Finance Bill

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Mr. Field: Given the Minister’s reassurances, surely the most important thing is that we get the new regime right rather than rush it through. I appreciate that, given the pressure and high profile of HMRC’s problems and concerns over the past year, the Minister wishes to get the new regime moving as quickly as possible. But surely, given the concerns that we have expressed today, it is even more imperative that we get the regime right, rather than allow for the prospect of HMRC getting a hell of a lot of bad news headlines and disrepute because of confusion about its precise powers in relation to many of the companies whose interests we are trying to defend in this debate.
Jane Kennedy: If I believed that there would be a lot of bad publicity as a result of our passing the powers and the way in which they will be applied, I would share the hon. Gentleman’s concerns, but the issue has been thoroughly consulted on and discussed. I shall continue to listen to the representations that are being made, and as we come to some of the detail in a few moments I will hopefully be able to give further reassurance.
I know what the hon. Gentleman is saying but do not believe that this is the right time to stop the reform and hold it back. It is essential to HMRC to enable it to bring together coherently its work across all the tax structures. As the Minister to whom HMRC is accountable, it would be irresponsible of me to make it even more difficult for it to achieve the changes that it clearly needs to make if it is to retain its position as one of the paramount tax authorities in the world and the reputation that it rightly has for using its powers reasonably, notwithstanding the fact that examples can always be given where those powers have been excluded. With the proper safeguards that we are building into the legislation, the Committee can be assured that HMRC will conduct itself with those new powers appropriately.
My last point relates specifically to the question that the hon. Member for South-West Hertfordshire asked. There is a tendency to dismiss guidance as not having safeguards because it does not have legal standing and, therefore, the same standing in court. It is true that a court would be entitled to take account of published HMRC guidance either of its own account, or if its attention was drawn to it by either party. Such guidance would not be conclusive, but it would be persuasive. In a case involving the administration of tax, guidance would provide a court with a statement of how HMRC expected its officers to act in different situations.
While the law cannot set out safeguards in every possible scenario, as I have said, codes of practice and guidance provide more detail on how legislation should be interpreted in different circumstances. A criticism from a court that an HMRC officer had acted outwith their powers and in breach of a code of conduct would be considered very seriously indeed, not least by me as the Minister to whom they are accountable.
Given that lengthy response, I hope that the hon. Member for Taunton, whose amendment was moved in order to set the scene for the debate, will feel that it is not necessary to press the amendment and will allow the clause to move forward with a fair wind.
Mr. Gauke: I will briefly make a couple of comments in response to the Financial Secretary. I welcome her comments on a road map and the need for a more strategic approach. I recognise that a new chairman and chief executive will be in place, which might provide the best opportunity to instigate that. I also noted her comments on the Bill being used as a vehicle for those measures and that she said that that is very convenient from the Government’s point of view—no one knows where we will be in four years’ time, so I will express myself carefully. However, there is an argument that it is too convenient on an annual basis. The Treasury has the privileged position of having a guaranteed Bill every year for good historical reasons, and I still question whether the Finance Bill is ideal. As a possible solution in the long term, perhaps some sort of consolidated Bill would be better so that it would not be done through a money Bill.
I noted the Financial Secretary’s point about guidance being persuasive to the courts, but there are two concerns with guidance. One is that it is not legally binding, a point that she addressed to some extent by saying that it is none the less persuasive. The other point is that it is not something that we in this place have a chance to review and consider in the same way that we do with legislation. She also drew the point that the powers might be diminished for some taxes, such as VAT, whereas for others they might be increased, such as corporation tax. It is worth saying that VAT, and to some extent PAYE, are continually paid and therefore need to be continually assessed. Some taxes are done on an annual basis so that a tax return is completed, and there are good historical reasons why slightly different regimes exist for those different taxes. There is a criticism to be made of a one-size-fits-all approach.
Finally, we welcome the Financial Secretary’s reassurance that no Government amendment will be tabled consisting of HMRC’s powers with guns. The Opposition welcome the absence of that amendment.
Mr. Browne: I tabled the amendments with the intention of kick-starting a proper debate on this important matter. Such is the importance I attach to the issues we are discussing that I would like to press the amendment to a Division.
Question put, That the amendment be made:—
The Committee divided: Ayes 5, Noes 15.
Division No. 11]
Browne, Mr. Jeremy
Field, Mr. Mark
Gauke, Mr. David
Hosie, Stewart
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
Palmer, Dr. Nick
Pound, Stephen
Sharma, Mr. Virendra
Simon, Mr. Siôn
Thornberry, Emily
Todd, Mr. Mark
Question accordingly negatived.
Clause 108 ordered to stand part of the Bill.

Schedule 36

Information and inspection powers
Mr. Browne: I beg to move amendment No. 162, in schedule 36, page 352, line 6, after ‘An’, insert ‘authorised’.
The Chairman: With this it will be convenient to discuss the following amendments: No. 163, in schedule 36, page 352, line 14, after ‘An’, insert ‘authorised’.
No. 164, in schedule 36, page 352, line 18, after ‘is’, insert ‘in that person’s possession and’.
No. 170, in schedule 36, page 356, line 36, leave out from ‘(b)’ to ‘a’.
No. 171, in schedule 36, page 356, line 39, at end insert—
‘(2A) A taxpayer to whom a third party notice relates may also request a copy of the document, and an officer of Revenue and Customs must comply with such a request without charge.’.
No. 172, in schedule 36, page 357, line 3, at end insert ‘and any consequential losses suffered.’.
No. 183, in schedule 36, page 370, line 14, leave out from ‘who’ to end of line 15 and insert
‘holds the position of Inspector of Taxes within Revenue and Customs.’.
No. 263, in schedule 36, page 362, line 24, at end insert
‘and of the company or companies that the Officer believes are subsidiary undertakings and the notice shall be taken as relating only to the companies so specified’.
No. 268, in schedule 36, page 370, line 15, at end insert—
‘(2) The Commissioners shall publish—
(a) the criteria by which they determine who should be authorised for any particular provision, and
(b) for each provision requiring an authorised officer, the names of all officers who are so authorised.’.
Mr. Browne: I tabled the first seven of the nine amendments that you read out, Sir Nicholas. I will not reheat the broad principles of the debate with every group of amendments. [Interruption.] There has just been a sedentary intervention about the interest being shown by my colleagues in these proceedings. Meanwhile, huge numbers of Labour MPs are walking out of the room who seem to pop in periodically only when we need some useful idiots to prop up the Government. [Interruption.]
The Chairman: Order. We have had a wonderfully sensible debate this afternoon and I am sure that it will continue. We can get a little bit more invigorated, but hopefully it will be totally in accordance with the content of the amendments.
3.30 pm
Mr. Browne: I am grateful for your guidance, Sir Nicholas, and for the audience that I have before me, diminished though it is, since the vote took place, on the Opposition Benches. Let me run through the amendments. They are all quite specific, but if they are seen in isolation, their purpose can be hard to understand. I will explain briefly what each of the seven is trying to achieve. Amendment No. 162 restricts the power to a senior officer who is able to undertake the inspections. Currently, the inspection can be authorised by any HMRC employee, including those at quite a junior level. The purpose of the amendment is to put a floor under the seniority of the inspector so that there is some reassurance that the powers are exercised by someone with the appropriate level of authority and experience.
Amendment No. 163 effectively covers the same points, and there is nothing extra that I need to say. The point of amendment No. 164 is that a third party should not be expected to provide a document to which they have no access. As currently drafted, paragraph 2 says that if information or documents are “reasonably required”, they must be provided by the third party. However, that does not account for the likely situation in which the third party does not have access to the documents that HMRC wants. In that case, the amendment proposes to ensure that the person is not liable to produce a document that they do not possess.
Amendment No. 170 says that a person should rightly have full access to copies of their own documents. This amendment would delete part of paragraph 14(2)(b) so that a person does not have to “reasonably” require a copy of their own document before they are granted one. I apologise to the Committee if I slightly garbled my words. At the moment, there is a threshold that the person has to overcome of “reasonably” requiring a copy of their own document if they are to be given that document by HMRC. Amendment No. 170 seeks to delete that requirement.
Amendment No. 171 allows the taxpayer access to a document when it is given by a third party if it concerns them. The amendment proposes to insert additional sub-paragraph (2A), so that if a third party has obtained documents from HMRC when someone’s tax record is inspected, the taxpayer has a right to obtain a free copy of those documents. Amendment No. 172 is designed to compensate business losses arising from HMRC errors. That is an important point that would concern some businesses in some circumstances. Currently paragraph 14(4) provides for compensation to be made to replace documents lost by HMRC. However, as the Institute of Chartered Accountants has pointed out, it would not cover instances in which negligent behaviour by the HMRC resulted in the business losing revenue. The amendment requires HMRC to compensate for any “consequential losses suffered”, so it covers not just the documentation itself but the knock-on effects resulting from the actions of HMRC. Amendment No. 183 also covers the point about an authorised officer that I raised in earlier amendments.
Therefore, the overall theme of the amendments in this group is about trying to tighten and strengthen the powers of the individual citizen in their dealings with HMRC. For example, the amendments require HMRC to engage with them at a senior level, and make requirements about the documentation to which the citizen has access. Finally, they ensure that HMRC’s behaviour does not impact in a way that is unfair or disadvantageous to that individual or business. For example, they ensure that the individual or business does not lose out financially as a result of the Government’s enforcement actions. It is, of course, right and appropriate that HMRC and the Government should seek to take and collect the taxes owed to them, but the individual citizen or company has rights in their interactions with the state. My intention is to protect those rights as far as possible.
Mr. Field: The hon. Gentleman makes an important point in his amendments, particularly in pointing out the need to create a level playing field between the individual and the state. In so far as the state wishes to take upon itself particular powers through any of its agencies—in this case, HMRC—it is fair that the individual, too, should be able to benefit at a similar level. In this provision, we are considering the power to exact money from either a sole trader or a company, and there should be a balance.
I suspect that I am about to pre-empt what the Minister is going to say about the nature of the compensation that the hon. Member for Taunton has in mind, but I fully appreciate that unfettered economic loss, particularly for acts of tortious negligence, would be against public policy. That has been the case in the past and will be so in future. Although the level of compensation that the hon. Gentleman has in mind would be a step too far, that does not detract in any way from the importance of ensuring that we do not trample over individual rights, particularly those of small companies or sole traders, as the hon. Gentleman suggests in his amendment.
I hope that the Minister will consider this matter. I suspect that she will not be happy about the notion of unlimited economic loss in respect of the financial compensation is proposed in the amendment, but the hon. Gentleman makes an important point. All too often, an increasingly all-powerful HMRC is pitting its powers against the individual, and we need the balance to which the Minister referred earlier, albeit in a different context.
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