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The first amendment would limit the scope of paragraph 18(2) by stipulating that amounts payable in respect of first-year tax credits, or interest on such credits, can be used to discharge only those corporation tax liabilities that are “due and payable”. However, those additional words will have no effect, because paragraph 18(2) is drafted in terms of discharging liability to pay tax, not liability pure and simple. The provision would not allow for the tax credit to be set off against expected liabilities in any case; it could be set off only against crystallised liabilities to pay. In effect, therefore, liability to pay is just another way of saying that the corporation tax must be due and payable. So the additional words are unnecessary.
On the second amendment, HMRC is under no obligation to make a payment where an inquiry is ongoing, but in the interests of providing support to business where possible, HMRC can use its discretion to make payments, for example, on the elements of the claim about which it is happy, while the inquiry is still open. The amendment would change the basis on which HMRC may make such provisional payments to require it to make provisional payment on a “just and reasonable” basis. Given that HMRC is under no obligation to pay, and does so at its discretion in order to be as helpful as possible to the taxpayer concerned, the amendment would undermine the beneficial feature of the legislation and might—paradoxically—lead to HMRC deciding that it will not make any payments at its discretion, to avoid being challenged in court. I urge the Committee to reject those unnecessary amendments.
Mr. Hammond: On the first amendment, the Minister has clarified the intention. She says that the amendment is unnecessary—whether or not it is, she has clarified the point, so I am grateful to her. I am rather less happy about her response to amendment No. 209. I would have thought that HMRC would always be expected to act justly and reasonably. Frankly, I did not care much for her tone. She said that if we impose on HMRC an obligation to act justly and reasonably, it might decide not to make any payments at all. What is HMRC? We are Parliament. We make the decisions, and Ministers, who are accountable to Parliament, ensure that they are carried out properly. That is not the job of some unaccountable, invisible body using its unfettered discretion in a fit of pique, because its Parliament has sought to constrain it, and deciding that it will not make any payments or implement the Government’s will.
Mr. Hammond: The hon. Lady’s position appears to be that it would be outrageous if HMRC was subject to any oversight from a court of its behaviour.
Angela Eagle: That is not what I said. Do not be ridiculous.
Mr. Hammond: I think that if the hon. Lady reads the record, she will see that that is exactly what she said. She said that HMRC must be completely unfettered in the use of its discretion to make such payments as it thinks fit. In contrast, under amendment No. 209 it would make payment on a provisional loss of such amount as is “just and reasonable”. Should the courts ever become involved in looking at what is just and reasonable, I think that they would take into account an ongoing HMRC inquiry. They would hopefully look at the amount that should be paid in the light of that.
We are merely seeking to establish the principle that HMRC should not have areas of unfettered discretion in this way that could thwart the will of Parliament and the intention of the Government. I thought that amendment No. 209 was entirely unexceptionable. I thought that the Exchequer Secretary was going to bob up and say that it was completely unnecessary because there is a long-established principle that HMRC, as with any Government body, always has to act in a way that is just and reasonable because it is subject to judicial review. [Interruption.] Now she is saying that it is. A few moments ago she told us that she did not think that it was at all reasonable for HMRC to be subject to the oversight of the courts.
Angela Eagle: The hon. Gentleman should not put such ridiculous words in my mouth. I was talking about a context in which a tax credit claim is outstanding and where there is an inquiry into whether an organisation has paid its corporation tax. I said that in order to be helpful, HMRC should be able to make payments in areas of the tax return that it is happy with. That is the context for this discussion and it is not any wider than that.
The hon. Gentleman should not seek to put words in my mouth and widen the context. This is a very narrow context based on what is the perfectly reasonable premise that HMRC should not be forced to pay tax credits to companies when it is not satisfied that they have paid their corporation tax liabilities and that tax credits can be kept aside to cover corporation tax liabilities in the event of an ongoing inquiry that may discover outstanding corporation tax liabilities. That seems perfectly reasonable to me and the hon. Gentleman should stop hyperventilating and putting words in my mouth in an attempt to widen the context when I am making very specific comments.
Mr. Hammond: That was a very long intervention, Sir Nicholas.
The Chairman: Clarification.
Mr. Hammond: As it stands, the schedule says:
“In those circumstances HMRC may make a payment on a provisional basis of such amount as it thinks fit.”
As amended, it would read:
“In those circumstances HMRC may make a payment on a provisional basis of such amount as is just and reasonable.”
I suggest that all of the hon. Lady’s concerns would be properly taken into account in determining what is just and reasonable. HMRC would still have discretion, but it would be a discretion fettered by a requirement to behave in a way that was just and reasonable.
As I said, I was expecting the hon. Lady’s response to be that the amendments were unnecessary because HMRC always would behave in a way that was just and reasonable and by long-established principle would be subject to the intervention of a court if it did not. She has not chosen to go down that route, but has decided to go down one that says that HMRC must have unfettered discretion.
I am disappointed that in this group of amendments, we have had a perfectly satisfactory answer to amendment No. 208 and a very unsatisfactory answer to amendment No. 209. I tabled the amendments as probing amendments, but I am not happy with the answer that the Exchequer Secretary has given to amendment No. 209.
Mr. Bone: I urge my hon. Friend, if possible, to put this matter to a vote. It is an extraordinary explanation that, if we insert “just and reasonable”, HMRC will have a hissy fit and not make any payments at all. That is a remarkable statement from the Exchequer Secretary.
Mr. Hammond: The Minister is smiling, but when she reads the record she will understand what my hon. Friend means. She may perhaps not have intended to say what she did say.
6 pm
Angela Eagle: Before the hon. Gentleman finishes, perhaps I can help him even further. What he is arguing is that there should be a just and reasonable test for what is currently at the discretion of HMRC. Its discretion in what is meant to be a helpful activity—if there is an inquiry ongoing and HMRC is happy with one part of the tax return, it might make a tax credit payment rather than not do so—is turned by the hon. Gentleman’s amendment into something that can be tested in the courts using the “just and reasonable” structure.
A just and reasonable provisional payment has to reflect the ongoing inquiry and therefore prejudge the issue under consideration. I am not sure that a judge would wish to be asked to make that judgment while an inquiry was ongoing. If companies received payments before their final tax position was calculated, were able to request a payment on account and were then overpaid tax credits, HMRC would need to make a specific assessment to recover the overpayment, which would make the mechanics of the system even more cumbersome and turn a provision that is meant to be helpful into something different.
I hope the hon. Gentleman will acknowledge that his amendment creates those kinds of problems, and turns what is meant to be helpful—
Mr. Hammond: Is this an intervention?
Angela Eagle: I was attempting to be helpful before the hon. Gentleman put his amendment to the vote. If he does not like the explanation I have given, he knows what he has to do about it.
Mr. Hammond: With respect, I am not surprised that officials would give the Minister the kind of briefing she has just read out. If I were doing their job, I would prefer not to be subject to any kind of oversight, rather than to be subject to it. She now appears to be arguing that the courts could not decide what was just and reasonable, but HMRC can. That does not strike us as very reasonable. As I understand it, the amendment would require that, when a payment is to be made, the amount of such payment is the just and reasonable amount. I beg to ask leave to withdraw amendment No. 208, but I would seek your permission, Sir Nicholas, to press amendment No. 209 to a Division.
Amendment, by leave, withdrawn.
Amendment proposed: No. 209, in schedule 25, page 307, line 23, leave out from ‘as’ to end and insert ‘is just and reasonable’.—[Mr. Hammond.]
Question put, That the amendment be made:—
The Committee divided: Ayes 9, Noes 17.
Division No. 9]
Bone, Mr. Peter
Breed, Mr. Colin
Field, Mr. Mark
Gauke, Mr. David
Greening, Justine
Hammond, Mr. Philip
Newmark, Mr. Brooks
Penrose, John
Viggers, Peter
Blackman-Woods, Dr. Roberta
Blizzard, Mr. Bob
Chapman, Ben
Eagle, Angela
Efford, Clive
Hall, Patrick
Hesford, Stephen
Joyce, Mr. Eric
Kennedy, rh Jane
Morden, Jessica
Palmer, Dr. Nick
Pound, Stephen
Sharma, Mr. Virendra
Simon, Mr. Siôn
Todd, Mr. Mark
Ussher, Kitty
Wright, David
Question accordingly negatived.
The Chairman: We are still on schedule 25. I say to the Committee in a helpful way that the last debate, important though it is, was somewhat—
Mr. Bone: On a point of order, Sir Nicholas.
Mr. Bone: On a point of order, Sir Nicholas, I heard the Division declared with eight for the Ayes, but I thought that there were nine for the Ayes, not eight.
The Chairman: I am grateful. Of course, I rely on those who add up the voting list. You are absolutely correct. The Ayes were nine, the Noes were 17. It does not affect the result, but you are quite right. There was a late vote that failed to be counted by the Clerk. It was my fault for not correcting him, so I take the blame and he does not. I am grateful to you for drawing it to our attention. My subsequent remarks remain the same. We are still on schedule 25.
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