Tax Credits Bill

[back to previous text]

Mr. Boateng: I am grateful for the way in which the hon. Gentleman spoke to the amendment. I assure him

Column Number: 201

that we will bear in mind the way in which the Revenue relates compliance and burden to employers. We will expect employers to act reasonably and they will face a penalty if they do not. However, I take the point that we should ensure that compliance is not unduly burdensome.

There is no question that the situation is different for people who are not in the business of engaging in fraud or a concerted action by deceit to obtain money. If a person makes an application and chooses to withdraw it in the ordinary circumstances of the case, there would be no question of imposing a penalty. I give the Committee that assurance.

Penalties may arise in a case such as this. If an application is made and the informal approach, which will always be made, is rebuffed, the application would be persisted with and a formal request made under formal powers. If there were still resistance, it is important that the Revenue should be able to invoke powers to require information to be provided within a set deadline. A penalty should be imposed for failure to do that.

There are safeguards against the indiscriminate application of penalty provisions. Penalties cannot be applied if there is a reasonable excuse for failing to provide information. If an application were made in an ordinary way but it were not pursued—that would be the end of the matter—that would appear to be a reasonable excuse. The initial penalty under the provisions is not at the Revenue's discretion because only the commissioners may impose it.

After hearing those reassurances, I hope that the hon. Member for Northavon will not press the amendment to a vote.

Mr. Webb: We want to remove clause 14(2) from the scope of clause 30. Clause 14(2) relates to situations in which no public money is paid. It is a preliminary stage. The clause states:

    ''the Board must decide . . . whether to make an award . . . and . . . if so'',

how much that should be. However, before the board decides, it asks for information. If the person who makes the claim fails to provide that information and the claim does not proceed with any public money payable, I cannot think of circumstances in which we would want clause 30 to apply to clause 14(2). No public money would be handed over unless information were supplied. If it is not handed over, why do we want to penalise people for not supplying the information?

I am grateful for the Minister's reassurance that only the commissioners will impose the penalty. On the assumption that they would not want to use the power, although it is in the Bill, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 30 ordered to stand part of the Bill.

Column Number: 202

Clause 31

Failure by employers to make correct payments

Mr. Clappison: I beg to move amendment No. 21, in page 21, line 17, after 'fails', insert 'without reasonable excuse'

The Chairman: With this it will be convenient to take the following amendments: No. 38, in page 21, line 22, leave out subsection (2).

No. 39, in page 21, line 22, after 'employer', insert 'without reasonable excuse'.

Mr. Clappison: The clause provides that a penalty of up to £3,000 can be imposed on an employer who fails to make correct payments. Is there not a case for at least giving employers a let-out from liability under the clause when they have a reasonable excuse for the omissions? The opportunity to put forward a reasonable excuse is available under the preceding clause in the case of, for example, an applicant who fails to supply the correct information. However, the same opportunity is not given to an employer. In fairness, is there not a case for doing so? It would certainly be welcomed, especially by small and medium-sized enterprises. We have debated under previous clauses the burdens that the provisions would impose on such businesses.

Clause 31(2) seems to be a stiffening-up of the equivalent provision under the Tax Credits Act 1999, which would appear to be section 9(7). It provides that an employer is liable for a penalty if he

    ''fraudulently or negligently makes or receives incorrect payments''.

The requirement for the employer's failure to be established as fraudulent or negligent is removed and the employer faces what the Minister will recognise as a regime of strict liability, which is a stiffening-up as far as employers are concerned. Why is that stiffening-up being proposed at a time when concern is being widely expressed about the increasing burdens on employers?

Mr. Boateng: Uncharacteristically unfairly, I portrayed the hon. Gentleman in an earlier debate as living a life of perpetual unease. In this regard, however, his lack of ease is entirely justified. He has put his finger on an error on our part. It is only right that I should own up to that—it's a fair cop, guv, you caught me bang to rights. The hon. Gentleman will be gratified to hear that he has put his finger on an omission. It was not our intention that penalties should be imposed on the basis of strict liability. We shall table an amendment in due course to make that absolutely clear. It would be wrong to penalise an employer for a course of action when the mistake was entirely innocent.

I must disappoint the hon. Gentleman on his first point, however. Our view is that there can be no reasonable excuse for refusing or repeatedly failing to pay tax credits to an eligible employee. We are not persuaded of the strength of the hon. Gentleman's amendment and I hope that, on reflection, he will feel able to withdraw it.

Mr. Clappison: What can I say? I am grateful to the Minister for that response. If I did feel unease in

Column Number: 203

relation to amendment No. 38, it has been removed. On the basis of the Minister's generous remarks, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 31 ordered to stand part of the Bill.

Clause 32


Mr. Webb: I beg to move amendment No. 117, in page 21, line 30, leave out 'has effect' and insert—

    'shall take effect on the laying by the Board before both Houses of Parliament of a statement explaining—

    (a) how it will balance the need to encourage persons entitled to claim a tax credit to do so with the need to control abuse so far as is reasonably practicable,

    (b) its criteria for deciding whether a claimant has been fraudulent or negligent, the manner in which it will exercise its discretion in cases of minor error, and its prosecution policy in relation to claims for a tax credit, and

    (c) the relationship between these criteria and those relating to income tax and national insurance contributions,

    following consultation on a draft of that statement.'.

I am being prompted by hon. Members on both sides of the Committee that a football match is due to start imminently, but I will not allow that to inhibit me from giving the exhaustive analysis of schedule 2 that I had planned.

We have been here before. The board has wide powers to impose penalties under schedule 2 as conferred by clause 32. We sought before to have guidance notes published and we should like the board to set out its approach to the imposition of penalties—the definition of negligence and so on—so that claimants know where they stand.

I will give an example of a grey area. Clause 29, which deals with one set of penalties, explicitly states that if one member of a couple did not know what the other was up to, he or she is not deemed culpable for that. However, that exemption is not explicit in clause 30. Someone is let off the penalties for incorrect statements if they did not know what their partner was up to, but it is not clear whether that applies to the penalties for not complying with requirements.

Column Number: 204

We seek a consistent statement, in the code of practice produced by the board if not in the Bill, that explains how the board will approach those issues. The penalties are quite serious, especially for the client group under discussion, and people might reasonably expect such a statement to be put in place before the penalty regime is imposed.

Mr. Boateng: I hear the hon. Gentleman's argument, but I regret that I am unable to satisfy him on the amendment except to say that the thrust of his arguments will be taken on board. It is important to remember that the proper place to reflect that is not in the Bill, where the requirement is unnecessary, but in the code of practice on compliance. It will be made available in draft for comment, and the hon. Gentleman will have his opportunity to make an impact on the collective consciousness of the Revenue then. With that satisfying prospect in sight, I hope that he will withdraw the amendment.

Mr. Webb: As I said before, my reservation about that strategy and that response from the Minister is that, after my initial profound impact on the consciousness of the Revenue, any subsequent changes that it decides to make without the benefit of my benign impact will be unbeknown to me and to members of the Committee. There is an issue about scrutiny.

On a slightly more serious note, we are talking about quite serious penalties for quite poor people and there are grey areas about neglect and so on. I am concerned that the level of scrutiny will not be all that it might be, but I am grateful that we have had further clarification at least on the draft code of practice for the Revenue. That goes some way to addressing our concerns and we look forward to seeing the draft. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 32 ordered to stand part of the Bill.

Further consideration adjourned.—[Mr. Sutcliffe.]

Adjourned accordingly at one minute to Seven o'clock till Thursday 24 January at half-past Nine o'clock.

The following Members attended the Committee:
Beard, Mr. Nigel (Chairman)
Boateng, Mr.
Buck, Ms
Casale, Roger
Clappison, Mr.
Cruddas, Jon
Flight, Mr.
Hoban, Mr.
Luff, Mr.
Mole, Mr.
Pond, Mr.
Primarolo, Dawn
Sheridan, Jim
Southworth, Helen
Sutcliffe, Mr.
Swire, Mr.
Webb, Mr.
Wright, Mr. Anthony D.
Younger-Ross, Richard

Previous Contents

House of Commons home page Parliament home page House of Lords home page search page enquiries ordering index

©Parliamentary copyright 2002
Prepared 22 January 2002