National Assembly for Wales

Diolch, Cadeirydd. It's a pleasure to be in front of you once again. Well, as you'll be aware, this is the third report that we have produced into this area over the last couple of years, and it's the third very positive report. So, my summary would be that this has been a project extremely well managed and well delivered. The devolved taxes have been delivered as required. The work has come in within budget, and though along the way we have flagged some particular risks that we saw at the time, those have been well managed, and our advice and that of others has been acted upon. I pay tribute in particular to the leadership and the staff involved. So, the leadership on this project, it appears to me, have helped to engender a culture of openness and willingness to engage with us and with others, and to take on board our advice and internal and external scrutiny and act upon that. So, a tribute to them.

So, no major concerns at all, and overall the governance on this project has been strong, in my view. It's been a pleasure, I think, for the team, having spoken to them, to have been engaged in work in real time, helping to influence and shape a project of this nature. As somebody put it to me recently, it's nice when the WAO is able to engage in this sort of way, rather than just dropping into the trenches and bayonetting the wounded. So, positives all round.

In terms of lessons learned, this is quite a specific project, self-evidently, so it's not straightforward to identify lessons that could be applied elsewhere, but a couple do spring to mind, and Richard and Gareth may want to expand on these. The first thing I'd mention is the use of fully cloud-based IT for a newly established organisation, which I think has proven a success, and also the use of agile project management methodology to help to develop the software and systems involved. That has been effective and well managed, I think. But, Richard, I don't know whether you want to expand on any of that.

Yes, thanks, Adrian. Good morning, committee. I think Adrian's right—it's worked well as a process from our side, in terms of the engagement we've had over the three years, and coming to these committees—for the third time today. I think one of the lessons that I think the Welsh Government are talking about themselves at the moment, I suppose, is using the independent gateway reviews as part of the project management as well. It's getting challenge and scrutinising at regular points through the process, to allow them to take action to make things get delivered on time. And, given the nature of this project, they couldn't fail or get it wrong. They had to put the pressure and the time into it to work it through. And I think the gateway reviews at specific points, and currently with the terms of Her Majesty's Revenue and Customs' involvement, have worked really well. It's given the assurance they need, but also targeted where areas needed to improve as well. And I think they've been open to that, and that's something that we'd recommend to be used across other similar projects that they use in the Welsh Government as well.

Thank you very much for that.

I'd just like to ask a few questions as well about Welsh Revenue Authority's role as a non-ministerial department and some of its governance arrangements. How has, in your view, WRA ensured its operational governance given, of course, that it is a non-ministerial department?

I think it's something that it's been conscious of from day one almost, and I think the conversations we've had with this committee over the last few years have tried to emphasise the importance of that independent role it does perform.

I think the way they set a board up from 6 October, when it went live, allowed it to get the governance arrangements internally set up properly. The way it's worked with Welsh Government, to make sure there are boundaries there in terms of the memorandum of understanding, the way it's worked through, has allowed it to make sure it sets itself up to have all the governance and scrutiny arrangements in place, and I think it's just key to keep that independent view working through as an organisation. So, I think it's done that from day one, it's been clear what they needed to do and, I think, from what we've seen in terms of our reviews, that's worked very well.

And would you say that the public perception is pretty clear in terms of that separation between Government as well?

I think there's still work to be done, and I think that every time they have had the opportunity to talk about how they're operating, I think they've taken that opportunity. Because it's a new function, it's a new way of working, and I think the independence is vital, and the perception of that is vital, given the nature of the data they're keeping. So, I think there's always work to be done in that area, which I think they're conscious of, but I think, from what we've seen and the engagement they've had with a range of stakeholders, I think that that's getting there. But, given the nature of the organisation and being the only one in Wales, that will take time as well, I'd say.

Okay. Thank you. And what consideration has been given to the WRA’s governance arrangements to enable its role to evolve in future? Because, clearly, we're hoping that this is going to be something that's going to evolve quite considerably in years to come.

Again, I think it's got big ambitions, the WRA, from day one. The 9 January session you had with Dyfed, and Kathryn Bishop, the chair—. I think they're conscious of where they want to go and I think, during the corporate plan this time round now for the next three years is a vital part of that process. Because I think year one, given the nature of it, is getting it right. It was making sure they could deliver from 1 April 2018, making sure they've got the process in place, the people in place. Now they're there and getting there with that, I think, going forward, they're looking at this governance, they're looking at how they engage with all stakeholders to make sure that the data sharing processes, what they can use that data for—. I think they've got this view of where they want to get to, and I think that's the corporate planning process they're working through at the moment. When we were there in October, we had sight of how they were doing that. I think it's delivering that document for you and then delivering that over the next few years as well.

And committee members had a flavour of that as well when we visited them before Christmas. Okay. Thank you. Mike.

Back in 2017, which seems a long time ago now, your report said,

'the delivery of digital systems remained the highest risk and was entering a critical phase with little room for error.'

Did it work and did they avoid having any errors? 

Quite simple answer: yes, it did work. It's something we've discussed with this committee a couple of times as well. The digital part of the process is the key part—that's the interface with users of the service, and I think what they've tried to do from day one is learn from Scotland, where this was an issue before it went live.

In getting involved with us and having expertise on the steering group, they brought out the issues all the way through the process. We did have some concerns this time last year. When we looked at the review in October 2017, I think there had been some slippage in the process, and the procurement took longer than they thought. I think getting the expertise internally to challenge some of that procurement took longer than they thought. And I think, coming back to what really helped them, they had a gateway review themselves internally, and that was amber/red for digital. And that focused their minds on what they had to do. And I think they stepped back from some of the ambition they had for day one to make sure it worked, and I think what we saw, in putting that process together then—. They put the planning phase to get to March last year, and I think, from 1 April, it did work, with hindsight now.

So, I think, having gone through that process, having their discussion with you and getting that gateway review highlighted the issues they had to address. They addressed those issues and it got delivered.

We've spoken to WRA and they accept they had delays in publishing some of their guidance, but they said that had no material effect on people who were going to be taxpayers. Would you agree with that? 

Again, from the review we did in October, there's nothing that came to our attention in terms of issues. I think they did try and focus that guidance on the areas that needed to be addressed, and I think they backed it up with some training and awareness raising on that guidance as well. So, I think, from the review we did, we didn't identify any problems. I think the ambition of getting the right people in the right tax at the right time comes back to some of that guidance, making sure it works through the year, and I think that's the next stage for them—to take stock as part of their annual reporting cycle this summer to see how that has worked. There was nothing that we identified from our review.

Okay. That's fine.

Okay. Thank you very much. Rhun.

Again, very positive. I think, given the size of the organisation—70-odd people—it's not a big organisation, but I think the ambition and the range of skills they needed was a challenge to them from the start. What they've been very successful at is attracting good loan people in. I think they used some of the contacts they had to get the right expertise in for day one, and I think they filled all the posts they then advertised very efficiently. The number of people applying for those jobs has been very high, which shows the dynamic of the organisation, I'd say.

I think there is a challenge in retaining some of those staff going forward, because, I think, it's such a new organisation, they've achieved day one and so they've achieved getting the taxes out there. It's where it goes next is something that they're working through at the moment—just making sure they retain some of those skills, retain those skills in Wales and develop the staff they've got.

When we did the review in October, a lot of the training and development they'd been doing was to get the process working. I think they are stepping back now and looking at that learning and development process to see what's next for those staff for personal development, where the organisation needs to go, and I think getting that right would be vital. Evaluating that process is a key part of their next 12 months' work as well.

Can I ask you to just go a little bit more into the evaluation of that process of upskilling the team? How do you think it's going? Have they got the evaluating processes in place that satisfy you?

It's very early days, to be honest. I think the evaluation of the training that took place to get everything ready for go-live worked because it went live and some of the comments and queries they had were resolved very easily. I think the trickier part is probably the longer term development of staff, retaining that interest in what the organisation's trying to do and the personal development of the staff.

One of the things that we challenged as part of the review was the loan staff that were coming in for a period of time. How were they then retaining the skills if those people move back, and how do they replace those people? They haven't resolved that yet, but it's something that they're working through as part of their corporate plan to make sure they've got plans in place to do it. It's early days in the evolution of the organisation, I'd say, to answer that.

So, we'll judge the effectiveness of their processes for developing staff according to (a) retention, (b) performance, I guess.

Definitely. Yes.

You mentioned the challenge of retention. The fact that a significant proportion of the staff—around a third of them—are actually on loan from Government departments, HMRC, means that they will lose those staff. What are your reflections at this point in time about the processes being put in place for knowledge transfer to deal with that churn of staff that is inevitable really?

It's probably early days again. It was six months into the organisation when we looked at the work. I think they did have the plans, the HR systems, around doing that and sharing teams. Although there were specific teams for things, they were trying to make that knowledge wider than just the one team they were working with. So, it wasn't just left to one person with the expertise; they were trying to share that around from the start.

I think it's going to be a challenge for them. In an organisation of that size, it is difficult. Seventy people with a range of work. The digital work they're trying to do is quite specialised, so how they use the resources they've got and how they work with stakeholders and buy things in is a challenge, and it's going to be an ongoing discussion for them to have.

One thing I'd—. Sorry, Chair. Just as a general point of principle, one thing a small, new organisation like the WRA has acting in its favour is that it is quite an attractive option for people from other, larger departments to come on loan. It's an attractive secondment opportunity. So, if they play that well, I think it can be a very positive feature.

So, the challenge isn't just in retention but it's also in making it remain an attractive place for new people to come, and, again, linked to performance.

I think that's going to be a key theme for their corporate plan that they're putting together at the moment. I think they're aware of that. The loan of people in has really worked for getting to where they are now; it's where they go next with that, I think, that will be—.

Mike's keen to come in.

Yes, I'm keen to come in. Obviously, there's an opportunity to mention football in a discussion like this. [Laughter.] In terms of loans, I can see that there is no difference to other organisations like football clubs. You have two types of loans: those who come to benefit from the experience as part of their career progression, and those who come who are testing it out to see whether they actually want to stay or not. Dyfed Alsop is an example of somebody who came on loan who wanted to stay, so, do you accept that there's going to be that mix of loans of those who are coming for career progression and those who are actually coming because they want to try it out to see whether they would stay or not?

Yes.

That's a good analogy, I think, yes.

There we are. Okay. Thank you very much. Alun.

Thank you very much. This is in danger of being a far too easy scrutiny session. [Laughter.] I enjoyed reading your report, because it coincided entirely with my own views and prejudices, which is always a good place to start. I should perhaps declare an interest—I don't know—I was in the Government when a lot of this work was being done. Your report is very positive and, I think, reflects the experience of many of us who've been involved at different levels at different times in the evolution of this policy, and I think we should recognise the work, as you have done, of the staff and the leadership in delivering this quite complex area, but you've also identified a number of areas, looking forward.

I'm interested—you've identified a number of different areas and different parts of your report, and I was wondering whether you could just outline for us where, if you were providing candid advice to the leadership of the WRA, you would you say, 'These are the absolutely key issues in the 2019-22 plan that you don't simply need to cover but have to get right', because you've indicated the different things: there was a definition of purpose, approach to risk, costing activity. You've also talked about your ongoing governance and use of data. Where are the key issues where you would wish to see a strong focus?

If I may, I think it is those areas, and I'll come back to some of them now. I think there's a lot there for an organisation of this nature to do. It had been running for six months, when we were there, and I suppose that was getting that first year out the way, delivering things successfully and introducing the new taxes. I think, from talking and discussing with lots of officials there, they want to—I suppose it's the purpose of what they're trying to do, going forward, that is key to them, because that's going to shape everything else. I think one of the challenges that we put back to them is the ambition of what they want to do with the people they've got, the time they've got. They've got to make sure that the systems work and the processes work, and then they've got to deliver for Wales, and I think they're fully on board with all of that, and I think the purpose is vital to that process. So, they understand where they're trying to go, coming back to the point of the Chair earlier about the people of Wales knowing what it's all about and how they work as an organisation, and I think some of the challenges within that, then, will be within the people they've got, the staffing they've got, the expertise they've got internally, the digital capacity they've got internally. They are things they've got to get right.

What was good about our review—the areas of focus that we've identified are what they've identified themselves. And probably, as in some other organisations that are quite new, these are things they've got to work through. We're also the auditors of the WRA's financial statements work, and so we sit on the board and the audit committee to observe and see how things are working, and these things are regular discussion areas. They're very keen about getting the security right given the nature of the organisation, but they want to share data, they want to inform public debate on where Wales is going, where the UK is going with some of the taxes. So, it's trying to get that balance between confidentiality, security and sharing right, which I suppose is the next stage. So, it's all those areas.

But what are the key areas? You've covered a number of different areas there, at different levels of detail. I don't disagree with you including those at all, but what is the absolute thing here that has to be right if this organisation is going to succeed over the period of this plan?

I suppose it's working through the people and staffing they've got and making sure they retain those staff and retain that expertise across the organisation so that they can build on what they've got at the moment. So, some of the loans will come to an end in the next 18 months—how will they move that—

So, the integrity of the organisation.

And I think it's the staffing there, because 70 people aren't many but they're running it all, so they've got to get the right mix of staff and expertise there to make sure they've got the capacity to do what they're trying to do.

I think one of the lessons they did learn in terms of some of the digital discussions we had—they were trying to be too ambitious on day one. They stepped back from some of that and left that scope there, so they can actually now develop some of the systems and processes. But I think it's having the right people in the right place through that process to deliver the organisation's ambition.

And I think that the point about knowledge transfer that we made earlier is quite important as well, with such a small organisation, sometimes, making sure that knowledge can be passed from person to person and that things don't fall down if someone isn't available is also fairly key, as the organisation continues to develop, as well.

Also, to meet different challenges, I assume—yes?

Yes.

I think there's a wider challenge, not just for the WRA, but for the Welsh Treasury and Welsh Government as a whole, in terms of having now established systems and organisations and structures, how do we move forward in terms of the quality of data and information that is available both to within Government to inform its decisions and to this place and the wider population as well? These are very significant new additions to the powers of the Assembly and the Welsh Government. So, great to have got the systems up and running—that's the first thing we needed to do—but they'll be in place for a long time, and if the system is to evolve, I think there's a considerable amount of work to be done in terms of data quality and the openness and transparency of financial forecasting information and so on that is available to inform us all.

We have a debate this afternoon across the way in the National Assembly about tax rates, and I'm sure I'll probably be a lonely voice in that debate again. I'll certainly disagree with Mr Hamilton across the way. But, if we were to vote to increase or change the levels of taxation, or to increase it by 5p in the pound— whatever it happens to be—does the organisation have the capacity to deliver that, in your view?

I think in terms of the income tax—

The Welsh rate of income tax, you mean?

Yes.

In terms of the income tax side, HMRC would be administering that process anyway, so—

But it would be responsible for dealing with elements of—

The WRA won't be responsible for—[Inaudible.] No.

But clearly, the Welsh Government would have to be in a position to understand the full implications of that, and so on.

So, you're happy with the capacity issues within your organisation.

Within WRA, yes.

There is, of course, a possibility that additional responsibilities would be placed on WRA in the future, but I'm sure that those kinds of discussions would be part of that deliberation, really, wouldn't they? 

Yes.

Rhun.

Yes, if we can move on to the Welsh Treasury and Welsh rates of income tax, starting with governance, could you comment on the development of appropriate governance arrangements for the implementation of WRIT and perhaps refer to the need there will be for a service level agreement between Welsh Treasury and HMRC? It's one of the things I would've thought that would've been done ages ago, but I just need to hear that things are on time, at least.

Yes, they are. I think this is a strange one, because I suppose people in the outside world need to understand how WRIT is going to be administered; it's not by the WRA, the first part of our report, this is done by HMRC. They're responsible for it, and the National Audit Office are responsible for auditing HMRC. And I think there'll be a report coming to this committee at some time in the future on their preparedness at HMRC for the Welsh rate of income tax.

I think, from our perspective, we looked at how the Welsh Treasury was engaging, involved and influencing that process. And I think from the governance that's been set up by HMRC and the Welsh Treasury, they are heavily involved in it, they do have a voice at the table—probably more than a voice at the table—from the view we've seen of the minutes and the action logs. They are influencing where things go, they are challenging some of the assumptions and they are learning the lessons from the Scotland discussion that went on previously.

So, I think the governance arrangements that we looked at with the steering group, the bodies below that, they're actively involved, so that's working. They do need an SLA. They've got a memorandum of understanding at the moment, which sets out a lot of those areas already, so I think it's building on that when things become business as usual after April. I think a lot of the focus at the moment is getting ready for April, but they're keeping an eye on what that means on an ongoing basis.

But you're satisfied that the SLA isn't in place. As I say, I would've thought it might've been in place for a while, but you're comfortable with that.

We're comfortable. They had plans to do it before 1 April goes live, and I think they are still on track to do that. The gateway equivalent review of HMRC suggested no issues on any of the processes that have been adopted. The memorandum of understanding's working and the SLA's being delivered. So, from our point of view, at the point of view when we did the work, we didn't have any concerns, no.

Sorry, just before we move on, the National Audit Office, as you say, is reporting on HMRC. Have you had any involvement in that process? Because, clearly, this relationship is important, and I'm just wondering whether you contributed in any way to the National Audit Office's deliberations.

Yes. Essentially, it was this piece of work and the work they were doing simultaneously. Ongoing discussions were being held. Although it's different remits for both of us, I suppose it's aligning the way we were doing the work and sense checking some of the findings as well, making sure, where we were seeing the Welsh Treasury's aspect of it, they were seeing the HMRC aspect.

Yes, I think what we'd be at pains to do, really, is just make sure we keep liaising at key points of both our studies. So, in particular, when we were scoping our work to make sure there were no crossovers in that sense, and also when we were drawing our conclusions like Richard said, really, just to sense check everything and make sure there was nothing there that was particularly contradictory or particularly out of place. So, we have kept in touch throughout.

Okay. Thank you. Sorry, Rhun.

My next question, hopefully, is sensitive to the fact that your review here has been into Welsh Treasury's work, not into HMRC, and HMRC has been responsible for the identification of Welsh taxpayers. But even though you haven't been looking at that in particular, are you satisfied that the correct processes, procedures have been put in place to properly identify those Welsh taxpayers? Because that's kind of crucial, really.

It's a vital part of the process, I think, as Welsh Government have said to yourselves in the past. I think this is an area that reflected badly on probably the Scottish rate of income tax at the time, with some of the missing information. As much as we can be, yes, I think, given that we're one stage removed from the process, HMRC have set out their methodology, set out the process they're following. Welsh Government have been challenging that process, they've used their own stats team internally to see some of the assumptions that are being used, and some of the issues that didn't quite work for the Scottish model have been addressed for the Welsh model. I think the NAO have looked at that process and they'll be reporting back to yourselves, but there's nothing much that's come out of that that causes us a concern at the moment. So, I think a lot of work's gone in, and it's sometimes better to go second with some of these things to understand where things fell down. They looked at the postcodes, the cross-border issues. I think the challenge will be there's a lot of work to get to day one, and it's an ongoing process. People will be moving in and out of the country, and I think that capturing that information on an ongoing basis will be important.

I think the key thing from our perspective was to ask the question: was the Welsh Government being an informed consumer, if you like, in terms of scrutinising, challenging the services that were being provided by HMRC in terms of identifying the Welsh taxpayers, and the work we were doing then was trying to identify whether they had the processes in place to do that. To be honest, I think in our report it shows that yes, yes they did.

Wasn't one of the problems in Scotland the difficulty with multihome owning higher rate taxpayers? People moving across the border should balance out, or be very close to balancing out; there's probably a de minimis amount. But very high-rate taxpayers who have multiple homes—there are very few of them, but they pay an awful lot into the system. Is that not one of the possible problems? They might spend most of their time, or a large part of their time, outside the country, outside of Britain, deciding whether it's Wales, England or somewhere else that they decide to be a taxpayer.

Yes, I think this is one of the key elements of work for HMRC, going forward. They will be the ultimate arbiter of what a Welsh taxpayer is going to be, and it's their responsibility to carry out that work to determine that. So, it will be an area of focus really for them, going forward.

It was a big problem in Scotland, wasn't it, that they had far fewer higher rate taxpayers than they expected?

I think what we've seen from Welsh Government's challenge and involvement with HMRC, those things are on the table, are being discussed, are being addressed. The extent of addressing them—I suppose then they'd come back to yourselves and discuss with you.

Finally, another question that is in the context of it being a dual-pronged HMRC-Welsh Treasury system: are you satisfied that Welsh Treasury is able, under the current arrangements or the planned arrangements, to influence enough the decisions that are being made about WRIT?

Again, from what we've seen, in terms of the way they're engaging the documentation of how meeting have been handled, the processes are there, the arrangements are there. So, we've had assurance from that that they are involved. We've seen changes in directions from the involvement of Welsh Treasury in the process. So, from what we've seen, I'd say, yes, we are. They are accustomed to it, and they've only got a certain influence, but they are using that to shape the future of what's happening, really.  

Yes, absolutely, and on top of the formal governance arrangements, I think there's been clear evidence throughout of good informal engagement between HMRC and Welsh Treasury as well; there seems to be a strong working relationship there. We've attended joint seminars and presentations delivered by both bodies as well. So, it seems fairly evident, really, that there's a good working relationship between the two bodies. The Welsh Treasury can put forward any views that it needs to put across. 

Thank you. We've touched on data a couple of times and, of course, it's going to be now increasingly important in terms of forecasting WRIT, and you note that the Welsh Treasury is exploring ways of improving underlying data for that purpose. Can you elaborate maybe on how it's attempting to accomplish that?  

Yes. In our report, I think we highlight that the data they have available is the most recent data available to them. So, for forecasting WRIT, they used a survey of personal incomes data from 2015-16, which sounds a little bit out of date when you first say it like that, but it is the most recent data available given the time lags in getting income tax information available. So, they're using the most recent data available to them in constructing their forecasts for the Welsh rate of income tax. What we just highlight in our report is maybe some ongoing work for the Welsh Treasury in terms of carrying on engagement with HMRC to make sure they obtain that SPI data as soon as possible. There's ongoing liaison and engagement with HMRC to do that; it's just a matter of carrying on that discussion to make sure that they're receiving that data as quickly as they can to make sure that it informs the forecasts as quickly as possible.

Another element of this forecasting work, then, as well will be the development of real-time information from HMRC, which will be available, then, on a monthly basis, and will allow the Welsh Treasury, then, to review actual tax outturn on a much more real-time basis—so, really, a few days after each month end. That will only cover pay-as-you-earn tax data as opposed to all the self-assessment tax data that comes in, but allows them to gauge their forecasting methodology, review it in a much more real-time way and make sure that it is as reasonable as possible. So, there are future developments to come on that front; it's just more of an ongoing process now for the Welsh Treasury.  

And any thoughts about striking that balance between investing in, maybe, means of generating more data that can be used, as opposed to going to extra cost that might not necessarily give you much more in terms of what you can do with it? 

I think the data is largely there; the data is available. HMRC hold huge amounts of data in terms of taxes that are collected. They have their own responsibilities in terms of taxpayer confidentiality, which they have to carefully manage, and that leads to some of the discussions, then, in terms of when the Welsh Treasury can obtain the survey of personal incomes data. So, they have their own responsibilities on that front. 

I don't think there's too much more that can be done in terms of obtaining additional information for forecasting of WRIT; it's just a matter of liaising with HMRC to make sure that it's obtained in the right format, and as soon as possible.  

Okay, that's fine, thank you. The Welsh Treasury finalised its WRIT communications plan in June, and I'm just wondering whether you feel that's been a sensible approach. 

Again, I'd probably say 'yes'. I think it's different to the other taxes that were brought in with the WRA, where a lot more communication and engagement went on because there was a change for people who were actually using those taxes and the systems. With WRIT, there's not going to be a great deal of change for people. They're still paying the taxes and HMRC are still collecting those taxes. What the communication is trying to do is just make people aware that Wales has got a role to play in it for the first time in some of the income tax discussions. The actual process behind that is not going to change massively. So, what they've tried to do is balance up what they need to say without scaring people, and I think the communication went out earlier this year or the end of last year to all households setting that out as a process. 

So, I think the communication plan they've put in place seems reasonable to us, in terms of what they need to be telling people. There's still probably a wider education about how the taxes process works and how Wales is getting its own tax system working properly, but for WRIT I think it made sense what they were trying to do.  

Yes, because we've seen—I think it's 24 per cent, isn't it, that were aware of the introduction of WRIT, but that isn't of concern as such? And I suppose, do people need to know, unless something changes in terms of the rate of income tax? 

I think that's the issue, Chair. I think when the other taxes went live: no news is good news; no knowledge is good knowledge, type of thing. And the same with the WRIT. On 6 April it's going to start—people won't notice a difference. If they do, that's when something has gone wrong, probably. But I think, from our point of view, what they try and do is just inform, educate—using social media to do some of that as well. So, I think they try and hit all the right buttons. So, I think, in the balance between cost and what they're trying to do, it's worked well from our perspective. 

But it's still important to monitor the impact that the work that they have done has had in order to inform future initiatives. 

Yes. 

Okay. I just want to go back a little bit to the WRA's corporate plan. You identified a range of areas that the plan would need to focus on. I'm just wondering if you could elaborate on some of those areas, and how subsequently that's being addressed by the WRA. 

In terms of how it's being addressed, we probably can't comment today, given that—

No, that's all right, because we sat in on a session where they were telling us what that potentially was. 

I think at the end of March, the plan is going to be published. So, I think they're well on track to do that from the last conversations we had with them. I daresay the plan will be coming through this committee at some point. I think the areas we identified—and there's some detail behind some of these that are not in front of me today—these are the things they've got to demonstrate as an evolving organisation, really. I think, as Adrian said, year 1 will have gone; the next three years they've got to set out what they're trying to do, and get buy-in to that internally and with their stakeholders. And I think that's the challenge with some of these. The purpose of the organisation is important. What's the ambition? And I suppose some of the way they want to do risk and management and everything else needs to be brought out and identified. 

The cost of the organisation needs to be thought through, tying into the ambition of the organisation, because they've got a budget now that they're delivering, and are on track to deliver. But I suppose, if they're going wider, and adding processes in the future, and new powers in the future, that's going to reflect in terms of some of the costs and the way they do it. So, there are quite high-level areas there. We have discussed these with them, and I think the key for us is that they're aware of these areas, and then are doing something about each one. We need to see what they're doing with each one now as part of our audit of the WRA, but I suppose on the wider development as well. 

Okay, thank you. Any further questions from Members? Yes, go on. 

Just to flag with you our kind of ongoing involvement in this area. So, obviously, we are the external auditors of the WRA, so Rich and his team will continue to be very close to the organisation and have good sight of its financial and corporate governance arrangements. You may be aware that, just recently, I've been consulting on my proposed programme of value for money studies over the next few years, and there are a couple of proposals in that that relate to this area. So, I think we may come back to the WRA in a couple of years' time, just to see how it's bedded in and how it's performing, and also possibly to do a piece of work looking at the issue of tax projections and forecasting as well. So, I think it's right that we give the organisation and the structures a little time now to actually get up and work, but we will come back to it in due course, and I'm sure we'll speak to the committee again at that point. 

Excellent. And as always, that will be an important source of information for us in our deliberations as well.

So, can I thank you very much for being with us this morning? You will be sent a draft transcript to check for accuracy, but for now, thank you again. I'm sure we'll be seeing you quite soon. Diolch yn fawr iawn. 

The work to transition to landfill disposals tax is complete. There was no charge involved in that because the costs were minimal. The work to transfer to the land transaction tax is almost complete. There's one outstanding action that will be completed next month, which is to transfer data from the Welsh Revenue Authority to the Valuation Office Agency, to ensure that they've got a complete data set for their evaluation purposes for business rates et cetera. That is very nearly complete, and it should not affect the costs, which we are still confident will come in within our revised estimate of between £1.75 million and £2 million. 

Yes, I am. The transition to the two taxes appeared to go very smoothly from our point of view. We had very minimal contact from stakeholders in the run-up to the transition, and we had very minimal issues with returns in the period after the transition—single figures, really, in both instances. So, that indicates to us that the joint communication strategy that we had with the Welsh Revenue Authority was effective in making sure that stakeholders managed the transition.

Not at this stage. That continues to be the range and we're confident that it will come within that. And, obviously, we will refine that with the Welsh Government as we can, but at the moment it sort of stays at that estimate. 

We estimate that the money that we've spent on implementation so far to the end of December is about £3.5 million. The work will not be completed until about April 2020. Although, obviously, Welsh rates of income tax come into force in April 2019 and the bulk of the work will be done ahead of then, for example, to make sure that pay-as-you-earn taxpayers have the right tax deducted, there are some further things to be done. So, for example, making sure that the first self-assessment returns for 2019-20 will be issued in April 2020. So, we have to make sure that the self-assessment system is updated by then, and also some changes, in particular for relief at source schemes for pensions, and they can all be done a bit later on. So, it will be, probably, the end of 2020 before we have completed all of that work and are able to settle the bill.

Yes. The project board, which the Welsh Government sits on, goes through all of those finances, which are forecast out over that period. So, they have full visibility of that, and obviously they might change over time, the profiling, but we still fully expect it to be within that £7.5 million to £9.5 million range.

Diolch, Cadeirydd. You alluded a minute ago to the success of the communication strategy and the raising of awareness amongst taxpayers generally of the devolution of taxes. Can we just return to that for a second, perhaps to flesh it out a little bit, in relation to land transaction tax and landfill disposals tax? Can you say how effective you think your strategy has been there and whether there have been any issues with individual taxpayers that we ought to be aware of?

We had a joint communications working group with the Welsh Revenue Authority, to make sure that our communications were consistent and synchronised. So, for example, we did joint communications around, in the case of the land transaction tax, how to handle issues with cross-border properties, and also issued our complementary guidance. As I said in answer to the previous question, what we found was that we got minimal contact from stakeholders asking questions in relation to what they should do in the run-up to that, and when we monitored the returns that came in in the period following that, we found minimal issues with those returns where, for example, someone was trying to pay stamp duty land tax when they should have been paying land transaction tax. Those issues were in the low single figures in both of those cases. So, from our point of view, it went smoothly, and the stakeholders involved in the administration of those taxes appeared to be clear about what it is they had to do. Obviously, we still continue to work with the Welsh Revenue Authority to monitor ongoing compliance and identify any issues, but from our point of view we haven't identified anything significant, and both have gone very smoothly.

Good. HMRC receives data on LTT and LDT transactions from the Welsh Revenue Authority on a weekly basis, apparently, for use in compliance work and for their own statistical purposes. Can you explain how you use this data, particularly for compliance work?

Yes. So, obviously there are taxpayers who may have obligations to HMRC in relation to UK taxes, but who may also have transactions that are subject to land transaction tax or landfill disposals tax here in Wales. Gathering that data is relevant to risk assessing those taxpayers and seeing the whole picture of what it is they are doing. Transactions that they may be undertaking in Wales may tell us something about the compliance risks that they pose to HMRC. So, it's been important to us that we have that data and are able to use it, for example through our Connect system, which is the system that pulls together all the data we know about taxpayers and that we use to risk assess. And I should say, similarly, we share data with the Welsh Revenue Authority so that they can do risk assessment for the devolved taxes that they administer. Any data that we have that is relevant to their risk assessment, under our memorandum of understanding, we share with them.

The land transaction tax is also relevant to the Valuation Office Agency, which is an executive agency of HMRC, so that they've got a complete picture of valuation right across the UK, which is important to them. And also, HMRC, together with ONS, produce statistical information, which is Katy's area of the department. We need to gather that information so that we can provide complete statistical information.

Good. Okay, thank you.

Thank you. Mike.

The Wales Audit Office produced a report, and in that it said an appropriate governance structure was required for the Welsh rate of income tax before it is collected in April 2019. Is that happening, and will it have happened by April 2019?

So, we have existing governance arrangements in place, which have been agreed with the Welsh Government, for the introduction of the Welsh rates of income tax. That is a project for us at this stage. So, we have a project board, and above that we have a programme board, and the Welsh Government sits on both of those, and so we have good governance and they are fully part of that and, through that governance, they have got complete visibility of our delivery planning and progress and also of our finances. Obviously, once we are in live running, we will at some stage close down that project and it will become just part of live running, so it's important that we agree with the Welsh Government new governance arrangements to supersede those when they're required, and that is part of the service level agreement that we are working through with them now.

So, we have today a memorandum of understanding and a set of governance arrangements around the project. From April, we will have a service level agreement to supplement that MOU and, in due course, when we close down the project, new governance that we will ensure the Welsh Government is content with.

Thank you. You sent out letters to Welsh taxpayers—I received one—identifying the Welsh rate of income tax. It's true to say that there was some level of confusion amongst some people who received it who thought that was an initial 10p rather than just a split of the 20p into two 10s for basic rate taxpayers, and I had several people contacting me, and I ended up writing a letter to the local paper to try and clarify it. Have you had many questions relating to that? And, whilst it doesn't matter to people on pay-as-you-earn because they just have money taken out anyway, how are you going to ensure that accountancy firms are aware that the Welsh rate of income tax is not 'in addition to' but 'instead of'?

Okay. So, no, we haven't had significant contact and I hadn't heard of that concern about the clarity of the communication, but I will obviously take it away and look at whether there's anything further we need to do to make sure that people are not confused. There was both a letter from HMRC and a leaflet from the Welsh Government. It went through quite a rigorous process of checking the drafting, so we felt that it was clear, but I suspect that, with any letter, someone is going to misinterpret, but we're not aware of any significant issues.

The question I'd like to ask, if I may, in relation to that—because, as a committee, we've had one or two pieces of correspondence about this—. I don't want to suggest that it's a huge issue, but clearly, as you say, there will be some people who felt that it was potentially announcing a 10p increase. But how are you feeding back to the Welsh Treasury, the Welsh Government any issues of that kind, because, clearly, it was their leaflet in your envelope, in a sense, wasn't it?

The project has a communications sub-group, which is a governance body that sits below the project board that signs off on the communication strategy and reviews the impact of communication and decides if there's any further communication required, and the Welsh Government sits on that sub-group. So, that sub-group would be evaluating whatever feedback we get from that communication. Obviously, the communication was designed not to get feedback in the sense that it tells people that you don't need to do anything unless you need to notify us of a new address. But that is the body that would evaluate that and decide whether any further action is required. And that is also looking at issues around making sure that we can reach people. For example, we are doing quite a bit now on social media, but there are people who obviously don't access social media, so that sub-group is looking at what further communication we need to do, whether it's by radio or whatever to catch groups—to make sure we catch all the groups.

Okay. Thank you. Sorry, Mike.

The most difficult task is identifying Welsh taxpayers, and, as you know, you had some difficulty in Scotland. I want to talk about two different things. The first one is people moving backwards and forwards across the border and not necessarily letting you know, which would be administratively a problem but, financially, probably wouldn't make a great deal of difference because the movements both ways are likely to be equal. The second one, which is much more important, is higher rate taxpayers who have numerous properties in different parts of Britain who also might spend substantial time abroad who will be substantially higher rate taxpayers. Although there might be very few of them, the amount of tax from them will be quite large. Are you confident you'll catch every one of them in the right place?

Okay, so I'll pick up the two points. First of all, people moving across the border: so, the most recent data that we have, which is for the year to June 2015, indicates that there were about 57,000 people that year who migrated from Wales and about 58,000 migrated into Wales. So, you're right that it's roughly the same, but, obviously, it's important to us that each taxpayer gets the correct treatment.

Obviously, even moves within Wales, although it doesn't affect your rate of income tax, we do want to know that you've moved, because we want to be able to continue contacting you. So, the main part, from HMRC's point of view, of the communication strategy is reinforcing to people that the key thing they have to do is tell us if they move house. We did some research with Ipsos MORI ahead of the introduction of the Scottish rates of income tax in 2014 and again in 2015, which told us that about three quarters of people do tell us about a change of address unprompted, and, of course, then, on top of that, we are doing promptings and we frequently tweet and add messages to the personal tax accounts, et cetera, reminding people of the need to update their addresses. In addition, we have third-party data sources that give us an indication if someone may have moved address and not told us and then we follow that up. So, we believe that we can get quite a high level of confidence in our address lists.

For example, with the letter that we sent out in November, normally when we send out a mass mail shot, we would expect about 2 per cent of those letters to be returned undelivered because the person is no longer at that address, and in the case of the mail shot we sent out for the Welsh rates of income tax, it's currently less than 1 per cent of those that have come back, which indicates to us, I think, that our strategy of encouraging people to update their addresses is correct. But it's a constant battle to make sure that people do that, and so I think you'll see, through constant tweeting and use of social media and everything else, we're getting that key message across, which is, 'Tell us if you move'.

For people who have several addresses—they may have an address in Wales and they may have an address, say, in England—and they may be mobile because of their work, yes, it's important that we reach out to those people and make sure that we understand and they understand what is relevant for determining their status. There are two levels of that. First of all, as to the very wealthiest people, we have a sort of man-marking approach to their compliance, so they have, effectively, a customer compliance manager whose job it is to make sure that we know where they are and what they're doing and what their attitude to tax compliance is. So, we've got a personal relationship with them and we can use that to make sure that we understand where they live. But for other people who may be affluent but don't contact us that much, we have run an exercise, which is not quite complete, on people where we have a correspondence address in Wales, but, say, their main residence is outside of Wales, and there are just over 4,000 of those people that we've identified. We have contacted each of them and asked them to confirm that situation and we've also looked at some third-party data to corroborate what they are telling us—so, for example, information like where they pay their main council tax, et cetera. So, that is an active part of our compliance strategy and our taxpayer identification strategy.

I don't think it's particularly easy, so you do have some sympathy when you're trying to identify all these. When you said you only had 1 per cent coming back, I do know, from personal experience—and it doesn't matter because this is in Swansea and they're all in Wales, but I'm sure the Wrexham and Chester area must have some of the same—that people who are mobile use their immobile parents' address for business and tax-type correspondence, and as they move from flat to house, with or without boyfriend, girlfriend, et cetera, and as they move around in this sort of way, they may be flipping back and forth across the border, but they'll always have an address where they pick up—. And they might visit their parents once or twice a month in order to pick up all business-type correspondence. And they don't want to keep changing their address on their car licence, for example, or changing their address for their car insurance every time they move.

And so, one of the things from our point of view is that you can have a separate correspondence address from your main residence. So, if you want to give us an address to which you want us to correspond with you, we can do that, but we still, obviously for the purposes of Welsh rates of income tax, need to know where you are resident. Certain other agencies and institutions like car insurance companies usually want to know the actual address that you are at and not a correspondence address. One of the pieces of information that we look at if we need to look at whether someone is resident in Wales is, for example, where their car is registered and insured. There will always be a small number of people for whom this is an ongoing challenge for us. We've still to work through this for the Welsh income tax, but, in the case of the Scottish income tax, where we've already been through this, we have done a lot of corroboration with third-party databases, and we're confident that we've got between 98 per cent and 99 per cent accuracy of that. We're in the process of going through that in Wales, but I've no reason to believe that it will be any different. There are some particular issues in relation to Wales compared with Scotland. So, Wales has a much more populous border region than Scotland, and, as I've mentioned, the 57,000 to 58,000 movements each way is actually higher than you would get in Scotland, so we have to take that into account as a specific issue for the Welsh project.

Okay. Thank you very much, Mike. Alun.

Thank you. I'm interested in that and how you manage data and what data you collect. Clearly, the Welsh Treasury will need access to accurate and timely data on forecasting to understand performance of taxation. What arrangements are you putting in place and what sort of datasets are you going to be creating in order to provide that level of reassurance and knowledge for the Treasury?

I'll let Katy pick up on the detail. This is Katy's area and is the reason why I asked Katy to come along with me today, because I knew you'd be interested in it. But, at a high level, the Welsh Treasury will have access to, essentially, the same dataset for Welsh taxpayers that the Scottish Fiscal Commission has for Scottish taxpayers and the Office for Budget Responsibility has for UK taxpayers. We will also provide in-year the real-time information we get through the pay-as-you-earn system. That won't be perfect. The receipts information for that will not be perfect, for some reasons that I'm sure Katy can explain—because, for example, it excludes self-assessment. But, Katy, you can give more detail.

So, we're planning to provide the public use tape to officials from the Welsh Government. They've already had versions of this previously. Now, the public use tape is drawn from something called the survey of personal incomes. It probably helps if I describe the survey of personal incomes first, and then how the public use tape reflects the survey of personal incomes.

So, the survey of personal incomes is a very large dataset of around 750,000 taxpayers for each year. It contains a set of details about income, the source of income—so, is your income from savings, from dividends. It contains information about the types of reliefs that you use, it contains information about the industry that you work in, where that's applicable, and it also contains information about the address of the individual. And this is the dataset that is the basis of all the forecasting that is done, for Scotland, for the UK and, we expect, for Wales. So, that's the survey of personal incomes—a very large dataset.

Then we produce something called a public use tape, which is basically pretty much all of that data, but with one important modification. So, for some tax records we have to aggregate them together, and the reason we have to aggregate these tax records together is that, if we didn't, there's a risk that people could start identifying the taxpayers we're talking about. So, the public use tape aggregates, particularly at the high end, which tends to have quite a small number of taxpayers when you cut it down to very small areas, so we have to aggregate those together to protect taxpayer confidentiality. So, that's the public use tape, and we've given a version of that to the Welsh Government, and we will give that to them every year as it emerges.

Then there's also a facility we have called the Datalab, where, if officials want to access this very disaggregated data, they can, and then there is a set of separate mechanisms we have for ensuring that taxpayer confidentiality is maintained. So, you've got the public use tape and we've got the Datalab. Then, the other thing we've committed to is providing in-year data on PAYE receipts. That's taken from something called the real-time information system, RTI, as it's known, and we think this is a—it's a very timely, up-to-date source of information. It covers receipts from PAYE, and therefore that's the vast majority of receipts—something like 85 per cent, depending on which year, are coming in through the PAYE system. Obviously, it doesn't include self-assessment, but it does include the bulk of the receipts. There are some issues around that in terms of the tracking of addresses can sometimes be a little bit tricky. So, the issue we were discussing before about whether people have updated addresses means that sometimes the RTI data is not 100 per cent accurate. So, there are some questions around the absolute accuracy of RTI but, nevertheless, it gives us a very good feel for what's happening in terms of PAYE receipts during the year, and it's very similar to the system we use in the UK where we monitor each month the PAYE receipts. 

I'm content with that. 

Okay. Could I just ask a question about how you're assessing the resources required to deliver bilingual services in Wales, because, clearly, that's an important feature? And what measures will you be using to measure performance? 

Okay. So, HMRC has a Welsh language scheme, which has been there for, I think, about 40 years. The basis of that—for example, if you take telephone contact—is that we have a Welsh language contact centre. So, people who wish to use the Welsh language service don't have to contact the general contact centre and then select a Welsh language option; all of their enquiries are actually dealt with by a Welsh language contact centre. Similarly, if they have signified a wish to be dealt with in Welsh, our normal approach is not to offer a bilingual service, it is to deal with them in Welsh. 

So, we provide some general things bilingually, like the website. Similarly, the mailshot that we recently sent out was bilingual but, generally speaking, when we're dealing with a specific taxpayer about their own tax affairs, we deal with them either in English or in Welsh, whatever preference they have expressed.

In the case of the Welsh rates of income tax, obviously, that is a specifically Welsh project, so we are trying to go beyond what we would normally do in our Welsh language scheme for that, hence the recent mailshot was bilingual, and we are working with the Welsh Government on what that communication strategy is. But when it is up and running and taxpayers are contacting us day in, day out, our approach will generally be to deal with them either in English or in Welsh, rather than bilingually.    

And how are you proactively encouraging Welsh speakers to make use of the Welsh-medium provision because, very often, people might not have the confidence or feel that it's just easier because they tend to see, maybe, access to English services as being more accessible? 

So, I think—you know, we do publicise the availability of the service and we've got quite a relaxed approach to how you sign up for it, which is just if you have clearly expressed a preference to deal with us in Welsh, then that's how we will deal with you. Interestingly, when we sent the notification letters out in November to people about the Welsh rates of income tax, we got a little boost in the use of the Welsh language service; so, about 200 people have come back to us following receipt of that letter saying, 'I would like to be dealt with in Welsh', and we've added them to our Welsh language service. So, I think every contact, probably, bilingually actually pushes up the demand for it.

In the case of our digital services, our approach is, while we are developing the service, we develop it in English. So, sometimes when it's in its beta form, there will only be an English version of it available. But, once the written parts of the service are settled and the supporting guidance is settled, then we would translate it into Welsh when it's a bit more stable. So, people who use our new services might find that they're an English service, but when they go back to use it later on they will find that, actually, they can just click to go into a Welsh service if they wish.  

Okay, thank you very much. Neil. 

Just to follow up on your digital delivery plan, this was in three broad phases, the first of which was completed towards the end of last year, identifying taxpayers, allocating tax codes and administering the Welsh rates of income tax. This year, I gather that you're going to do further work in relation to self-assessment, and then by April 2019 there'll be changes to HMRC's online services, along with requirements for financial accounting. Can you tell us what changes are being made currently in your digital system to administer Welsh rates of income tax and how these are progressing?

Yes. So, the first stage was to identify Welsh taxpayers. So, we ran our scan to pick up all the records that we believe are Welsh and to put a flag on our system to say that this is a Welsh taxpayer, having done work, obviously, to cleanse the address database. Mr Hedges mentioned earlier that when we did this scan initially for Scottish taxpayers at the equivalent time when we were sending out the notification letter in Scotland, we missed the fact that on some of our databases we have addresses in a non-standard format, and therefore our scan did not pick up those people correctly as Scottish taxpayers and they did not receive that notification letter. And there were about 400,000 taxpayers missed from that mailshot. We did fix that before the Scottish rate of income tax actually came in, so they weren't affected by that. 

So, we've learned from that. The first step was to cleanse our address databases to make sure that they all had postcodes and they were all in a standard format, and that the scan picked them all up. So, the first was to run the scan, put the flag on the system, and that identified about 2.01 million people who we regard as Welsh taxpayers, or will be Welsh taxpayers if they have sufficient income to pay tax. We believe that about 1.35 million of them are actually going to be Welsh taxpayers in terms of paying tax. 

The next stage, obviously, was to notify these people, hence the letter. That letter went out to all 2.01 million, so, even if you are not liable to tax, because we have a record that says you would be a Welsh taxpayer, and because it's possible you'll have income next year that exceeds your personal allowance, we did notify them. And, obviously, any of those people who are in pay-as-you-earn will be affected. 

The next stage is to initiate it so that, for people who have tax deducted from their earnings, the correct tax would be deducted. So, that means that they get issued with a Welsh pay-as-you-earn code, which will have a C prefix on it. We started issuing those last month, and we will complete the issue of those in the next few weeks. We will then notify employers of these new codes, and, in the meantime, we are working with employers and payroll bureaus and software houses to make sure that their payroll systems can pick up a C prefix and make sure that that is on their payroll, so that they run that correctly.

So, that will mean that we've moved from having just a flag on our system to actually applying to the deduction of tax from people's earnings in time for the first payroll run after 6 April. So, having had a notification letter from us, the next thing that Welsh taxpayers will see, if they are an employee or a pensioner in pay-as-you-earn, is this coding notice with the C prefix in front of it. And that is another opportunity for them to get in touch with us if they think they've got something that they shouldn't have had. 

For self-assessment, obviously, the first returns for 2019-20 get issued in April 2020, to come in January 2021, so we've got a bit more time to make any changes to self-assessment. But the main thing required there is to make sure that people who file a self-assessment online for 2019-20 are able to declare their Welsh taxpayer residency status, and that we, therefore, make sure that the Welsh rate of income tax is applied to their record as well. So, although we already have the flag on the system for the person, we have to then apply that to their self-assessment account. 

Beyond that, there are a few things to pick up. A key one is relief at source schemes. So, these are people who make pension contributions net of their basic rate of income tax. So, if you want your pension scheme to receive £100, you would pay them £80 and they claim back £20 from HMRC. Obviously, in the past, those pension schemes have not had to differentiate between a Welsh member and an English member, but, in the future, they will have to be able to distinguish, and we will have to tell them which of their members are Welsh, and there could, in the future, obviously be a different rate of basic rate relief to be applied. But that can be done further down the track as well because there is no immediate impact. So, that's something that needs to follow on, and I think there some change for gift aid required as well. 

Beyond that, the next part of our Welsh taxpayer identification strategy is to maintain the high level of identification , so continually corroborating our address file against third-party data and determining whether there is an indicator that suggests that the address we have is no longer up to date and we need to take action, and obviously continuing to promote the need for taxpayers to alert us of any change in their residence.

What about work on self-assessment? What will need to be done in the coming year to ensure that you've got accurate records et cetera there?

People who are on our self-assessment database already have the Welsh taxpayer flag set against them. The key thing is that when they come to file their 2019-20 self-assessment return they are prompted to confirm their residency status, and then when we account for those self-assessment receipts those that are relevant to Wales get accounted for to the Welsh Government. But there's plenty of time to do that, because, as I say, the first returns for that year don't get issued till 6 April 2020.

And as regards guidance and support for taxpayers in relation to Welsh rates of income tax, how is that progressing? Is there any more work that needs to be done there?

That is fairly minimal because the only action that taxpayers really need to take is to tell us where their main residence is and to make sure that they keep us up to date if they move. So, the key message that we want to get out is, 'You don't have to do anything yourself to administer the Welsh rate of income tax, other than make sure we know where you live.' That's the key part of our communication strategy, which is an ongoing one in any event, because we had to do it for Scotland. We don't just target this communication at Scotland—we target it, for example, through Twitter to all of our followers. So, that's an ongoing piece of work. But apart from that, taxpayers shouldn't have to do anything specifically to make sure they pay the right tax to the right country. If they tell us where they live, we take care of it.

Okay, thank you very much. 

Rhun.

Just a couple of quick points, really. We've talked a lot about how taxpayers are informed about the changes. Can you just tell us what you've done internally to make sure that your people, the HMRC staff, are fully informed about all the consequences and likely questions that are going to arise, and the changes in their work that arise from devolution of the WRIT?

We've got our own intranet site that our staff can see. We've done an intranet article on there about the implementation of the Welsh rates of incomes tax. We also specifically brief staff who are in contact with customers when an event takes place that they need to be aware of, in case they have to advise customers. For example, we updated all our customer-facing staff after the budget in October. We also notified them that we'd issued the notification letters in November and that therefore customers had received this and might raise queries—that's our general contact centre staff for customers in Wales who come to deal with us in English, as well as the Welsh contact centre for customers who deal with us in Welsh, who almost always but not necessarily will actually be in Wales. 

We've also specifically briefed our customer compliance managers who deal with large businesses, because part of their work now is to work with their large business customers to make sure that their payroll departments are able to handle the C-prefixed codes and apply those correctly to their payments.

The other question I had: you've talked about the work that you do anyway to try to ensure compliance with income tax rates, and in many ways those will be the same steps for making sure that people who are Welsh taxpayers comply with WRIT—what's the level of collaboration with Welsh Government and the Welsh Treasury on that kind of compliance work?

We will expect to sign off our compliance strategy with the Welsh Government. You're right that we've got a general approach to managing taxpayer compliance, to make sure that people declare the tax that they're supposed to declare and pay it. If there are specific compliance risks in relation to the Welsh rates of income tax, then there would be specific additional steps in our compliance strategy that we would need to follow, and we would aim to agree those with the Welsh Government. In the case of the Scottish income tax, which is obviously already in force, we have an agreement with the Scottish Government that every year we will complete a risk assessment that identifies what additional risks we think exist, and then, from that, produce a compliance plan for what we are going to do to manage those risks. Clearly, the key—there are two key risks if rates of income tax diverge. One is that it might create an incentive for taxpayers to conceal their real place of residence and try to claim a different place of residence. Or the other is that they might say, 'Yes, this is where I'm resident', but higher rates of tax create a greater incentive to conceal income and underdeclare income. So, we might have to manage either of those risks, specifically in relation to the Welsh rate of income tax, depending on how rates diverge in the future. But while there's no divergence, we conclude that the risks are very, very low—any additional risks are very, very low.

Okay. Diolch.

Thank you. Could you tell us a little bit about the service level agreement that you're, I think, still working on? Why is it not already in place? It just seems strange that you haven't already established those parameters, really?

Well, I have a meeting with the finance Minister after this as part of that process. I don't think there's any difficulty; we are just working through it. I fully expect that we will have a service level agreement in place before the new rates of income tax come into force in April. We already have a memorandum of understanding, and we have the membership of the project board and programme board, so I think we feel satisfied at the moment that we've got good engagement and everyone knows what our expectations of each other are. But, obviously, those change when you are in live running. And, in particular, there is the data for in-year forecasting, which we've mentioned, which the Welsh Treasury will be very interested in. There's the future compliance strategy, which—although I don't believe we will need to do anything additional in year 1—we'll want to lock down. And there is making sure that we're counting correctly for the tax. So, that's all being worked through. There are no difficulties, but it just needs to be finalised and agreed.

Okay, thank you very much. Any further questions from Members? No. Are we happy? Well, thank you very much for your time, and for your evidence. You will, as always, be sent a draft copy of the transcript to check for accuracy, but with that, can I thank you very much for your time, and for joining us once again? Diolch yn fawr. Thank you. 

We as a committee will now move back into private session, as was agreed earlier in the meeting. Diolch yn fawr.