 We have received apologies today for Alex Neil MSP and Anas Sarwar MSP. I welcome Angela Constance MSP and Dave Stewart MSP, who are attending in their places this morning. Item 1 is decision on taking business in private. Do you need to make a decision in private? If the Government has the interest to make a decision, what will it do to make it business in private. Does the member agree to take items 3, 4, 5 and 6 in private today? Yes. Thank you. Item 2 is administration of Scottish income tax 2017-18. I would like to welcome our witnesses this morning, Carline Gardner, Auditor General for Scotland, Mark Taylor, Audit Director, Audit Scotland, Sir Amius Morse, Comptroller and Auditor General, and John Thorpe, Executive Leader of the National Audit Office. I believe that the Auditor General would like to make a brief opening statement, followed by Sir Amius Morse. Thank you, convener. As you know, Scottish income tax is a major part of the new financial powers being devolved through the 2012 and 2016 Scotland Acts. Those powers are substantially changing Scotland's public finances. Today's reports relate to the auditing of Scottish income tax in 2017-18. That was the first year in which the full amount of non-savings, non-dividend tax collected by HMRC was payable to the Scottish Government. It was also when the outturn for the 2016-17 tax year was established, setting the baseline for all future income tax reconciliation adjustments under the fiscal framework. The amount of tax collected will have a direct impact on future Scottish budgets, and the operation of the fiscal framework is complex. HMRC will publish the final UK and Scottish income tax outturns for the 2017-18 tax year in its 2018-19 accounts, and those will be reconciled to the forecasts incorporated into the Scottish budget for 2017-18, with the associated adjustments incorporated into the 2020-21 budgets, so a lot of uncertainty for fiscal years still to come. The impact on the 2020-21 budget will not be known until the 2017-18 outturn is available. We already know that the number of Scottish taxpayers is lower than previously thought, but the impact of that on the budget is less certain. For example, lower than forecast tax revenues could be offset by similar reductions in the block grant adjustment. As more outturn data becomes available, it can better inform the budget process, the Scottish Government's financial management and the forecasting and reconciliation processes that are now central to the Scottish budget. Underlying all of that is the correct identification of Scottish taxpayers and the effective administration of Scottish income tax. Finally, considering those reports, it is important to be clear about the responsibilities of those involved. Firstly, HMRC collects and administers Scottish income tax as part of the UK's overall income tax system and is responsible for developing its systems to implement the Scottish Parliament's decisions on tax rates and bans. The Scottish Government funds this work and reimburses the costs of collecting and administering Scottish income tax. The Scottish Government also seeks assurances that the correct amount of tax is collected and properly accounted for. Secondly, for auditing, the National Audit Office audits HMRC's accounts and the Comptroller and Auditor General reports to the Scottish Parliament on that administration. I provide the committee with additional assurance on the NAO's audit work in line with a recommendation from this committee in 2014 and I also explain what the findings mean for the Scottish budget. This is the fourth year of that arrangement. In summary, my report says that I am satisfied that the NAO's audit approach was reasonable and covered the key audit risks. I am also satisfied that the findings and conclusions in the Comptroller and Auditor General's report are reasonably based. With that, I hand over to Saronius Morse. Thank you very much, Auditor General and Cominir. Thank you for inviting me. I will not go into the restatement of who I am because you have already had that covered off very well. I am required under section 80HA of the Scotland Act 1998, as amended by the Finance Act 2014 to report to both Scottish and UK Parliament on HMRC's administration and Scottish income tax on behalf of the Scottish Government. Specifically, the act requires me to report on the adequacy of any of HMRC's rules and procedures put in place, in consequence of the Scottish rate provisions for the purposes of ensuring the proper assessment and collection of income tax charged at rates determined under those provisions. I am also assessing and reporting on whether those rules and procedures are being complied with, the correctness of the sums brought to account by HMRC, which relate to income tax, which is attributable to the Scottish rate resolution, and the accuracy and fairness of the amounts that are reimbursed to HMRC as administrative expenses incurred as a result of the charging of income tax. This report for the 2017-18 year is on the first year that I can report on all aspects of administration of Scottish income tax, because HMRC published its calculation of the amounts brought to account for the 2016-17 year in July 2018. The key findings incorporating my conclusions are set out in paragraphs 12-17 of the report on pages 708. Having completed the audit of the outturned calculation, we are satisfied that HMRC have brought to account the income tax revenue attributable to Scotland. However, the report notes that there are still necessary areas of estimation in this figure because of the timing of some processes and the data available to HMRC. The committee will no doubt be aware of the on-going discussions around estimates of Scottish income tax. HMRC's estimate for 2017-18 used the same approach as previous years, and last year we discussed some of the uncertainty that this modelling creates. My report again highlights the specific limitations of the model used by HMRC for estimating Scottish income tax, and we are expecting HMRC to look at this in future years. Identifying Scottish taxpayers remains a continuing focus for our work with HMRC, and the report highlights how they have been tackling this on-going challenge. We will continue to return to this topic in future years, as it is essential to the correct allocation of tax to Scotland. The purpose of today will, hopefully, help to understand my report, but some of the issues raised within it will be for HMRC revenue and customs as the audited body to respond to. Of course, I am not here today. My team and I work closely with the Auditor General for Scotland and colleagues at Audit Scotland throughout our audit, and I am very grateful for your support and work in doing that. With that, I conclude my opening remarks and I should also say that, for most of the technical questions on the audit, I am going to turn to my colleague John Thawpe. I am going to ask Colin Beattie to open questioning for the committee. I would like to start by just asking clarification on a couple of points that have actually come up before in discussions around this table. In the past, there has been some concern about companies that have employees on both sides of the border and how efficient they are at identifying Scottish taxpayers. Previously, there was mention made of one or two companies that were struggling on that. Has this all been resolved? Is this now an accurate figure? There is continuing work to identify the correct addresses. HMRC's own work on address accuracy has found employers operating the incorrect code. In the report, 90,000 cases were identified where the incorrect codes were being operated, identified by HMRC. There is evidence that that is still an issue and there is still a response. I think that there will need to be a continuing response in that area. There is a lot. There could be a significant difference in the revenue. Yes, but that is corrected. That is identified and corrected through the year. There could be considerably more still. There could be. You never know whether you have identified everything, but the fact is that there is a process in place. There is quite a lot of validation of addresses that is now going on throughout the year and will continue to happen. We have tried to draw some of those procedures out in figure 10 of the report. The other thing that has come up in the past has been the question of workers in the oil industry. There seems to be a question as to where their tax fell north or south of the border. Has that been resolved? I cannot answer that one specifically. I do not know what the position is on that particular issue. We can take that away and have a look at that and talk the revenue about it. I am just coming now to the actual report. We say here that the share of the total tax that the UK estimated for Scotland is 7.13 per cent. Obviously, that is below our population proportion. The Auditor General mentioned that there are less taxpayers in Scotland than anticipated. Although we can find another 90,000 that might help the figures considerably. How satisfied are we, as to the reason behind that, that there are less taxpayers in Scotland? We have expressed reservations in the past, as we mentioned earlier, about the estimation process. The original estimate is based on a sample, rather than the exact information that is now recorded within HMRC systems, both in the pay-as-you-word and the self-assessment system, which is what is ultimately driving the out-turn figure and what we are auditing. Our point is that now that we have that data and there is a lot of validation around individual addresses and the residents of Scottish taxpayers, that would be possibly a better and more appropriate baseline for preparing an estimate. There are a number of things. I think that the Office for Budget Responsibility has identified some of the challenges in actually arriving at the estimate under the existing approach. To the question of the 90,000 taxpayers who were identified by HMRC as being Scottish taxpayers, it is good that they identified them. However, I think that the committee would be right to have an underlying concern that that shows you a moderately significant error rate by employers. I think it would be, if I can suggest to you, it is worthwhile keeping on that subject with HMRC and saying what we would really like to do is to see the error rate by employers. It is nice that you found it, but there must be, it is fair to assume there might be some leakage around the sides of that, what we would really like to see is that error rate coming down, in other words, that you work with employers to make sure that they are getting it right in the first place, not relying on you to correct it for them. I think that the committee would be entitled to take more assurance from that, and I think that that would be quite a good thing to push it to say to HMRC, well, are you doing a good enough job of briefing these employers or are you really working with them so that they get right first time? I think that you make a very good point. Continuing on this question of estimates and so on, which is obviously a big issue, I am looking at paragraph 1.27, which the bullet points there highlight a number of types of estimates that are being used. I am trying to understand the implications behind that and what kind of error could come into that sort of sampling. For example, the third bullet point says that the data used for PAYE includes all income types. That must be a huge distortion if there are non-savings and non-dividend income included in that figure in terms of dividing it up. This relates to the basis of the estimate being on the survey of personal incomes, which is just 1.5 per cent of the total population. That is done on a national basis for the whole of the UK. A number of assumptions have to be made is how you translate that into the Scottish environment. Those assumptions and the projection of that figure can potentially introduce error. There must be some projection as to what percentage error is built into that calculation. I cannot really comment on that. I know that the HMRC and the Office of Budget Responsibility prepare their own estimates for the UK, the Scottish Government and then take some of those data, use some of the same data sources but refine that for the Scottish environment. Indeed, I think that the Scottish Government's estimates are slightly more accurate in this area. I am just concerned because the amount of non-savings and non-dividend income in the UK is going to be fairly substantial across the whole of the UK. If that is coming into any sort of estimates that we are making, it is going to be distorted. I think that Jim Harrow, when he gave evidence to the finance committee last year, talked about some of those issues, particularly around the profile of taxpayers across the whole of the UK compared to Scotland and certain potential differences in higher earners, which could drive some inaccuracy. I am still trying to get my head around what sort of risk there is here in terms of error. For example, bullet point 1 talks about sampling. How do we get an accurate estimate? We are not obliged to audit the estimate. That is the responsibility of the OBR and HMRC. I do believe that those risks are ones that probably Audit Scotland has also looked at in the context of the fiscal framework. Does it come out what sort of percentage risk it is looking at in terms of that? If that was a reconciliation with the outturn, which we have audited with the original estimate, that exercise has not been done, but I think that that might be something that would be quite informative. It might be helpful to clarify that the section of the report that you have identified there, Mr Beattie, is about the estimation of Scottish tax receipts that play into the Scottish Fiscal Commission's estimates that play into the budget. Any errors there are reconciled later on, but that is an additional source of volatility and uncertainty for the budget. For example, we know that any shortfall against the estimates for the 2017-18 budget will not be reconciled until the 2021 budget, and current estimates are that that may be north of £100 million based on the information that is currently available, so it is not insignificant. That is why I made the recommendation in my report to the committee that, as more information becomes available, it will be important for HMRC to be refining their estimation methodology. Some of the information that is now needed was never needed or collected before. It is becoming available as we have more outturn data, and I think that the estimation methodologies need to be updated to take account of that, to minimise that volatility and uncertainty in the budget process, not because Scotland will not eventually be receiving the revenues that it is entitled to. Some of those estimates are making a built-in error when you are taking into account, and I will come back to dividend income and savings income. That is a built-in error. The Scottish Government and so on are basing its calculations on the figures that are outturned from that. To me, if there is a built-in error at the beginning, somebody has to know what the risk is in terms of how that will impact down the line. What we do know is that, when the 2016-17 baseline was established, there was a correction and Fiscal Commission had gone through commentary on that, which was in the order of £0.5 billion, and that was a correction to the expected tax take. That also corrects the baseline for the grant adjustment. Other things being equal, you would expect those two things to offset each other, but it reset where that baseline was. The estimate that we are talking about is done on the same basis as that, so that is a look forward to what HMRC thinks the outturn for 2017-18 will be. We do not know the implication that that correction and the estimate will be out of that order. The other bit of information that we have is referred to in paragraph 42 of the general's report, as if you compare the 2016-17 outturn on the Scottish rate of income tax basis with what was estimated the previous year based on the same methodology. That was about 5 per cent difference, which is, again, aligned with that figure for the correction. We have a sense that, using the survey methodology, you get numbers that are 5 per cent more broadly than using actual data that comes out from HMRC. The Fiscal Commission knows that now, the OBR knows that now, the Scottish Government knows that now, so that is getting factored into future forecasts and future budgets. In fact, current budgets have been factored into the 2019-20 budget. What this is about is when HMRC provides the estimate, how useful is that to have a sense of what the outturn and therefore what the reconciliation will finally be. Based on the current methodology, I think that we would recognise that it is not as useful as it might be, and what the Auditor General is saying is that it would be helpful to, now that we have the data in place for actual outturn that HMRC uses to change the way that it does its estimate, to make it more useful in a Scottish context to understand where it might be heading in future budgets. Willie Coffey I wonder if I could just come back to the identification of Scottish taxpayers, please, that Colin Beattie led on there. I understand from the work that I've been doing, or we've been doing in the Finance Committee, that HMRC incorrectly identified 45 Scottish MSPs as being Scottish taxpayers. That gave that committee and I'm sure that committee some concern that this problem is still there after a wee bit of time to have this system bedded in. I mean, what on earth is going on if HMRC can't identify Scottish members of parliament as being Scottish taxpayers? I'm sorry, I'm not familiar with that particular issue. We're looking across the entire response of what they're doing and the countermeasures that they're employing in terms of using third-party data. In terms of where those things don't identify, known cases, we can pursue that and take that up. By and large, there's quite a lot of effort looking at the whole 2.5 million of Scottish taxpayers that HMRC are doing. Can I just add a little bit, if I may? Thanks a lot. There's also a need for a bit of common sense about it, you know. In other words, it'd be nice to make sure that there's someone at HMRC whose job it was and you'd think there would be. Sometimes there aren't in large government departments, someone who's actually sitting looking at the Scottish results and saying, does this actually all stack up? I mean, are we going to look a bit pretty stupid if we put something out about Scottish MSPs and say they're not Scottish taxpayers? You know, come on. So, often in these big systems, what you need is someone with enough perspective to look at what's coming out and just ask questions that are common sense. I would press them on that. I think that's the bit that we just need to be sure. A lot of the big systems are definitely getting better and more accurate. I would say that you can see progress over the time as you'd expect, and you're entitled to expect, but what you do need to do is to, and I was looking over the press coverage of these various items and you do think some of these things were sort of, you think they were avoidable, really, wouldn't you, come on, from a sort of common sense point of view? I mean, there are only 129 Scottish MSPs in the ballot. I'm really not disagreeing with a one little bit about it. Fortified of them wrong, there's... I know, it's just not a common... There has not been a common sense review where somebody sat down and said, like, come on, these things you need to be sure you've got it right. You're really going to catch it in the neck if you get this wrong. You'd expect that, wouldn't you? And we will press on that. Yeah, we will make it correspond. In your assessment of whether they're doing it correctly and whether their approach is reasonable, was that part of your consideration? Yes, well, we've identified the identification of Scottish taxpayers is the key risk in this process, and once you have that S identifier within the system, then the system, by and large, should work well. If you don't get that appropriate flag, then it won't. It's just around the allocation. We know, we've reported for several years about the work that's been going on to try and get that base population identified, but you can't leave it at that. It's what sits around that, and the continual review and testing of that using, as I say, third-party data and other types of scans just to say where might you've got it wrong and then investigating those and making sure they're corrected. This can't be a failure by the employer to allocate the S code surely in this case. You know, we mentioned the 98,000 that are possibly in error, but because of the employer's failure to allocate the S code, surely that can't apply to the Parliament as an employer. No, well, I think we can take that away and find out precisely what happened there, and there may be some learning from that. Why don't we undertake to do that? We'll actually look into it and let you know what happened in that case. I think you're quite right to do that. You're absolutely spot on, and it's one of those things where if this is the best, you just need to try quite a bit harder to get these sort of things right. I'm not going to defend it. I mean, I think nobody's suggesting, Sir Amy, that our tax codes are any more important than anyone else's, but it doesn't give us much confidence. Mine was one of the ones that was messed up, and when you got a convener of public audit tax code messed up, it doesn't give much confidence to the Parliament or to the general public. Strangely enough, and I find myself in this position and I will say it, I agree with what you're saying, and I'm not taking a sort of defensive position about it. It probably doesn't quite reflect that actually things are getting better, progress is being made. It's just sort of like, as I said earlier, it's the common sense review that you make sure you get these things right. So in the back, it's not enough to get to make systemic progress. You need to have an alert eye looking over it, and they need to try harder at that, and that will be a message that we'll be taking back to them, I assure you. Liam Kerr. Thank you, convener. Good morning. I'd like to stick with a similar point. I mean, you've said, Sir Amy, that the identification of taxpayers is everything here. Just in January there were reports that around 30,000 Scottish residents were not correctly classified as Scottish taxpayers, and it turned out, in a response from HMRC, the reason was that these taxpayers had not ticked the relevant box to say that they were Scottish taxpayers. My reading of that is that they had apparently not ticked a box that would result in them paying higher tax. Should the identification in your view of Scottish taxpayers really be dependent on taxpayers ticking a box on an online self-assessment form? No. We are looking into that case. That happened after we produced this audit report, and it will be covered in our 18-19 report. That box existed in the previous year, but when it was ticked or not ticked, no action was taken at that time. The process changed, as I understand it, in 18-19, and it took action on that. Perhaps the more appropriate way to do it was to say that we have a variance here. Somebody is saying that they are or are not a Scottish taxpayer. We hold that information on them. If there is an inconsistency, that should be investigated before you make the change. My understanding is that the change took place and people were reclassified perhaps without that conversation or inquiry happening. How are addresses checked throughout the year? Is there any process in place to proactively look into addresses? Yes, there is. We talked about the use of third-party data and checking against our employers using the same information that HMRC is doing. All of it is making sure that information is continually aligned on that particular case. By and large, that is what we would expect to happen. If they are misaligned, you do not necessarily make a change until you understand which piece of information is correct. Has the employer got it right or has HMRC got it right? How do you do that reconciliation? In this case, there was a misunderstanding perhaps around what the self-assessment form was requiring and people weren't quite clear. They provided an indication that the HMRC just acted on a tick rather than perhaps making the inquiry. Finally, on that reclassification point, what is the process to alert taxpayers who are now living in or predominantly in England who were previously predominantly in Scotland? Are warnings part of the self-assessment process? I am now living predominantly in England, but previously I was predominantly in Scotland. Presumably, that has an impact on how you will classify me. I do not do the classification. HMRC does the classification. How HMRC will classify me. What is the process there, such that I am classified properly and such that I know that I am classified properly? I am not entirely familiar with what precisely the communications are with the taxpayer in that situation and what HMRC would do proactively in that situation. We could absolutely look at and see what is being done to be clear about that. At the moment, I think that the self-assessment episode identifies that there can be a misunderstanding here and people can make what they think is a fair declaration. It does not really understand how that is being used in that circumstance, but it seems to me that in that situation, there ought to be a reaction to that and, as I say, an inquiry and a conversation with the individual before action is taken. If someone has an address available to them, let's say in Dundee, Cardiff, Monaco, and maybe a tax adviser in Paris, what address goes on to their tax return? That's based on—I mean, I'm not going to—I mean, I could repeat to you the rules as determining where what should go on to their tax return, should go on to their tax return, is their predominant place of residence, as you know. So the question is, and if that doesn't happen, what examination is carried out by HMRC? That's your question. So that's really the question. If you pick one of those three, let's say, innocently, because that's where you may spend your time. How would HMRC look at that? Well, I suppose it depends on what—I mean, we've been speaking to HMRC about how they do risk in this particular case, and one of the things that we didn't have before we completed this report was the updated view of the strategic picture of risk, particularly as it related to Scotland and how they would respond to those particular types of risk, but there is normally it's a profiling of the taxpayer population, which clearly all cases, unless it can't be investigated, but they would identify those cases where the increased likelihood of error is or misrepresentation is and focus their resources in those areas. I'd expect them to profile high net worth individuals much more strongly than anyone else. That's their normal practice. I don't see why it would be any different in this case. So, when you say you would expect them to, you think they do— Well, we haven't seen the risk report, but I'm basing this on—having done a lot of studies of HMRC, normally they profile high net worth individuals more strongly than others, so I would expect if you've got an address in Monaco and everything, you've probably got quite a lot of money too, it's likely that they'll take quite a close interest in those sort of decisions and they certainly should. That process is sort of like a baseline compliance process that would happen, whether you lived in London or in Edinburgh, that would be the same for any member of the taxpaying public. Willie Coffey, do you want to ask about the framework? Thanks very much, convener. You may recall that there was some discussion about the audit and accountability framework that should be in operation and we've received a late paper yesterday last night about the revised arrangements for it. One of the concerns that the committee had was that, if this committee perhaps were to seek information from an equivalent body responsible and accountable to the UK Parliament, there seemed to be a series of steps to the Government's endowment and so on to the various departments and we were a bit concerned that that was a bit too much in terms of red tape. I think that it's been partly addressed in the paper that I've read, but I wonder if you could explain to me how that particular concern has been resolved, if even partially. I don't speak for the UK Government, by the way, so as I'm independent of the meeting now, but I have seen that latest paper. Let me try and say it like this. As I understand the arrangements, normally what would happen is if there was anything that the Auditor General of Scotland wanted to look at in a body that was performing work for Scotland in connection with the devolved function, the Auditor General of Scotland would say to me, would you do this piece of work for me, because I'm the person with the audit rights, I'm a statutory appointed auditor. That will be the normal arrangement, irrespective of all this toing and fraying of papers, that's the normal arrangement and normally I'd expect that that's how it would function. This correspondence has been about the remote contingency, which is for some reason the Auditor General of Scotland asked me to do a piece of work and for some reason I have a difficulty or disagree about whether I can do that piece of work at the particular time. Assuming that I couldn't work that out between myself and the Auditor General of Scotland, then I imagine under these arrangements that we would be, if either of us was being unreasonable about it, I'm sure that you the committee or the Public Accounts Commission would call us in and ask us what we were doing. That seems to me the way the arrangements would be likely to work based on that paper. I think that that's common sense. I think that trying to get into something that says, well, but what if, what if, what if, does I'm driven into arguing extremely unlikely circumstances, but when you actually start looking at them and saying, so what if, what if a body here, what if the Auditor General of Scotland is entitled to overrule my judgment, which I hope would never be contradictory to hers, and then come in and do a piece of audit work. Then I have to look at the fact that I've, because I'm the statutory auditor, I've got powers to examine subcontractors and all the other contracting work around it, which wouldn't go with step over rights. So, you know, it does create, it does have the potential to create mayhem if you go down such an extreme road. So, I'm very glad that what we're at now, albeit vaguer, I admit, is actually going to throw us back on good offices and being transparent. So, I'm in favour of that. And I think if any of us is behaving, you know, were to behave badly, and I'm afraid I'm retiring in a few months, so it won't be me probably, but if I, but if anyone were to behave badly, I'm quite sure that Parliament, looking bad and looking as if these arrangements don't work in front of Parliament, is going to be a pretty strong disincentive. So, I can tell you, and I'm quite sure I would speak for my successor as well, that there's a great interest in being seen to work really closely between the two, between ourselves and Audit Scotland, that I believe these somewhat broad arrangements enable us to do that, to use our absolute best efforts to do that. I've written to the committee, and I'm not sure if you've received that on the back of the framework that's been issued just in the last couple of days. I'm comfortable that many of the concerns that I'd raised with the committee previously have been addressed in this version. I think it's helpfully simpler and more principles-based than it was before and clarifies the roles and responsibilities of everyone involved. As the CNAG has said in practical terms, I think it's very likely that whoever the CNAG and the Auditor General for Scotland are, they will be able to agree appropriate ways of providing the assurance that this Parliament, or indeed the UK Parliament, needs. I have flagged with the committee that there is the potential risk because it relies on agreement between the two national auditors at a Scottish and UK level, that there is a risk that it may not be possible to fulfil the expectations of this committee or other committees of the Parliament as the new financial powers are fully devolved over the next couple of years. I think that it goes without saying that we both have a very strong interest and commitment to using the framework as well as we can to meet what Parliament needs. I think that it will be important just to keep under review how that works in practice as we reach the point where the Scottish Parliament is raising 50 per cent of what it spends in the context of much more uncertainty and volatility, and obviously a requirement for this Parliament to have very clear assurance that the sums being raised are the right amounts and are being accounted for properly. It's a step forward and I think it will need to be kept under review as the new powers are fully operational over the next couple of years. Just supposing this committee continued to be concerned or dissatisfied with HMRC's estimation of the number of Scottish taxpayers, can the committee reach out directly to HMRC and have it at the table at some future meeting of this committee without going through all the hoops and asking the Governments to agree? Can we do that now? The previous model suggested no ceramist that we have to go on and on. No, we are talking about audit examinations only, so you can perfectly well call and you can, and I think that you should, call HMRC to ask them about these sort of things and they'll come. That's different from what we're talking about, going into the organisation that you may or may not be familiar with, looking at all the books and records that you may or may not have ever done before and carrying out an examination. That's what all this discussion is about. It's not about having access to officials, which is a different question altogether. You've had HMRC officials before previously. I would recommend that you have—I think that this hearing would be improved by having HMRC officials sitting at the table here, which is what I really think. Instead of me criticising the manti, let's be honest, and I'd like to hear the mantis of that right there and then at the table. I think that we'd have a very valuable discussion for them as well as for you. I think that there are some salient questions that need to be raised to give everyone confidence this committee and beyond. Mr Coffey, are you— Thank you. Angela Constance. I have two quick questions. The first one is that the controller concluded in his report that the £4.8 million that the HMRC invoises the Scottish Government for the work that they do on behalf of Scotland, you concluded that that amount was fair and accurate. I wonder if you could speak in more detail about what led you to that conclusion and the processes that informed that. There is a process between the Scottish Government and the HMRC that identifies the tasks that need to be performed. Those are tasks that are absolutely additional to the normal management of the income tax system, so those costs are ordinarily borne by HMRC. It is actually specific additional work and additional procedures that would arise specifically out of the Scottish rate of income tax. In the past, those might have involved specific system changes to get the IT up to date. In the future, if there were any specific compliance activity agreed between HMRC and the Scottish Government, which were related specifically to Scottish income tax and the risks that were related to that, that is what would be covered. There is a process of estimation, management and review that the Scottish Government exercised over. We then review HMRC's records to make sure that those costs are properly allocated, attributed and extracted for that purpose. I am also interested in the relationship between the controller and the auditor general and the auditor general for Scotland. I wonder what progress you are making in terms of the review of your memorandum of understanding and whether you have established any timescales. I will start if Mark can add. The MOU was put in place about three years ago, with the expectation that it would be reviewed after three years. We think that it should, and not least because the environment has moved on. We have the framework agreement, but, more importantly, we have the experience of doing the audit and working together. We will be, in fact, today, after this meeting, getting together to review the lessons learned and actually start to recast that. If you look at the memorandum itself, there are numerous paragraphs, but there are probably just three or four at the end that relate to the conduct of the audit. Those are the ones that we will be really focusing on in terms of how we engage through planning, how we share information, Audit Scotland's access to our records and how they oversee the audit and the like, in terms of assessment of risk. There is quite a lot of engagement between us. We think that that can be reflected more effectively going forward. Just to add to what John says, and absolutely, after we finish here today, we will continue in those discussions. I think that the key point is that, when we get to the next year, the next audit year, the new memorandum that we aspire to have in place, and so the next year's audit will be governed by that memorandum when it is updated. Can I ask you about the strategic picture of risk? I think that HMRC was supposed to publish its most recent strategic picture of risk and has not done so yet. Do we know when it is likely to be published? It is not published, it is not shared publicly because it is quite a sensitive document, but it is actually shared with the Scottish Government so they have access to it. I do believe that that has now happened and we will be looking at that in the next audit round. Do you know what caused the delay? I am afraid that I do not. We did expect the document to be available at the time that we did this current audit and it was not. Can I ask what impact not having it had on the report before us today, on preparing that report, Auditor General? I think that is the question to the general. Sorry, I mean it initially. Part of this report is historical. It is looking at the extraction of data and information in a particular environment, but going forward, the strategic picture of risk becomes very important because as divergence starts to bite and understanding specifically how risk is assessed in that environment and what that means for compliance is going to be very important. I do think that in future reports, as we start to look at what has happened in 18, 19 and what is planned for beyond that, that will be very significant. Your understanding is that the Scottish Government has that and perhaps we could see that from the Scottish Government. Just to say, I do not think that you need to feel that it undermines your confidence in the report, but some of the discussions that we were having would have been better had in light of that risk report. It is true. In other words, I was pointing the way ahead, as John has said, as to how we can get better and better at running this system and identifying Scottish taxpayers more and more efficiently. That should be led by, the risk report should really lead that discussion. It is that piece of it that I think would be improved by having current risk reports. I think that it will be a better discussion next year because of that. That is something that we can explore with the HMRC if the committee decides to have them in for evidence. That is very helpful. Do members have any further questions for our witnesses this morning? I thank you very much indeed for your time and evidence this morning. I now close the public part of this meeting.