Mr. Flight: As the Bill more than removes the major fiscal incentive given to small business incorporation, I see that there is an argument basically that the notice period should be the same for the self-employed as for businesses. I trust that the Revenue's guidelines will be to act in a reasonably mature and helpful manner and not to start whopping people with fines in an aggressive fashion. I also make the point that there could be a nice little earner in the measure, notwithstanding that. It is debatable. I can see the symmetry with the self-employed and I do not think that we want to raise the issue as a major point. I trust that the Revenue's guidelines will be to act in a reasonable fashion, and I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Mr. Flight: I beg to move amendment No. 111, in
Column Number: 191
This follows from what I have talked about in relation to amendment No. 110. It is more practical and removes the existing obligation to notify chargeability to corporation tax where notice has already been given for the same accounting period.
John Healey: What is at issue is the interaction between two separate and distinct obligations: first, the obligation under schedule 18 to the Finance Act 1998 to notify chargeability to tax as an annual obligation, which applies only if the company has not received a notice requiring a company tax return, and secondly, the obligation introduced by the new clause, which is not annual and is triggered only when a company first comes within the charge to corporation tax or comes back into charge after dormancy.
There are important differences between the separate requirements to notify. One applies only in the first year of starting a business; the other is an annual and recurring obligation. One does not depend on any liability to corporation tax; the other depends on such a liability. In one case, it is important to get things right from the start for both companies and the Inland Revenue; in the other, it only applies where there has been a failure by a company.
The amendment would switch off the failure to notify chargeability obligation for the first accounting period of a company starting in business where the clause 55 obligation has already been satisfied. The amendment adds little of value and our concern is that it could prove to be counter-productive. Switching off paragraph 2 would, in a small but possibly significant number of cases, reward non-compliance. It would pay companies deliberately to drop off the radar, as it were, when notifying under clause 55; only when the Revenue catches up with the company would it have to pay tax and interest, but it would not receive a penalty for an attempt deliberately to evade.
In practice, a compliant company that gave notice within three months of first coming within the charge to corporation tax, or within three months of coming back into charge following a period of dormancy, would also have notified its chargeability to tax for that accounting period, as required under schedule 18. There is no need to provide for that explicitly in the clause. I therefore ask the hon. Gentleman to consider withdrawing the amendment.
Mr. Flight: I do not want to be a pedantperhaps the amendment could be improvedbut the intent is rather the other way round. During the first year, companies giving three months' notice under the clause should not have to repeat the obligation of notice under schedule 18. As the Minister pointed out, it would be relevant only during that first year; but they would have to continue complying with the requirements of schedule 18. It seems that bureaucracy should be aimed at removing double reporting of the same information.
Column Number: 192I repeat that we may have got it drafted the wrong way round, but it seems that the new arrangements for that first year should give the Revenue all it needs, albeit for different purposes, and schedule 18 should come afterwards. Would the Minister comment on that?
John Healey: I believe that I have dealt with the points made by the hon. Gentleman. The two obligations have slightly different purposes. We believe that the existing obligation under schedule 18 is fine for the purpose for which it was designed, but the obligation under clause 55 serves a different purpose, which would be undermined by the amendment. I shall therefore encourage my hon. Friends to vote against it should the hon. Gentleman choose to press it.
Mr. Flight: I hope that the Revenue can sort it out. It is clearly silly to have to give the same information in year one under two different parts of the law; it is the same information. That is what the amendment is about. It is not a huge point and it is not worth voting on, but it is the other way round from what the Minister argued. I have made my point. Perhaps the Revenue can get its act in order, so that companies will receive one request that meets both schedule 18 and the new requirements. Otherwise, it will be a classic example of the bureaucratic incompetence that is sweeping our society that people will have to send the same information twice under separate provisions. I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Question proposed, That the clause stand part of the Bill.
Rob Marris (Wolverhampton, South-West) (Lab): I seek your guidance, Mr. McWilliam. Clause 55 has provision for prescribed regulations. A draft of those regulations has been circulated. Is it in order for me to make brief comments on those draft regulations?
The Chairman: It is in order.
Rob Marris: Following the point made by the hon. Member for Arundel and South Downs, paragraph 2(3) of the draft statutory instrument seems to require a company to provide information that would already have been supplied to Companies House on the incorporation of the company. It seems to be a duplication. Can the Minister explain whether it is for data protection reasons that Companies House is not allowed to pass even such basic information across to the Inland Revenue?
John Healey: If my hon. Friend will allow me, I shall look into the point and write to him. In general, the purpose of circulating regulations in draft is to give Committee membersand others, as the consultation is much widerthe chance to pick up and query any points in just that fashion.
Question put and agreed to.
Clause 55 ordered to stand part of the Bill.
Column Number: 193Clause 56
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