Angela
Eagle: The amendments would change the rules for how a
first-year tax credit can be set off against other tax liabilities and
impact on the discretion that Her Majesty’s Revenue and Customs
has to make a payment when an inquiry has been opened into a tax
return. I do not believe that the Opposition’s amendments are
necessary. The Government have based the design of the first-year tax
credits on the successful research and development tax credits for
small and medium-sized enterprises. The two subsections that the
amendments would change are mirrored in the R and D tax credit
legislation, and the Government have not received any representations
from business that those conditions would benefit from being
changed. 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.
Angela
Eagle: I think that the hon. Gentleman is going slightly
over the top, perhaps because we have been in Committee all day. I am
sure that he will agree that HMRC should not be put in a situation
where it should pay tax credits to companies that have not paid
corporation tax. His second amendment addresses a
situation in which HMRC is trying to be helpful to a business over
which an inquiry might be ongoing. In certain circumstances, if it is
happy with bits of the tax payments or liabilities, it can make
payments. His amendment would make that not discretionary, but subject
to “just and reasonable” clauses, which could be
challenged in a court. That seems unreasonable given that HMRC cannot
make tax credit payments to organisations that might have outstanding
liabilities against which they can offset tax credit liabilities. That
is perfectly reasonable in my
view.
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] Blackman-Woods,
Dr.
Roberta 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.
The
Chairman: In a minute. The last debate was slightly
laboured. We need to make progress. I say that to Committee members of
all parties: I am here as a
servant of the Committee, and in no way do I seek to dictate what goes
on, but there are still important matters to be discussed, and I want
to ensure that adequate time is available for them. If Mr.
Bone wishes to raise a point of order—I hope that it will be a
point of order—I am grateful to him for
rising.
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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