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|Commissioners For Revenue And Customs Bill|
These notes refer to the Commissioners for Revenue and Customs Bill as introduced in the House of Commons on 24 November 2004 [Bill 3]
COMMISSIONERS FOR REVENUE AND CUSTOMS BILL
1. These explanatory notes relate to the Commissioners for Revenue and Customs Bill as introduced in the House of Commons on 24 November 2004. They have been prepared by HM Treasury in order to assist the reader of the Bill and to help inform debate on it. They do not form part of the Bill and have not been endorsed by Parliament.
2. The notes need to be read in conjunction with the Bill. They are not, and are not meant to be, a comprehensive description of the Bill. So where a clause or part of a clause does not seem to require any explanation or comment, none is given.
3. In July 2003 the Chancellor of the Exchequer announced a major review of the organisations dealing with tax policy and administration: 1 HM Customs and Excise, the Inland Revenue, and HM Treasury. Gus O'Donnell, Permanent Secretary to the Treasury, was responsible for leading the review. He published his report 2 alongside the March 2004 Budget, and the Chancellor announced that he accepted its recommendations. This Bill implements the main recommendation - to create a new department integrating the Inland Revenue and HM Customs and Excise. The new department is called "Her Majesty's Revenue and Customs" (HMRC) 3.
1 Treasury Press Notice, 2 July 2003, available at www.hm-treasury.gov.uk
2 Financing Britain's Future. Review of the Revenue Departments by Gus O'Donnell, March 2004
3 Treasury Press Notice, 13 May 2004, available at www.hm-treasury.gov.uk
4. The Customs and Excise Prosecutions Office was created in April 2003 and has operated under the terms of a Memorandum of Understanding agreed between the Attorney General, Treasury Ministers and the Commissioners of Customs and Excise. Following specific recommendations made in the Hon. Mr Justice
[Bill 3EN] 53/4
Butterfield's Review 4, and accepted by Ministers in December 2003, the Bill puts the prosecutions office on a statutory footing, and provides for it to undertake all the new department's prosecutions in England and Wales (i.e. including those formerly carried out by the Inland Revenue). The new prosecutions office is to be called "the Revenue and Customs Prosecutions Office (RCPO) 5.
4 The Review of Criminal Prosecutions Conducted by HM Customs and Excise (15 July 2003)
5 Attorney General's written statement 12 October 2004 Column WS9.
OVERVIEW OF THE BILL
5. The Bill establishes HMRC and RCPO. It includes provisions for the effective governance and operation of the new organisations. The following overview paragraphs summarise the purpose of the clauses, with the detail of how each clause achieves this set out in the commentary section.
HM Revenue and Customs general (clauses 1 to 3, 8, 10 to 13)
6. The new department, like its predecessor departments, will be a non-ministerial government department. The Queen will appoint Commissioners for Her Majesty's Revenue and Customs who will exercise statutory functions on behalf of the Crown. They will be able to appoint officers of Revenue and Customs, who will work under their directions. Officers, subject to and acting under the direction of the Commissioners, will also be able to exercise any of the Commissioners' functions, apart from the making of statutory instruments and approving the making of applications for search warrants relating to former Inland Revenue functions.
7. The Bill provides that, in the exercise of their functions, Commissioners will comply with directions of a general nature given to them by the Treasury. It provides the legislative structure within which the Commissioners have the operational discretion to organise in the most appropriate way, and to make changes over time as necessary. With the agreement of at least half the Commissioners, they may decide on arrangements for the conduct of proceedings and of their committees, including matters such as quorum and delegations.
Functions and powers (clauses 4 to 6 and 15 and Schedules 1 and 2, Part 1)
8. The Commissioners will be responsible for all the functions (bar prosecutions as a result of clause 31), which were previously the responsibility of the Commissioners of Inland Revenue and the Commissioners of Customs and Excise. Officers will be able to exercise all of the functions of Inland Revenue and Customs and Excise officers, unless stated otherwise.
9. The Bill identifies all of the functions previously carried out by the Inland Revenue (see Schedule 1). It provides that powers previously available to the Commissioners of Customs and Excise and their officers may not be used for these former Inland Revenue functions, while powers previously available to the Commissioners of Inland Revenue and their officers may only be used for these functions. This is to prevent any inadvertent widening of powers in the new department.
Power to transfer functions (clause 7) and Agency functions (clause 14)
10. Clause 7 enables HMRC functions (other than revenue 6 or tax credit functions) to be transferred out of HMRC to a ministerial department, and any functions to be transferred into HMRC from such departments by Order in Council (rather than primary legislation). This is achieved by amending the Ministers of Crown Act 1975. Equivalent provisions apply to the Scotland Act 1998 and the Government of Wales Act 1998. And the Bill also allows HMRC to enter into 'agency' arrangements with Scotland and Northern Ireland, where a function may be exercised on behalf of HMRC by a Scottish Minister or Northern Ireland Department, or HMRC may exercise a function on behalf of the Scottish Minister or Northern Ireland Department.
6 Revenue is defined as taxes, duties and national insurance contributions
Valuation Office (clause 9)
11. The Bill puts on a statutory footing functions currently undertaken by officers of the Inland Revenue through the Valuation Office Agency in respect of the valuation of property.
Use of information (clause 16 and Schedule 2, part 2)
12. These enable information acquired by HMRC in connection with a function to be used for any of its other functions. Prior to the integration information could be passed between the Inland Revenue and Customs and Excise through statutory gateways. This clause will enable the department to pool all its information, irrespective of the purpose for which it was originally obtained. The use of such information within the organisation is subject to any prohibition imposed by other enactments, including by the Data Protection Act 1998 and the Human Rights Acts 1998. Management controls ensure that the use of the information will be appropriate and proportionate.
13. The Bill also provides for HMRC to have the same statutory gateways for information to be passed to other government departments as Inland Revenue or Customs and Excise had.
Confidentiality and wrongful and public interest disclosure (clauses 17 to 19)
14. Clause 17 sets out the statutory duty of officers, Commissioners (and others acting on their behalf, and their committees) not to disclose information held by HMRC unless authorised to do so - and sets out the circumstances where disclosure may be allowed. It replaces the former Inland Revenue statutory declaration which required officers and Commissioners to declare that they would not disclose information acquired in the course of their duties.
15. Clause 18 makes unauthorised disclosure of information relating to an identifiable person a criminal offence carrying a maximum penalty of imprisonment for up to 2 years and an unlimited fine. This widens the current criminal offence of unauthorised disclosure of information held in relation to tax and other functions, which currently does not cover information obtained in the course of Customs' non-revenue functions.
16. Clause 19 introduces a provision enabling the Commissioners to instruct officers to disclose confidential information where it is in the public interest to do so. Regulations (made by the Treasury) will set out the conditions and circumstances under which such disclosures may be made. This replaces current arrangements allowing the Commissioners of Inland Revenue and the Commissioners of Customs and Excise to authorise disclosure.
Proceedings (clauses 20 to 22)
17. These clauses make provision for the effective working of the new department and replace provisions which currently apply in a different way to the Inland Revenue and Customs and Excise:
Inspection and complaints (clauses 23 to 25)
18. The Bill provides (in England and Wales) for Her Majesty's Inspectors of Constabulary (HMIC) to scrutinise how HMRC ensures compliance with the laws, rules and procedures of the criminal justice system. It also provides for the Independent Police Complaints Commission (IPCC)'s remit to be expanded to include investigations into complaints made about HMRC officers when conducting criminal investigations; and alleged criminal conduct or gross misconduct by an HMRC officer. Equivalent arrangements will be brought forward for HMIC (Scotland); the procedure for investigating complaints in Scotland does not require legislation. Provisions in respect of Northern Ireland will be brought forward in due course.
19. The Bill provides that, in relation to information obtained in the course of their HMRC functions, HMIC and IPCC should be bound by a duty of confidentiality, and unauthorised disclosure should be an offence carrying a maximum penalty of 2 years imprisonment and an unlimited fine.
20. The Bill provides regulation-making powers, with the detail of the inspection and complaints provisions to be in regulations.
Offences (clauses 26 to 29)
21. The Bill consolidates existing criminal offence provisions relating to the Inland Revenue and HM Customs & Excise, to create a single framework for these offences within HMRC. In addition to consolidating these offence provisions, the Bill brings their penalties into line with the equivalent Police offences. The offences are assaulting, obstructing or impersonating an officer of Revenue and Customs. Clause 29 provides HMRC officers, where authorised by Commissioners, with the power of arrest for these offences.
22. The Bill also repeals the existing offence of bribery and collusion in respect of Customs and Excise matters, without replacement. Matters of corruption will be covered within HMRC by the Prevention of Corruption Act 1906 and the common law offence of misconduct in public office.
Revenue and Customs Prosecutions Office (clauses 30 to 37, 44 and Schedule 3)
23. These clauses put the new independent prosecutions office (RCPO) on a statutory footing. A Director, appointed by the Attorney General, will head the Office and he will employ all RCPO staff. The remit of the Office will be to provide legal advice and institute and conduct criminal prosecutions (and related proceedings such as the restraint and confiscation of assets) in England and Wales where there has been an investigation by HMRC. It will do so in accordance with the Code for Crown Prosecutors and will publish an Annual Report detailing the exercise of the Director's functions during the previous financial year. The Director will exercise his functions under the superintendence of the Attorney General.
24. Clause 36 sets out that RCPO may not disclose information relating to an identifiable person except in specified circumstances. It provides that unauthorised disclosure is an offence carrying a maximum penalty of two years' imprisonment and an unlimited fine.
25. The Office will also be the subject of external inspections by HM Crown Prosecution Service Inspectorate. The Bill (clause 44) also makes provision for the Treasury to identify Customs and Excise and Inland Revenue property, rights and liabilities which should transfer to RCPO, and not to HMRC.
Money (clauses 38 to 42)
26. HMRC is to be funded by monies voted by Parliament. The Commissioners will pay all money received on account of taxes, duties etc. into the Consolidated Fund, other than money that is required by law to be otherwise accounted for e.g. National Insurance Contributions, Student Loan repayments and National Minimum Wage fines. They may deduct disbursements from payments into the Fund, in particular for tax credits and tax (mainly VAT) repayments. Where it is likely that the amount of such disbursement and other contributions will exceed HMRC's receipts the Treasury may make payments to the Commissioners out of the Consolidated Fund, such payments being subject to oversight by the Comptroller and Auditor General. The Commissioners must send daily accounts of the monies they receive, and the disposal of those monies, to the Comptroller and Auditor General.
Transfer of property etc; transitional arrangements and consequential amendments and repeals. (Clauses 43, 45, 47, 49 and 50; Schedules 4 and 5)
27. The Bill makes provision for the effective transfer of Customs and Excise and Inland Revenue property, rights and liabilities etc. to HMRC. Transitional provisions ensure that all the authorisations, decisions, and actions that were valid within the two predecessor departments continue in the new department. Consequential amendments are made to other enactments, and clause 45(4) also provides for further consequential amendments to be made through Treasury regulations. Obsolete provisions are repealed.
Commencement (Clause 48)
28. The Bill will come into force by Commencement Order. It is intended that this should be shortly after Royal Assent.
COMMENTARY ON CLAUSES
Clause 1: The Commissioners
29. This clause establishes a body of Commissioners to be known as the Commissioners for Her Majesty's Revenue and Customs (or as Comisynwyr Cyllid a Thollau Ei Mawrhydi in Welsh). The clause sets out the Commissioners' status and tenure.
30. Subsection 1(1) provides for the Crown to appoint Commissioners to hold office in accordance with the terms of their appointment in the Letters Patent. Such Letters Patent for the Commissioners of the predecessor departments traditionally designated one Commissioner as chairman. It is intended to continue that practice.
31. Subsections (4) and (5) provide that the Commissioners act on behalf of the Crown and are civil servants. This continues the arrangements for the predecessor departments, and it is intended that one of the Commissioners will be appointed by the Prime Minister to be Permanent Secretary of Her Majesty's Revenue and Customs, and by the Treasury to be Principal Accounting Officer. In practice this will be the Commissioner designated chairman in the appointment Letters Patent.
Clause 2: Officers of Revenue and Customs
32. Subsection (1) provides for the Commissioners for Her Majesty's Revenue and Customs to appoint staff to be known as officers of Revenue and Customs. Officers will support the conduct of Her Majesty's Revenue and Customs' day-to-day work.
33. Subsection (3) requires officers, in the exercise of Commissioners' functions and functions not otherwise conferred on the Commissioners themselves, to comply with the Commissioners' directions.
34. Subsections (4) and (5) provide for officers to be civil servants. The terms of an officer of Revenue and Customs' appointment may include provision for their suspension or discharge (subsection (2)).
35. The description of "officers of Revenue and Customs" replaces the previous nomenclature for describing staff who were empowered to exercise the functions of the predecessor departments, e.g. inspectors, collectors, receivers, authorised persons, etc. (see clause 45(2)).
Clause 3: "Her Majesty's Revenue and Customs"
36. Subsection (1) provides that the Commissioners for Revenue and Customs and officers of Revenue and Customs together will constitute a non-ministerial government department called Her Majesty's Revenue and Customs.
Clause 4: Commissioners' initial functions
37. Subsections (1) and (2) transfer to the Commissioners for HMRC responsibility for the exercise of the revenue, tax credit and other functions previously the responsibility of the Commissioners of the predecessor departments, except for the conduct of prosecutions of Revenue and Customs offences in England and Wales (as a result of subsection (3) invoking clause 31). The expression of Commissioners' responsibilities preserves the managerial discretion available to the predecessor Commissioners in the exercise of their functions. Details about arrangements for the Commissioners' exercise of functions is at clause 11, the exercise of Commissioners' functions by officers is at clause 12, and the exercise of delegated functions is at clause 13.
38. The Commissioners' responsibility for the collection and management of revenue is defined in clause 46 (3) as meaning the same as "care and management" in previous enactments. It thus preserves continuity of treatment for those revenues that previously were subject to a duty of care and management, as this term is familiar to the wider business, legal and tax practitioner communities and to officials. Subsection 4(4) defines the expression "revenue" to include taxes, duties and national insurance contributions.
39. Subsection 4(2) gives the Commissioners for HMRC responsibility for all other functions, i.e. those which are neither revenue nor tax credits, of the predecessor departments, conferred on the Commissioners by or under this Bill or any other enactments. For example, the Commissioners of Customs and Excise have the function of investigating suspected offences of dealing in tainted cultural objects under section 4 Dealing in Cultural Objects (Offences) Act 2003. "Functions" is defined at clause 46 (2) to mean any power or duty.
Clause 5: Officers' initial functions and clause 6 and Schedule 1: Former Inland Revenue Matters
40. These clauses transfer the functions of Inland Revenue and Customs and Excise staff to officers of Revenue and Customs. They also place a restriction on the transfer, so that powers previously used by Customs and Excise staff may not be used in respect of matters inherited from the Inland Revenue, and powers previously used by Inland Revenue staff may only be used for matters inherited from the Inland Revenue. This 'ring fencing' is intended to prevent any accidental widening of the scope of existing officers' powers. Accidental widening of Commissioners' powers is prevented by Schedule 2 Part 1.
41. Most powers are defined in their own legislation as relating only to specific functions, and these definitions will remain unchanged. For example, the Inland Revenue power to require someone to produce their financial records can only be used in order to enquire into their tax return. But some powers have a wider scope, relating to any matter assigned to the Commissioners of the department in question, or to any tax within the care of that department. Because of the general deeming provisions in clause 45 they would come to apply to matters inherited from the other department as well, unless these restrictions in clauses 5 and 6 are introduced.
42. Customs officers currently have a power under the Proceeds of Crime Act to search premises or persons for cash which may have been obtained through unlawful conduct. This power is restricted to cases where the unlawful conduct relates to a matter dealt with by Customs and Excise, but it is not explicitly limited to indirect taxes and duties. If it were transferred to officers of Revenue and Customs without restriction it could be used, for instance, where the unlawful conduct related to income tax. These clauses prevent such an accidental widening of the scope of officers' powers.
Clause 5: Officers' initial functions
43. This clause transfers the powers and duties of Customs and Excise staff to the officers of Revenue and Customs. The transfer is made by subsection(1), and the various descriptions of Customs and Excise staff are given in subsection(2). Subsection(3) makes this clause subject to clause 6 (4) and clause 31. This means that the powers transferred may not be used in relation to matters inherited from the Inland Revenue.
Clause 6: Former Inland Revenue matters
44. Subsection (1): This applies to former Inland Revenue matters, and those matters are listed in Schedule 1. The list is supplemented by a list of obsolescent functions at clause 49 (4).
45. Subsection (2): The functions of Inland Revenue staff are transferred to officers of Revenue and Customs. But they are only transferred to the extent that they relate to former Inland Revenue matters. An officer of Revenue and Customs can use all of the current Inland Revenue powers, but only in relation to former Inland Revenue matters.
46. Subsection (3): This lists the various descriptions of Inland Revenue staff, whose functions are being transferred.
47. Subsection (4): This disapplies the transfer of Customs and Excise officers' powers to the extent that an officer of Revenue and Customs is exercising a former Inland Revenue function. So an officer of Revenue and Customs may not use Customs and Excise powers in relation to former Inland Revenue matters.
Clause 7: Power to transfer functions
48. The Bill establishes HMRC as a non-ministerial department. It would therefore not ordinarily be covered by the provisions of the Ministers of the Crown Act 1975, which allows the transfer of functions between Ministerial departments by Order in Council, thereby removing the need for primary legislation to achieve this.
49. This clause amends the Ministers of the Crown Act 1975 to allow HMRC to be treated as a Ministerial department solely for the purposes of transferring functions under that Act. Functions may therefore be transferred into or out of HMRC by Order in Council under negative resolution.
50. Subsection (1) inserts the required text into the Ministers of the Crown Act. The effect of that text is:
51. Subsections (1) and (2) of the clause to be inserted into the Ministers of the Crown Act provide that the functions that may be transferred are those conferred upon either the Commissioners for Her Majesty's Revenue and Customs, or officers of Revenue and Customs. This distinction reflects the fact that legislation confers some functions (such as responsibility for administering a particular tax regime) upon the Commissioners, while other linked functions (such as the powers required to administer that regime) are conferred upon officers of Revenue and Customs. Subsections (1) and (2) ensure that both sets of functions may be transferred under this provision.
52. There are, however, a number of restrictions imposed upon the ability to transfer functions under this clause.
53. Subsection (3) operates to prevent the transfer from HMRC of any of the functions specified in clause 4(1) of the Bill, including the collection and management of revenues (i.e. taxes and duties) and the payment and management of tax credits.
54. Subsection (4) provides that an Order transferring functions to HMRC may limit the powers available to exercise those functions, and it may ensure that the function can only be exercised with the consent of a Minister.
55. Arrangements also exist within the Scotland Act 1998 to allow the transfer of functions between Ministers of the Crown and Scottish Ministers. Clause 7(2) and (3) therefore extend those arrangements to include the transfer of functions between HMRC and Scottish Ministers. Subsection(2) allows HMRC to be treated in the same manner as other ministerial departments for the transfer of functions to or from Scotland, while subsection (3) restricts this ability to prevent the transfer of HMRC functions specified in clause 4 (1) of the Bill under this provision. Subsection (3) also permits limitations on the exercise of powers when a function is transferred into HMRC, and allows for the order to provide that a function may only be exercised with the consent of a specified member of the Scottish Executive.
56. Subsections (4) and (5) of clause 7 introduce arrangements to permit the transfer of functions from HMRC to Welsh Ministers (but not from Welsh Ministers to HMRC), in a reflection of arrangements that already exist for other ministerial departments in the Government of Wales Act 1998. Subsection (4) permits the transfer of functions from HMRC to the Welsh Assembly, however subsection (5) prevents the transfer of those HMRC functions specified at clause 4(1).
|© Parliamentary copyright 2004||Prepared: 25 November 2004|