Duty of person dealing with promoter outside United Kingdom
Amendment made: No. 561, in
clause 293, page 242, line 34, leave out 'in the prescribed manner'.—[Dawn Primarolo.]
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Clause 293, as amended, ordered to stand part of the Bill.
Duty of parties to notifiable arrangements not involving promoter
Amendment made: No. 562, in
clause 294, page 243, line 1, leave out 'in the prescribed manner'.—[Dawn Primarolo.]
Question proposed, That the clause, as amended, stand part of the Bill.
Mr. Flight: The provisions, as described, should be targeted at least initially at marketed schemes that are being promoted. The clause imposes an obligation on a taxpayer who enters into arrangements without the involvement of outside advisers. Such an obligation should be limited to his final ordinary, self-assessment requirements, and the clause illustrates the fundamental point that I have been trying to make throughout, namely that the requirements have moved well wide of the reporting of unacceptable schemes.
Rob Marris: I am surprised at the hon. Gentleman's remarks, because the second word in the clause is ''person'', and that can apply to a company. A company may have in-house advice and no external promoter, but with in-house advice it may be setting up a tax-avoidance scheme that could and should be notifiable. The clause would cover that, and the clauses relating to promoters that we discussed earlier would not.
Mr. Flight: I accept that ''person'' could mean a company. However, I was seeking to make a point about a person as an individual, and not about in-house arrangements.
Question put and agreed to.
Clause 294, as amended, ordered to stand part of the Bill.
Arrangements to be given reference number
Amendment made: No. 563, in
Clause 295, as amended, ordered to stand part of the Bill.
Duty of promoter to notify client of number
Amendment made: No. 564, in
clause 296, page 243, line 16, leave out 'in the prescribed form'.—[Dawn Primarolo.]
Clause 296, as amended, ordered to stand part of the Bill.
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Duty of parties to notifiable arrangements to notify Board of number, etc.
Amendments made: No. 565, in
No. 566, in
No. 567, in
clause 297, page 243, line 40, at beginning insert 'in prescribed cases'.
No. 568, in
Clause 297, as amended, ordered to stand part of the Bill.
Legal professional privilege
Mr. Flight: I beg to move amendment No. 369, in
We have already focused on the definition of promoter, which has caused difficulties, in clause 291. The Inland Revenue is clear that the definition is worded in such a way as to catch all concerned—accounting firms, legal firms, counsel, banks other than in the course of their normal lending business, and, to a limited extent, in-house tax teams. However, it is not as clear as it might be. We have already touched on the Government amendments that would make it clear that banks are involved. More importantly, there is considerable argument about the extent to which lawyers, within law firms and the Bar, are caught by the provisions. Some contend that legal professional privilege means that they do not have to comply with the provisions; I understand that the Inland Revenue contends that clause 298 is sufficient to ensure that lawyers can comply, in that, fundamentally, there is no requirement to disclose the names of clients.
However, I understand that some members of the Bar feel that Bar Council rules will prevent their compliance. If lawyers are to any extent exempt from these rules, the system will not apply as the Government want, for obvious reasons. The amendment would put the issue beyond doubt.
Mr. Burnett: I have already disclosed that I am a lawyer, although I do not practise. To be even-handed, I should allude to points made by the Institute of Chartered Accountants. It would like the Inland Revenue to clarify some things. I would be grateful if the Minister would clarify her interpretation of the interaction between legal professional privilege and the duty to make a return under clause 298.
Another important thrust among the ICA's submissions is its anxiety to know whether the clause
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might create a competitive advantage for those covered by legal professional privilege, compared with those who do not enjoy such a privilege. I look forward to hearing the Minister's response to those two points.
Rob Marris: On the comments made by the hon. Members for Arundel and South Downs and for Torridge and West Devon, I think that it would help if the Minister gave some examples. As a member of the Law Society, albeit non-practising, because I do not believe in moonlighting, I have the society's brief on the Bill, which does not suggest any amendment whatever to the clause.
Dawn Primarolo: The amendment would define the operation of legal professional privilege in relation to the disclosure rules. Not only would that not work, but it is inappropriate to attempt to define the scope of legal professional privilege for the purposes of the disclosure rules in that way. Whether particular items are subject to legal professional privilege is ultimately a matter for the courts. As the material provided by the promoter will be anonymised, we do not think that any question of legal professional privilege will normally arise, even if a lawyer makes the disclosure.
I should remind the Committee, however, that the law on legal professional privilege is in a state of flux, following a decision by the Court of Appeal in the case of Three Rivers Council v. Bank of England (No. 10). I understand that there will be an appeal against the decision, which may lead to a revision in the law on such matters. The clause as drafted makes it explicit that no disclosure of privileged information will be required under that measure. That is probably why we have not heard from the Law Society—the provisions are pretty clear.
The Chairman: Order. Let me give the Committee my general caution about entering into areas of sub judice. We can get into a lot of trouble if we are not careful.
Dawn Primarolo: Indeed, Mr. McWilliam—those are my final comments on that matter.
The clause explicitly provides that the disclosure rules do not override legal professional privilege, but that does not prevent compliance with the disclosure rules. There is no requirement to disclose details of clients or to provide copies of documents or planning advice. We have taken note of what happens elsewhere. The hon. Member for Arundel and South Downs asked earlier whether we had taken note of what happens in the US. That case, among others, is a classic example of where we have done so.
To approach the matter from a different direction, the interesting question is whether the exclusion of legal professional privilege distorts competition. In whichever way the Government seem to be going, someone has a criticism in aid of maintaining the status quo. The argument is that the provisions would somehow give lawyers a competitive advantage. Perish the thought, Mr. McWilliam.
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The Chairman: Order. The Minister is no danger of insulting me—I am a humble engineer.
Dawn Primarolo: Perish the thought that the Government would wish to enter the debate about the balance of competition between accountants and solicitors. The rules apply equally to all persons involved in marketing, or advising on or assisting in the implementation of disclosable schemes. Far from being anti-competitive—we would not dream of that—the rules help to redress the balance in favour of those businesses that suffer an unfair competitive disadvantage owing to the exploitation of avoidance schemes. That point goes to very heart of the clause.
I hope that hon. Members are reassured. I am certainly reassured, because I am sure that I would have heard from the Law Society if I had inadvertently entered the field of legal professional privilege. It is never shy about putting its view forward, and that is always much welcomed.
I hope that I have reassured the hon. Gentleman not only that the amendment is not necessary, but that the ground is clearly laid out.
Mr. Flight: May I suggest that the Paymaster General's comments about the Law Society and lawyers would be relevant if the matter were to their disadvantage? However, as the measure may or may not be to their advantage, it is fairly unlikely that they would have raised the issue.
By comparison, as my hon. Friend the Member for Torridge and West Devon pointed out, the accountants all seem to be hot under the collar, thinking that the lawyers may have a competitive advantage over them. I am glad to hear the Paymaster General confirm that they do not.
There is probably an issue about the advice of the Bar Council. I do not know precisely what that advice is, and if the Minister has it, that could resolve the issue. However, the point has essentially been answered: the Government will not achieve their objectives if any aspect of privilege, Bar Council rules or anything else would prevent a barrister from providing the information that he is supposed to provide.