoring and indicative reporting on a quarterly basis from 2006 onwards.

3. National Insurance contributions

For the administration of National Insurance Contributions four key processes, requiring a relatively high degree of manual intervention by staff, are covered by this Indicator. These are:

1. Register adults with a NI account.
2. Maintain accounts of self employed customers.
3. Maintain NI accounts.
4. Contracted-out pensions.

Monitoring is carried out on a monthly basis with separate samples taken for each of the four processes covered by this Indicator. A random sample of worked cases is selected (where possible from Departmental management information systems, otherwise by staff) and quality assurance teams assess the accuracy of the work done.

A case is deemed inaccurate if at least one major error is found (e.g. customers given inaccurate information). Minor errors, such as not recording telephone numbers, are not logged as an inaccuracy for the purpose of this Indicator.

Data

Quality Monitoring staff collect data on the accuracy of work. To weight the results together data is used from Departmental management information systems on the amount of HMRC budget devoted to the administration of:

• Self-Assessment and PAYE from the financial year 2003-04
• Tax Credits, and National Insurance Contributions for the year to December 2004 (Nine months’ data only because some of the quality monitoring processes were only introduced there during 2003-04).

Margins of error for SA and PAYE are +/- 1 per cent and for TCO are +/- 2 per cent (confidence interval 95 per cent). For NI a 90 per cent confidence interval of +/- 2 per cent applied for 2006-07. For 2007-08 NICO is also working to a 95 per cent confidence level and an interval of +/- 2 per cent still applies. When scores for the four business lines are combined the weighted national result is expected to have a margin of error (95 per cent confidence intervals) of +/- 0.5 per cent.

Baseline

The baseline for this target is 91 per cent, based on 2003 and 2004 data:

• Self-Assessment and PAYE from the financial year 2003-04.
• Tax Credits, and National Insurance Contributions for the year to December 2004.

Reporting

Progress against this target is monitored monthly internally and will be reported twice a year in the Department’s Spring and Autumn Reports.

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Key Indicator 7

by 2007-08, increase to 35 per cent the percentage of Self Assessment tax returns received online

Scope/nature of KI 7

This indicator measures Income Tax Self-Assessment returns received online via the internet by the filing deadline of 31 January each year, as a proportion of all SA returns received and due by that date.

Construction of measures

The target measures the number of returns that are issued by the 31 October for the tax year 2006-07, which are subsequently received online and on time as a percentage of the total number of SA tax returns for that period. ‘On time’ is normally taken as close of play on 1 February after which penalties can be imposed.

Data

Data is drawn from Departmental management information systems.

Baseline

The baseline for Self Assessment tax returns received online was 13.2 per cent in 2003-04.

Reporting

Progress against this target is monitored on a monthly basis and reported twice a year in the Department’s Spring and Autumn Reports.

Key Indicator 8

By 2007-08, increase to 50 per cent the percentage of VAT returns filed online.

Scope/nature of KI 8

This Indicator measures VAT returns received each month online via the Internet, as a proportion of all VAT returns received that month.

Construction of measure

All VAT 100 returns received are counted towards this target. As most businesses are required to submit quarterly returns, measurement of this indicator is monitored on a rolling 3-month basis. Achievement for the VAT target will be therefore be based on returns submitted online in the final three months of the period (January 2008, February 2008 and March 2008), as a percentage of the total number of returns received during those periods.

In March 2006, Lord Carter of Coles’ Review of HMRC Online Services recommended that online filing of VAT returns be made compulsory in phases. Our delivery strategy for electronic lodgement of VAT returns has now been refined to take account of this and we are now working to improve our systems in order to handle the increased take-up that will follow, and to increase voluntary take-up in advance of the implementation of Lord Carter’s recommendations. We have set a timetable for compulsory filing in phases from April 2010, and the 50% target is now expected to be achieved in that year.

Data

Data is drawn from Departmental management information systems.

Baseline

The baseline was 0.2 per cent in 2003-04.

Reporting

Progress against this target is monitored on a monthly basis and reported twice a year in the Department’s Spring and Autumn Reports.