Official Report 843KB pdf
Good morning and welcome to the 31st meeting in 2025 of the Finance and Public Administration Committee. The first public item on the agenda is our annual evidence session with Revenue Scotland on how it fulfils its functions.
We are joined by Elaine Lorimer, the chief executive of Revenue Scotland, and Aidan O’Carroll, the chair of Revenue Scotland’s board. I welcome them to the meeting and invite Aidan O’Carroll to make a short opening statement.
I thank the committee for the opportunity to appear before its members this morning. We are pleased to be here once again.
Our annual report and accounts for the year to 31 March 2025 were laid before the Parliament in October, and we welcome the opportunity to discuss any aspects of those documents. We are happy to report continued positive progress at Revenue Scotland and there are several highlights that I will mention in advance.
This year marks a significant milestone: Revenue Scotland’s 10th anniversary. Over the past decade, we have grown from a newly established body into a mature, resilient, and forward-looking organisation. To recognise that achievement, we were honoured to attend an event a few weeks ago at the Scottish Parliament—I thank the convener for agreeing to be our host—where we engaged with MSPs to reflect on our journey and share our vision for the future. Throughout the year, we have held a series of events with staff, stakeholders, and partners to set out our progress and reaffirm our commitment to delivering excellence in tax administration for the people of Scotland.
The organisation is committed to being as efficient and effective as we can. We continue to operate with a strong focus on automation, technology and maintaining a digital-first mindset. That is a fundamental pillar for our organisation. During the past year, we have made additional investment in the skilled resources that will help to deliver on our digital data and technology strategy, ensuring that we drive additional value through a critical area for the benefit of all our stakeholders.
We have also actively contributed to the development of Scotland’s tax strategy by engaging directly with Scottish Government colleagues through round-table and bilateral discussions on the future shape of devolved taxes in Scotland. Clearly, that has to be achieved against the backdrop of significant public sector reform. By ensuring that we invest correctly and wisely during the next few years, we will be able to contribute fully across a number of the areas set out in the recent public sector reform strategy that was published by the Scottish Government. We want to be an exemplar in our ability to collaborate, use shared service models and share our ideas and deliverables to help make us all more efficient.
As we look ahead to the design and delivery of existing and new devolved taxes, we are looking to ensure that our future operating model aligns to that public service reform agenda. Our corporate plan for 2024 to 2027 shows that we continue to make strong progress, and it remains our strategic focus in the coming years. Our annual business plan supports delivery across all four outcomes that are mentioned in that plan, and I will highlight another few areas where we are already seeing meaningful progress.
I have already mentioned our digital data and technology strategy, which is embedded in the corporate plan. To support that, we have continued to enhance our digital and data capabilities, ensuring that customer needs are at the forefront. Not only have we have invested in our core digital systems, we have improved our website and guidance materials and we have embraced new developments in information technology.
During the next few years, there will be additional tax responsibilities for new taxes. The first of those, the Scottish aggregates tax, will launch next April, and we have worked closely with the Scottish Government and industry stakeholders to ensure an effective implementation, with successful internal testing of our Scottish electronic tax system—SETS—platform, and further taxpayer engagement is planned. That we are on track is a great example of close collaboration, a technology-first approach and great project management to date.
There will be other devolved taxes that are either in train or being considered—for example, the Scottish building safety levy and the air departure tax. Again, we are working closely with the Scottish Government on sharing our insights and expertise, and we will be ready to adapt our systems to be able to implement or support the implementation of such taxes efficiently and effectively.
We continue to make progress on creating a supportive, inclusive and high-performing workforce and workplace. Our EDI strategy and action plan are aligned with our corporate plan and people strategy. Through the futures project, we have successfully implemented a dynamic hybrid working model that enhances operational efficiency and supports staff wellbeing. That has allowed us to use physical office space much more efficiently and to recruit skilled personnel more widely than from the central belt of Scotland. We base that working model on external and internal evidence on what works best and we continue to refine our approach.
In 2024-25, our people survey results placed us among the top seven civil service organisations in the UK across all themes, achieving our goal of ranking within the top 25 per cent across the UK. Revenue Scotland benefits from an excellent board with a diverse range of skills and experience, and I publicly thank our board members for their invaluable contributions and their support for me as chair. We recently welcomed two new members, further enhancing the diversity and expertise at board level, and we have also taken on board three co-optees to our two committees, which has again given us greater expertise in areas that will be important in future.
I also record the board’s heartfelt thanks to Elaine Lorimer, who has decided to step down after nearly a decade of distinguished service. Her vision, integrity and unwavering commitment have shaped the organisation from its earliest days. She leaves behind a legacy of excellence, resilience and innovation. On behalf of the board and all of us at Revenue Scotland, I extend our deepest appreciation and warmest wishes to Elaine as she embarks on her next chapter. Her leadership will continue to inspire us as we move forward.
Following a rigorous recruitment process in which we had a lot of applications, we are pleased to welcome Johanna Boyd as our new chief executive officer. Johanna brings a wealth of experience and a proven track record in executive leadership, and I am confident that, under her guidance, Revenue Scotland will continue to thrive and deliver for Scotland.
Finally, in the context of the continuous change that we are all going through, we should note that Revenue Scotland collected £962 million in revenues for the year to 31 March 2025, while keeping our costs below 1 per cent of revenues collected, which has been an important benchmark for us up to this point.
We look forward to continuing to improve on our overall performance and be seen as a real asset and an efficient public service, and we stand ready to take on more challenges going forward.
I again thank the committee for the opportunity to engage with you today. I very much look forward to our discussions.
Thank you very much, Aidan, for that opening statement and for the reports. We have given them a thorough read-through, and I have to say that they are very positive, but I will ask you about one or two things, as will colleagues around the table.
Your revenue expenditure is £8,694,000, which is £406,000 less than your budget. That is significant given what the Scottish Government is trying to do in terms of its efficiency targets. Is it likely that that downward trend will continue?
I will take that question, Aidan. Thank you for noticing, convener, that we made savings in our budget last year, but there were reasons for that. Part of it is to do with the introduction of the new Oracle system, which we report on in our accounts. It is the human resources system—it is a finance processing system—that the Scottish Government introduced last year and which we benefit from by way of a shared service. As part of the handover for Oracle, we had to freeze the filling of any vacancies to allow for secure data transfer and so on, which meant that we were not able to fill vacancies last year. We were holding vacancies for a number of months, which is why, when we come back next year to talk about our performance this year, you will see that our head count has gone up again.
What we also managed to do last year was to screw down on the little discretionary spend that we have. We were conscious that the Scottish Government was looking for a path to balance. There was an ask of all public bodies to see what savings could be made in that year, and Revenue Scotland contributed to that. We went round every area of discretionary spend that we had and made as many savings as we could. We have done the same again this year for the same reasons, but because our recruitment profile has been more active and we have managed to fill our vacancies faster than last year, we will not be able to offer up the same savings this year as we did last year.
Savings and operating efficiently as an organisation are absolutely at the heart of what we do. When we discuss what budget requirements we need from the Scottish Government and the Scottish ministers, we always look at how we can keep our costs down as much as we can. As you will see, that plays out in the costs that we are asking for for the introduction of the aggregates tax and the building safety levy. The approach that we have taken is very similar.
I know that you are always keen to try to keep the cost of Revenue Scotland below 1 per cent of revenues collected, and that will be a bit of a challenge with the bill that we will be debating and discussing soon, but I will not go into that at the moment.
It appears that staff absences are an issue. I notice that you went from an average of 8.6 working days lost in 2023-24 to 10.7 in 2024-25, which is a jump. That means that your staff, on average, are off for more than two weeks each year, which is quite a lot.
Yes—being a relatively small organisation, stats around things such as staff absences are overemphasised because of our size.
If one person was off sick for six months, that would have an impact on the figures.
Yes, that would skew our stats. On the figure that you cited, the increase was due to two members of our staff being on long-term sick leave. I am pleased to say that, through our approach to supporting our staff when they were off, we enabled one of those staff members to return to work. Unfortunately, the other one had to leave.
We have a forensic approach to sickness absences. We get quarterly statistics, which we look at as an executive team. Obviously, we know what the situation is at team level, and we have a whole process of supporting our people when they are off to encourage them to come back fit, well and able to contribute to our performance.
09:45
In his opening statement, Aidan O’Carroll talked a lot about digital issues and the need to invest more in digital services and so on. There is a whole list of different programmes that you are investing in. What work is being done to ensure interoperability with existing Scottish Government digital platforms?
I will start with the shared services that we rely on. All of our core operating systems in Revenue Scotland sit on the SCOTS connect network. That is a shared service, and it is core to our operations. The rest of our digital investment has been primarily in our electronic tax system.
On interoperability, we are really interested in ensuring that that system can be added to on a modular basis, for new taxes, for example. We must have barriers and place fences around that because of the taxpayer information that resides in it. Rather than the system being interoperable, what is important to us is having access to data that we can share with other organisations. We do not need to create new data sets where that data set exists somewhere else.
Our system meets all the Scottish Government’s security requirements. On future interoperability, what is important to us is whether we can get the data access that allows us to share the data that we are able to as a tax authority with other public bodies and whether we can have pipes of data coming back into our organisation so that we can maximise the benefit of the data that is available across the public service and do our job without the need to create new sets of data just for us.
I hope that that makes sense to you.
Yes, it does. I will not go down a rabbit hole and ask a lot more questions on that topic, because of time constraints and other issues that I want to cover. However, that was informative.
On issues arising from last year’s evidence session, we talked about user satisfaction being 76 per cent. On that rating, Elaine, you said:
“We think that it is good, but it is not good enough.—[Official Report, Finance and Public Administration Committee, 19 November 2024; c 41.]
What is the position on user satisfaction now?
That relates to the key performance indicator that we set, which is a recognised benchmark that different types of business in 13 sectors across the UK use.
I was asking about that yesterday, because I thought that you might ask me about it. The benchmark across the 13 sectors is up at 77 per cent this year. What we measure to look at compliance against that benchmark is feedback on the Scottish electronic tax system, which we get directly from agents, and feedback on our website. Each month, more than 200 elements of feedback on our electronic tax system come back via our website. I am advised that, so far, our performance against that benchmark is positive.
That benchmark looks only at so much. We also look at our performance against other things, which are statutory requirements, such as our performance against answering freedom of information requests timeously. You will see from our report that we have done that in every instance, bar one. We look at our other KPIs that we set ourselves, such as how quickly we answer phones and how quickly we respond to correspondence. You will see in our report that we have more than exceeded those KPIs.
That particular benchmark looks at responses to the services that we provide digitally. This year, we are already ahead of that.
You have talked about 77 per cent being the benchmark, and it was at 76 per cent last year. Roughly, where do you think that you are now? You have said that you cannot be too specific.
I am afraid that I cannot give you that information at this point in the year.
That is a politician’s answer, is it not?
That is because we look at it and reflect on it at the end of the year. However, as of the mid-year point, we are there.
It would be fair to say that the board is also looking at other ways of engagement to get more feedback and provide further assurance that we are heading in the right direction and that we are staying at a high level of efficiency and acceptance, as far as our key stakeholders are concerned. We are continuing to take on more feedback and more avenues and streams of feedback, which will help to establish more evidence to show that we are on the right track and that the feedback that we receive continues to improve.
The directorate for internal audit and assurance has pointed out that the
“culture within Revenue Scotland continues to be open to audit and assurance”.
However, it has said that two items were highlighted for attention as part of the 2023-24 audit, namely
“the risk that the related party disclosure may be incomplete or inaccurate”
and
“the scope for medium-term financial planning arrangements to be developed further to highlight and ensure financial sustainability.”
It notes that
“Action to address these matters is underway and is expected to be completed”
during 2025-26. I wonder whether you can touch on that for a wee minute.
Audit Scotland’s audit recommendation is around our medium-term financial planning. As we have said in the report, it is not that we do not do financial planning—we do, but Audit Scotland is asking us to go deeper to stress-test our plans against different scenarios. We are taking forward that work this year. Our budget bid to the Scottish Government is presented not just on a one-year basis but on a three to five-year basis, and we run a load of scenarios around it. Audit Scotland is looking for us to set that out in a document that we can take to the board and that we can stress-test. That work is under way this year.
On the assurances that are provided by the accountable officer, I understand that some issues were raised in respect of financial controls in the organisation. Some additional matters were identified internally to do with backlogs of work within the finance function.
In the past year, we had a situation with our finance team. We had a very small team of only four people and a number of staff left over the course of the year and took their knowledge and experience with them. That gave rise to some backlogs that we had identified, but Audit Scotland was very thorough and found more issues relating to backlogs and non-conformance with some of the processes that we had set out. We took immediate action to address that.
As the accountable officer, I set up a steering group to oversee delivery against the actions that we were asked to do. It was a fantastic example of Revenue Scotland standing up to respond. We were able to deal with all the backlogs, bring in internal audit to provide assurance that there were no untoward matters; the challenges were simply created by staff churn and turnover and processes not being followed as timeously as they should have been. We got all that back on track in time for the full audit, which stuck to the original timetable. I am pleased to say that, over the course of the summer, we have recruited an experienced new head of finance and a new finance team. They are continuing to adhere to the timescales that we set ourselves for those processes. As part of the internal audit work that I asked for, I asked the team to look forward at the further opportunities for us to enhance our finance team and the processes that it undertakes.
There are a lot of hand-offs between our finance team and our tax operations team. Some of the processes are terribly manual, so there is an opportunity for us to automate some of them in due course. The team gave us some recommendations on that, and a project is now going on within Revenue Scotland to act on those recommendations. I expect that, in due course, we will be able to automate some of those manual processes, such as reconciliations.
That was an area where the board and, as you would expect, the audit and risk committee took keen interest. It was an example of where everything was stepped up to ensure that we take learning from it. It is a vulnerability for a small organisation if we have a small finance function. We are trying to embed a greater skill set so that we would be able to identify any issues earlier and deal with them.
That is, to be more flexible in future. The Scottish Government’s directorate for internal audit and assurance said that
“no fraud or losses of tax revenues were identified”
through the process, which, obviously, is important.
I have one last question about the statement of revenue and expenditure. I noticed that, in relation to penalties and interest, there was a significant increase in penalties from £2.178 million to £5.58 million, so they have more than doubled. If you add the interest to that, there is about a £3.7 million increase year on year. Can you explain what the reason for that was?
Indeed—this is the issue with issuing penalties. If you look back at previous years, you will see that there was a drop in the amount of penalties that we were issuing. That was a product of the Covid period when part of our response to support businesses was to pause issuing penalties when they were going through significant challenges in that period. Essentially, we have caught up with the penalties that were due to be issued over those earlier years.
The vast majority of those penalties are in relation to lease reviews. We have spoken to the committee before about the challenges that we, as a tax authority, face with the lease review policy whereby holders of commercial leases should be submitting a fresh tax return to Revenue Scotland every three years. We are finding that to be a challenging area of policy to get above 50 per cent compliance, so we are issuing a lot of lease review penalties—they are by far the majority of the penalties that we are issuing. Essentially, it was catching up on the backlog created over the Covid years and because of the focus being on those lease review penalties.
In our report, you will see that we talk about areas where we have introduced some automation. The issuing of penalty letters is one area where we have been able to automate some of that process, so we have also become more efficient and are issuing more penalties. That is the cause of that, I am afraid.
Thank you very much. I have hogged enough of your time and colleagues are keen to come in.
Thank you for joining us—and thank you, Elaine, for all of your hard work in Revenue Scotland. You have created a culture that will influence and shape the organisation, which is very important.
Last year, I asked about the representation of, and the split between, men and women in the organisation. I can see that you have made determined attempts to improve that; I was heartened to hear about your new CEO and the two new board members. There is still a way to go in relation to the board and the audit and risk committee, which have 37 per cent and 20 per cent female representation. I can see that you have co-opted board members, too, because those are fixed-term positions. Aidan, will you state what your target is and give a sense of where you are in the journey towards that?
As you know, getting the best diversity at board level that we possibly can is an issue that is close to my heart. This year, we have made good progress in terms of the diversity and skill sets not only of board appointments but of the mix of co-optees. Inevitably, it will still take time, based on when future retirements will be, but I see an opportunity again next year when we start the process to replace board members and, ultimately, to replace me.
We will use the same attraction strategy that we adopted this year, which was to reach out as far as possible to as many groups as possible, and to deliver the message that we are serious about improving the diversity—not just the gender diversity but the overall diversity—of the board. This year, that led to different types of applicants for the non-executive positions and the chief executive position, and it was quite heartening that we had a much broader mix of applications.
10:00
Is cognitive diversity part of your mix?
Yes.
That is good, and I will watch the situation with interest.
On the gender pay gap, women on average are earning 5.9 per cent less than men, but that figure has increased from 1.6 per cent since the previous reporting period. Again, I appreciate that the scale of the organisation can mean that that can quite quickly become skewed, particularly with senior appointments, but it would be useful to hear your reflections on why that is the case, because the figures are going in the wrong direction.
I will make a couple of points about that. That is measured at a particular point, so it just depends on how your organisation is sitting at that time, which is 31 March. In a small organisation, the figure can get skewed. However, when you look at the representation across the grades, we are doing well in making sure, as far as we can, that there is gender diversity and equality. Everybody gets paid the same rate, irrespective of gender, so it is a question of where the women sit in the grades in the organisation. The number of women who have been promoted from the lower grades this past year has been pleasing to see. Similar to Aidan O’Carroll’s point, it is just a matter of time.
There are four of us at the senior leadership team grade, and the gender balance is 50:50. At the grade below that, the balance is almost 50:50. As you go down through the organisation, you see that we are making progress. The percentage that was mentioned is simply a reflection of the position at that point in the year.
What assessment have you made from a risk perspective, particularly from a corporate risk perspective, of the Supreme Court judgment earlier this year? Many organisations have left that with their HR departments, but it must be assessed as a corporate risk, given the potential for litigation. What has your approach been?
I will take that, initially. That issue has been discussed at the board’s staffing and equalities committee. We have not elevated it to a position on our corporate risk register; instead, we decided that we must walk very carefully through the impact of the judgment on our policies, but, of course, many of our policies are policies of the Scottish Government.
That is a risk in itself, and given the slowness to respond, it is a critical risk. Somebody could litigate against you and saying that you are waiting on the Scottish Government is not a defence under the law.
Yes, and we are aware of that. Our staffing and equalities committee has made that very clear to us, because the chair of the committee is also a member of Employment Tribunals (Scotland).
We are doing what we can. I will talk about practical things and then come on to cultural issues. We sit in a Scottish Government building in Victoria Quay, where it is up to the Scottish Government to make sure that the facilities there are commensurate with the judgment. There are gender-neutral toilets, and there are female and male toilets.
To come back to our organisation, it is really important that we treat everyone in our organisation respectfully. We have a fantastic reputation for being an inclusive employer, and everybody is welcome. That is the message that we have been sending out from Revenue Scotland. We are engaging with the Scottish Government to ensure that our specific policies on where we are located and what facilities we have for people are commensurate with the impact of the judgment.
We also take regular feedback from focus groups in the organisation to ensure that our finger is firmly on its pulse and we know how staff feel about the policies and how we are doing. To re-emphasise the point, the staff and equalities committee is not just focused on looking at our workforce planning but on the practical implementation of those policies. We are not only aware of how staff feel; we are keeping our finger on the pulse, so that we can be rapidly reactive if there is an issue.
There is a Scottish Government delivery bodies group, which consists primarily of organisations that are separate employers but are subject to the Government’s main terms and conditions, so all the staff are civil servants. As a collective, we have been staying connected, because we are conscious that we need to stand together in our approach. It would not be right for one organisation to head off in a particular direction, because that could open up concerns about litigation for the rest of us. We are trying to move forward carefully and be mindful of the guidance that has come out from the Equality and Human Rights Commission, but we must also ensure that we are in lockstep with what the Scottish Government is publishing by way of policy change.
Taking a risk-based approach will be very wise for all the areas that you have outlined.
I have a final wee question, which I also asked last year. Going back to the convener’s questions about digitisation, I asked you last year about your thinking on artificial intelligence. We are a year down the line. I have heard that some public sector organisations have said that their staff should not use AI at all, which seems somewhat luddite, but I want to get a sense of where you are at. A lot of people are routinely using Copilot, Gemini, ChatGPT or whatever, but where is your thinking on that this year?
Essentially, there are two elements on AI that I can talk about, one of which I have already mentioned, which is the use of AI for the automation of our processes. We have made progress in that area this year with some of our batch correspondence. We can now generate that automatically as a result of investment that we have made in our system, and that will free up staff time to do other work.
We are also one of the organisations within the Scottish Government’s remit that has taken on Copilot. We are mindful of the risks that are associated with that, because the key thing for us is understanding where information goes from a security perspective. A small number of staff in Revenue Scotland have the full Copilot licence, and they are trialling that in safe areas. That is being overseen. We have an information governance group that supports our senior information responsible owner with regard to the corporate decisions that we will need to make about using such software more regularly across our organisation.
The feedback so far is that Copilot is pretty good for the things that we are using it for, such as producing minutes and notes of meetings, but we will need to walk through very carefully whether we could introduce Copilot more broadly into some of our interactions with taxpayers and things like that.
We also had a presentation at the board. Are you going to speak to that, Aidan?
Yes. Again, keeping abreast of the developments in the wider Scottish Government, we have already engaged on AI and had updates about where it could be deployed. As such, we have baked into our future digital data and technology strategy the increasing use and usability of AI-driven automation.
A caveat that I always add is that what we get from using AI will very much depend on the quality of data that we can extract from the systems. It is just as important that we improve the data sets that we are getting, because that will lead to increased opportunity for the data to be interrogated intelligently by AI. We see that as a big plus in the future, because this is not about just our data sets—we will be able to interact with other departments’ data sets, which will deliver the bigger prize for everybody.
I noticed that your staff costs have gone up somewhat. The figures show an increase in staff from 94 to 99, including an increase in permanent contracted staff from 88 to 96. Wages have gone up from £4.1 million to £4.6 million, and staff costs have gone up from £5.8 million to £6.5 million. Will you comment on that?
Yes, that is right. Our head count has increased as per our workforce plan for the year. We needed to bring some new staff into our organisation to support the introduction of Scottish aggregates tax and the preparatory work for the building safety levy. This year, we have also invested in our digital and data team, as Aidan O’Carroll mentioned. In order to accommodate those changes to our staffing complement, we have not filled other vacancies that have arisen elsewhere in the organisation. We are taking a strategic approach to how we invest in the capability that we, as an organisation, must have.
Obviously, that has had an impact on our costs. However, when those costs are broken down, we see that a significant element of the higher costs is related to pay rises, which we have to adhere to as we are subject to the Scottish Government’s main terms and conditions.
The Government’s target for pay is an increase of 9 per cent over three years.
Yes, but that does not mean 3 per cent each year. The uplift was what had been negotiated by the Scottish Government, and that was front loaded. Our cost rises resulted from a mixture of our head count going up slightly and the impact of salaries.
On the use of agency staff, that was to assist us. The convener mentioned that we have had long-term absences. We had some real pinchpoints in the two teams that were impacted by that, so we brought in short-term agency staff to support us, who have now left.
Your annual report and accounts talks about the pension benefits of the senior leadership team. Those appear to have gone up quite a lot.
I am afraid that that is just a product of the scheme. We have no influence on that at all.
I thought that might be the case.
As the convener mentioned, you have a target of 1 per cent of total revenues going to administration. Your admin costs went up from 0.87 per cent of revenues the previous year to 0.93 in 2024-25. I take your point that you are preparing for new taxes, and, as the convener also said, we will discuss the building safety levy in the next part of this meeting. However, even though the levy will be quite small, is it liable to push you over the 1 per cent?
Two new taxes are coming our way—the aggregates tax and the Scottish building safety levy. We are very mindful of the revenues that are being forecast for those taxes and the impact that that will have on the 1 per cent figure. Putting set-up costs to one side and looking just at our running costs for the administration of those taxes each year, we can see that the 1 per cent target will be put under pressure, because the revenues will not be as high as we would like.
Of course, those are forecasts. It will depend very much on what happens when we take on the taxes—what we see when we start to administer them and what we see in terms of compliance or non-compliance.
I can assure the committee, though, that we have that 1 per cent firmly in our sights as we work hard to figure out what the additional costs will be for our organisation to take on those taxes.
10:15Aggregates is a good example to cite. Our previous model might have been to set up an individual aggregates tax team within our organisation and to staff it up the way in which we staff up our other taxes, but due to our concern about running costs, and taking account of the decline in landfill tax revenues, we have instead put together a joint team called the environmental taxes team. The aggregates tax will be administered and managed by a joint team, which means that we do not have to increase the head count as much as we might have done in the past.
The building safety levy is a brand-new tax, so there is not a direct equivalent that we get from anywhere else.
I am reluctant to get into that topic now, as the convener might want to keep it for later.
Okay. The story with building safety levy is slightly different.
Fair enough. Presumably, with landfill tax, although the revenue is falling, the admin costs for it are much the same.
Indeed. The admin costs might go up marginally as the behaviour of that industry moves towards the decline of landfill tax. We might require to do additional compliance activity around that as the revenues decline. It is not always a linear model that we will be looking at.
That is right. The nature of the work in that team is changing, as Aidan said.
Going back to your staff, I note your comments about the hybrid operating model. Will you tell us about that? My reading of it is that staff have flexibility, but they must be in for key business activities, including new-start induction and board and committee meetings. Can the staff work entirely at home unless they have a special meeting to go to, or is that not the case?
It is open to the staff to work at home, provided that there is not a business need for them to be in the office. The range of activities that we class as anchor activities for the office is wider than what you have just described. For example, team meetings take place in the office, and if staff are working on a project and it would be of benefit to the outcome of that project to come into the office, they do so. I was in the office yesterday, and there was a group of staff in because there is a project that they want to get their heads around and take action on, and they recognised that they needed to come into the office for that.
We have a bare minimum, if you like. Outside of that, if staff are as productive working from home as they are in the office, they are able to work from home.
Some organisations have moved away a bit from home working and have insisted that people are in the office two or three days a week. You do not have that kind of rule.
We have not moved to a direct model of insisting that people are in the office on set days in the week, because that would not necessarily produce for us the performance that we have enjoyed over recent years. Apart from anything else, if I insisted that staff were in the office on set days in the week, our office would not be big enough, because, as part of our hybrid operating model, we were able to reduce our footprint in Victoria Quay.
We deliberately chose not to go down that route, because all the evidence told us to look not just at anchor days in the office but at activities in the office. That allows our staff to come into the office for the things that require to be done in the office for reasons of optimum performance, and then they have the flexibility to work from home.
We also have staff who would rather be in the office more, so they can be, and are, in the office more.
I re-emphasise that we keep a close eye on this and look at the behavioural patterns. We are very much focused on the outputs, as opposed to the inputs, when it comes to productivity, and we see that productivity has improved over the period since Covid.
As an attraction strategy, there is definitely a connection between the high staff satisfaction scores and the model that we are operating. As long as productivity remains high, we are content to keep taking evidence on that model and to share that evidence more widely. It is a model that the board certainly believes in at the moment.
So, to an extent, the issue is still under review. My personal experience, which is reasonably limited, is that I completely trust some staff at home, and they probably work better there than in the office; frankly, however, some staff do not.
Most of our work is done electronically now, so we absolutely know what our staff are doing and what their output is—we can see it. With respect, I would push back on your assertion.
Okay—that is fine.
There will always be a small number of people at the margins who are not performing in the way that we would like them to perform, and we would have that anyway, whether or not they were in the office. When we have that situation, we bring such staff back into the office under our hybrid model. However, I would not want to change our model because of a small number of people at the margins. The model has fantastic benefits for recruitment. The people who we are bringing into our organisation talk about our hybrid model as one of the attractions for them. As we said in our report, we can now recruit people from all over Scotland, although they recognise that they have to come into Victoria Quay for the anchor activities in the office. The model has broadened our reach as an employer, which can only be a good thing.
Somebody might ask you the same question next year, but it will not be me.
My final point is on cybersecurity. Your report lists 13 risks, and number 11 is cybersecurity. I do not know whether those are in order, but that seems to be quite low down.
No, they are not in order.
That is perhaps reassuring. Are you reasonably relaxed about that risk?
No.
The board is never relaxed on cybersecurity. You might know that one of the co-optees on the audit and risk committee is a cybersecurity specialist—that is what he does for a living. It is an issue that keeps us all awake at night. We do not just rely on what is happening more broadly at Scottish Government level; we need assurance on our connection with external stakeholders, which is a key risk, particularly in working with NEC on SETS. We need to always get the key assurance that those stakeholders are staying completely up to date in relation to their firewalls and the way in which they would handle a potential penetration attack.
The issue remains very high up on the list, particularly at the audit and risk committee level, as a key risk that we must monitor regularly. Indeed, we question whether there are things that we need to do that go further than cyber essentials plus, which is the benchmark at Scottish Government level. We keep that constantly under review.
Just last week, we had a business continuity exercise. We do that quite regularly now, with the support of the Scottish cyber co-ordination centre, which comes in and runs thorough the exercises. Last week’s exercise was specifically about our tax system and how we would respond if there was an issue.
Cybersecurity will always be high up in our approach to risk as an organisation. The only way to prepare for an issue is to practise, because one of the things that the experts have told us is that it is not a question of if but of when, so we have to be as ready as we can be. As Aidan O’Carroll said, the board takes the issue incredibly seriously and, as an executive, we do, too.
Training is essential as well. Recently, we have mandated that all board members must go through an element of cybersecurity training. We are using the cyber co-ordination centre and the governance training that it provides, which is helpful. All of us will have been through that by the end of the year.
Thank you.
I could only work from home if there was no chocolate or there were no crisps in the house and there was a lock on the fridge to which I did not have the key.
Good morning. I have a brief question on organisational culture before I move to something more substantive. You have implemented a 35-hour working week. How is that panning out? Are you finding that some staff cannot do their job within that 35-hour working week? For example, Ms Lorimer, are you working 35 hours and capping it, or are you working more?
The senior civil service is not affected by the 35-hour working week and I can assure you that I am working longer hours than that.
We are on Scottish Government main terms and conditions, so our organisation had to implement the shorter working week. As you would expect from Revenue Scotland, we put a project together to work with our staff to see how we could accommodate that. We had reduced our working hours by one hour the previous year, so it was just another hour that had to be found. We have taken that forward by being really mindful about meetings. We are an organisation that loves meetings, so we have tried to reduce the length of our meetings and to question whether we need a meeting. It is fair to say that, across the organisation, most staff are managing to work within that 35-hour working week. We monitor staff working hours, and where we find that staff are regularly exceeding the 35 hours, we pick that up at their monthly conversation and talk to them about how to improve their ability to adhere to the 35 hours. In general, across the organisation, we are managing to work within the 35-hour working week, and we monitor whether it is not working for particular individuals.
Just in practical terms, how do you monitor that? Do you monitor when staff log in to and out of their computer, or do you do something more sophisticated?
Our staff are on a flexible working scheme. As part of the new Oracle system, they log in and log out, and we get a monthly report on balances. We are able to take immediate action if we notice that there is a problem.
You report a 99 per cent tax collection rate in 2024-25. For a layman, what does a 99 per cent collection rate mean?
It means that 99 per cent of the tax that was declared by taxpayers was received by us.
The principal tax that you collect at the moment is land and buildings transaction tax.
Yes.
Are you concerned that, because of the operation of LBTT, the amount that is declared could be less than the amount that is due?
That takes us to our role in compliance. We look at compliance from a risk basis. Through experience, as an organisation, we are aware of particular types of transaction or interaction, for example between non-residential and residential tax, and the opportunities for taxpayers that there might be. We focus on areas in LBTT where we see the greatest risk, and that is where we target our compliance. If you look at our compliance yield, you will see that, in the past year, it has been in the order of £3 million, most of which has been through LBTT.
That £3 million sounds significant, but if you missed a few additional dwelling supplement transactions, for example, you could get quite close to that figure quite quickly.
The additional dwelling supplement is an area where we have increased our activity. We talked earlier about the importance of being able to access data. For the additional dwelling supplement, we are really interested in, in due course, being able to access data from local authorities on council tax and the second home premium that people now pay. I am sure that, if we look at that alongside our ADS data, that will throw up compliance issues for us. ADS is an area where we are increasing our compliance activity.
Some estate agents say that they are now advising customers early on in the process, even before viewing, about the burden that LBTT and potentially ADS will put on the transaction. However, when you speak to some conveyancing solicitors, there is still a sense that they are only as good as the information that the client gives them.
You are saying that you think that your compliance costs and your recoveries are quite good, where you have anticipated something. However, if, for example, someone is buying what appears to be their first property in the UK and happens to own a bolthole in Slovenia, what capacity do you have to find out whether ADS should apply to that? I assume that you will not trawl the land registry in Slovenia.
10:30
That is right. We need to take a risk-based approach to the transactions that we look at. The team is very expert at being able to sample transactions as they come through and to look for risk areas.
The issue relating to conveyancing solicitors that you identified is really important for us. We have always worked closely with the Law Society of Scotland, but we are now talking to it about specific areas, including what information solicitors get from clients. We want to know whether there is an assurance point further up the chain that solicitors could be involved in that would ensure that they get the evidence that they should get in order to ensure that their client is paying the right amount of tax. Ultimately, of course, that is a matter for the client, because it is a self-assessed tax.
Our relationship with the Law Society is really important here, and we are taking that forward.
I know from talking to our head of tax this morning that that is a key area for continued investigation. We want to find out whether there are other data sets that we can access that could give indications of misbehaviour or of what would be, in effect, misrepresentation of what the property is.
One of the critical elements, particularly for ADS, is the concept of being in an economic unit, which means, for example, that cohabiting couples will incur ADS even though one partner will not be on the title deeds of their partner’s property. That will be very complex for you to unpick, will it not? With ADS, there is an element whereby, if someone chooses to pay it, they are choosing to pay it.
Yes, there are particular scenarios involving the constructs of economic units and parties to transactions that are more complex. We in Revenue Scotland think about ADS as a tax. We talk about LBTT, but there is LBTT and ADS.
It is a hefty tax.
Yes, it is a significant tax, so, when it comes to our compliance work, a lot of our emphasis is on ADS. It is not solely on ADS, but a lot of it is on ADS. Increasingly, we are having to look at quite complex transactions.
It is clear from looking at the cases that, ultimately, have gone to tribunal that some of the more complex ones have been about ADS. That means that our staff, as well as needing to have solid tax experience, must be able to understand commercial constructs and tax-efficient ways in which people might construct their affairs, so that they can properly analyse and inquire into such transactions.
Are you aware that some couples are considering trial separations for the period when the transaction goes through, in order to avoid the tax?
I think that my team—I say this in the nicest possible way—have the sharpest and most cynical minds, so they are well aware of the ways in which people attempt to circumvent the rules around ADS.
You are aware that, as the percentage is increased, people will be increasingly inventive when it comes to ways to avoid what is quite a hefty bill.
That is an obvious conclusion to draw.
Thank you.
I have a question on the theme of data. You rightly say that data is extremely important when it comes to the work that you do.
We have had many discussions with the Scottish Fiscal Commission and think tanks about the relevant data from the labour force survey, which has been flagged up to us as not being particularly accurate. Labour market trends are crucial in relation to tax revenue. Does that problem affect you in any particular way? Are you aware of concerns about the lack of accurate data on labour market trends?
For the taxes that we have, we are not so much concerned about labour market trends, but we are really interested in other data. For example, in relation to aggregates tax, it is difficult for the Fiscal Commission to accurately forecast the revenues because the Scottish data that we might need does not appear to exist. The first couple of years of the operation of that tax will tell us what the revenues could be. Data becomes really important for us in being able to work with the Fiscal Commission on revenues forecasting.
The other point for us around data is, as we have mentioned, whether we can access data that exists in other public bodies that will assist us in our compliance work.
However, the labour market trends data is not necessarily something that concerns us.
Is there good co-operation with other public bodies that are trying to access that data?
Because we are a tax authority, we have very rigorous rules around what we can share. In fact, it is an offence if we share protected taxpayer information without consent. We have been able to use the Digital Economy Act 2017. We are named as a body that is covered by the 2017 act, which allows us to share data with local authorities, albeit that that data is limited to areas where there could be fraud.
We would really like to have a wider ability to either share data, recognising that there would need to be safeguards around that, or seek data from other public bodies or entities that have data that would be useful to us. At the moment, we do not have those powers, but we are really keen to see them brought forward.
We are engaging with the three key stakeholders from which we would like to be able to access more data on land-based transactions, which are His Majesty’s Revenue and Customs, Registers of Scotland and local government. We are keeping the debate on that live at this stage, because if we can get access to that data in the future, subject to the rules of confidentiality, it will make informed and intelligent investigation, as well as challenge and forecasting, much more effective.
Thank you.
That concludes questions in our annual governance evidence session with Revenue Scotland. Would the witnesses like to make any further points before we conclude this part of our deliberations?
The only thing that I would like to say, convener, is thank you very much for inviting us and for your on-going interest in our organisation. It has been an absolute privilege to lead Revenue Scotland for nine and a half years.
I am always mindful that it is Parliament to which we are accountable. Having these sessions enables us to come and share with you what we have been doing, and they also allow you to probe away to satisfy yourselves that we are the efficient organisation that we think we are. Thank you very much for your on-going interest.
Thank you. I will not say goodbye just yet, because you are about to take part in the next session. These are really important sessions and they are very interesting for the committee in seeing how Revenue Scotland is progressing.
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