Mr.
Gauke: I shall speak briefly on the Liberal Democrat
amendments and on those that I tabled with my hon. Friends. Amendments
Nos. 162, 163 and 164 relate to paragraphs 1 and 2 of schedule 356,
which are important because they contain provisions relating to the
power to obtain documents from a taxpayer and from a third party.
Although paragraphs 1 and 2 are widely drawn, as long as paragraph 3,
which relates to the next group of amendments—I shall not go
into it in any detail at all at this point—is adequately
drafted, we broadly accept them.
The hon.
Member for Taunton made an interesting point about the authorised
officer. In schedule 36, and in other schedules, there is concern that
sometimes powers are too widely dispersed within HMRC. Those powers
need to be vested in people with sufficient seniority, training and
expertise so that particular points may be addressed. That is the
purpose behind amendments Nos. 162 and 163. If those amendments are to
work, the definition of “authorised officer in paragraph 57
needs to be tightened, because at the moment an authorised officer is
simply someone who is authorised by the commissioners. That is an
incredibly broad definition—anybody could be authorised by the
commissioners. I suspect that we could have a re-run of the debate on
guidance, although I do not want to do so. Will the Financial Secretary
provide clarification about who an authorised person will be and what
level of training and expertise will be expected of
them? The
Conservatives and the Liberal Democrats have sought to tighten the
definition of an authorised officer in different ways. Liberal Democrat
amendment No. 183 states that an authorised officer should be an
inspector of taxes. Conservative amendment No. 268 would create a list
of criteria for authorised officers for particular provisions. Under
our proposal, somebody might be
authorised for one power but not another, depending on their expertise
and training in each field. It also states that their name should be
published, which is a more accountable way of doing things. I suspect
that the Financial Secretary will outline some of the practical
difficulties with that proposal, which I have tabled in a slightly
probing manner. However, the definition needs to be tightened, as the
definition in paragraph 57 is too broad, as authorised officers who are
simply authorised by the commissioners will not provide the necessary
reassurance to taxpayers and third
parties. I
will say a brief word about Liberal Democrat amendment No. 164, which
relates to documents in the possession of third parties. I think that
the Financial Secretary will make the same point, but I do not think
that the provision is necessary. Paragraph 16
states: “An
information notice only requires a person to produce a document if it
is in the person’s possession or
power.” Paragraph
6 defines an information notice as including anything under paragraphs
1 and 2. Unless the Financial Secretary corrects me, I do not think
that amendment No. 164 is
necessary. Three
Liberal Democrat amendments have been tabled to paragraph 14, which
deals with the power to remove documents, and I am sympathetic to two
of them, which make the point that if a document is removed, the person
who produced the document may request a copy of it. I do not think that
there is a need to qualify that by saying that it must be
“reasonably required”. On amendment No. 171, I am
sympathetic to the proposal that the taxpayer to whom the third party
notice applies may receive, by request, a copy of the relevant
document. I agree with my hon. Friend the Member for Cities of London
and Westminster, with regard to consequential loss, that this is
usually resisted by Governments in such circumstances for
understandable reasons. It would put the taxpayer in a difficult
position, so I do not support
it. I
will make one further point about paragraph 14, which is slightly
broader, and to which three amendments have been tabled. The
explanatory notes state that paragraph
14 “does
not amount to a power to seize
documents.” Looking
at paragraph 14, that seems to be precisely what it is. Will the
Financial Secretary explain why paragraph 14 does not provide a power
to seize
documents? Stewart
Hosie (Dundee, East) (SNP): I have a question about
documents produced or inspected that an officer may remove or retain
for a reasonable period. An investigation could be concerned with
transactions made with particular bank accounts that the Revenue
believes to have been opened for some reason. If the proof of identity
given to open the bank account is a passport or a driving license
essential for running the business, could those documents be
legitimately removed and, if so, for how long? This issue does not
relate to being given a copy of one’s documents. Perhaps the
Revenue would take a copy and allow the original to be retained because
it is important for business reasons. I would like some clarity on
that, because although such information might appear in the guidelines,
it is not in the Bill, which could cause significant
difficulties.
The
Chairman: I call the Financial Secretary to reply. I am
sure we will get the answer to the last
question.
3.45
pm
Jane
Kennedy: Thank you, Sir Nicholas, I will do my best to do
so.
Amendments
Nos. 162, 163, 183 and 268 refer to the term “authorised
officer” as a way of limiting who should exercise the powers
contained in schedule 36. Taken together, the amendments would mean
that all officers using the powers would have to be authorised
inspectors of taxes and their names would have to be
published. I
entirely accept that it is important to consider who should use the
powers and how taxpayers can be assured that those HMRC officers who do
so are suitably trained. Requesting information or documents to check a
tax position is the bread and butter of the work of thousands of
officers in compliance units in HMRC. The Department’s care and
management responsibilities already require the assurance that officers
are appropriately trained for the work that they do. A general
authorisation requirement, particularly one using an outdated and
inappropriate label, such as “inspector of taxes”, would
simply create bureaucracy without providing any real additional
safeguard.
Instead,
schedule 36 differentiates the more intrusive powers, such as the power
to visit business premises without prior warning, and states that those
powers should be exercised only by officers authorised by HMRC
commissioners who have had specific training. In that way, the law
differentiates which officer may use which power, depending on the
intrusiveness of that power. That is a more sensible and effective
safeguard. Two
further points are relevant in relation to that. HMRC is already
planning a major programme of training and guidance for this package,
and publishing a list of authorised officers’ names would be
potentially dangerous. Officers of HMRC engage in investigations that
can be highly sensitive and I am sure that hon. Members have a mind to
the need to protect the identities of individuals in those
circumstances. However, quite rightly, there are concerns and
reassurance needs to be provided. I would like to make it clear and put
on the record just how seriously authorisation levels will be taken. As
I have outlined, authorised officers will have an appropriate level of
seniority, on which HMRC will consult, and they will have proper
training. Amendment
No. 164 would restrict the power to obtain information or documents
from a third party to those in their possession. That restriction
already exists in relation to documents, but information is
different—it includes explanations of facts or may involve
creating a document. The concept of power and possession does not work
in this
case. Amendment
No. 170 would require HMRC to provide copies of all documents
taken—and this brings me to the point made by a number of hon.
Members, in particular that made by the hon. Member for Dundee,
East—if requested to do so, rather than those that might be
reasonably required. It is HMRC’s duty to administer the tax
system in an efficient way and, in many cases, providing copies will
not be a problem. I cannot imagine that there would be any problem with
the sorts of documents that the hon. Gentleman has rightly mentioned.
It would be completely unreasonable not to comply with such requests.
However, there might be instances in which the request is vexatious or
unnecessary.
For example, it would be costly and cumbersome for HMRC to have to copy
a full set of books and records for a closed year when HMRC needs only
to review them for a short period. Amendment
No. 171 would require HMRC to give the taxpayer a copy of any document
obtained from a third party. Information from third parties is a hugely
important way for HMRC to establish the facts, particularly where the
taxpayer is evasive or obstructive—that is remarkable, but it
happens. Giving copies of all third-party documents to the taxpayer
would undermine the ability of HMRC to investigate effectively,
particularly in the more serious cases. It may also create
confidentiality issues for the third
party. Amendment
No. 172 suggests a requirement on HMRC to compensate the owner of a
document for consequential losses, if HMRC loses or damages the
document. I am grateful for the helpful comments made by the hon.
Member for South-West Hertfordshire. The schedule already requires the
Department to pay expenses reasonably incurred in replacing or
repairing a lost document. That is sufficient recompense. HMRC officers
take care to keep taxpayers’ documents safe. The hon. Gentleman
asked what would happen if damage were caused during an inspection as a
result of a negligent act by an officer. Where a document is damaged,
the rules on reimbursing the costs of replacing that document would
apply, and normal consideration would apply in other circumstances.
That is not unusual; HMRC has been doing it for many
years. Amendment
No. 263 would, if it were carried, seriously undermine the
effectiveness of the improved approach to checking groups of companies,
which has been welcomed in
consultation.
Mr.
Gauke: Rather to my embarrassment, I am not sure whether I
mentioned or explained amendment No. 263. It was wise of the
Financial Secretary to do that, because I was going to intervene on
that point. However, paragraph 33, without being amended, essentially
will require a third party to provide information about all the
subsidiary undertakings and the parent undertaking, even if it does not
necessarily have that information. If we are talking about a bank or an
accountant that is advising the parent undertaking, they might not
necessarily know all the subsidiary undertakings. However, that appears
to be the obligation under paragraph 33. I will be happily reassured,
but if I have understood correctly, the requirement seems to be
unreasonable.
Jane
Kennedy: The process by which documents and information
are to be provided to HMRC is changing as a result of the reforms that
we are making. For example, the documents that the hon. Member for
Dundee, East mentioned, such as driving licences, would have to be
provided as a result of an information request. HMRC would have to
apply a formal procedure. It is possible for that to be challenged, and
for a taxpayer in those circumstances to question why a particular
document is requested. The context in which such documents are made
available to HMRC is being changed. For some taxpayers who have dealt
with certain parts of the tax system under HMRC, the new system will
feel more intrusive, but my expectation is that the application of the
new powers by HMRC will be done and carried forward in a completely
reasonable way,
which should be able to be justified at every step. We are providing
safeguards so that taxpayers can challenge the
process. I
was asked about the difference between removing documents and seizing
them. The power allows an officer to take away, where necessary, a
document that he has looked at as part of his visit. That power already
exists for both VAT and PAYE, so it is not something that HMRC has to
do often. Sometimes, however, there is a risk that during a visit an
HMRC officer will see a document that contains vital evidence. That
contrasts with the seizure powers, which have the feel of a dawn raid.
That is not what this power is about, and I appreciate the spirit with
which the issue was raised.
An officer
would be able to remove the document if it seemed necessary to do so.
That might be when there was a risk that the document could be
concealed or destroyed later or when more detailed consideration might
be needed. As for the reasonable conduct of the officer in carrying out
such an inspection, it would be necessary for the staff to be supported
with proper training so that appropriate powers are used in the right
circumstances. I
have a final comment on the third party and the scope of amendment No.
263. The third party will have to provide replies to the specific
questions only if they relate to particular subsidiaries. That will be
made clear in the questions that are asked. I hope that I have dealt
broadly with the concerns that have been expressed. The amendment would
undermine the effectiveness of the
measure. Paragraph
33 provides a streamlined approach to checking groups that, among other
things, removes the need to include the names of all subsidiary
companies, of which there could be hundreds, as I am sure the hon.
Gentleman knows, on information notices to third parties. His amendment
would reintroduce a requirement that would increase the administrative
burden on both taxpayers and HMRC. Indeed, it would negate many of the
hoped-for
benefits. It
has been suggested that we cannot trust HMRC’s view of what is
reasonable. Legislation requires its checking to be reasonable. It is
not possible for the law to define what is reasonable, as that varies
from situation to situation. Ultimately, the courts will make final
decisions about what is reasonable. However, it is possible to give
more certainty by using guidance to set out examples of what is
reasonable and what is not. There is a general duty on any public body,
including HMRC, to act
reasonably. The
civil service code also requires officers to behave sensitively in
their dealings with the public. Those messages will no doubt be
reinforced in the forthcoming taxpayers charter. I am pleased to see
HMRC making progress on its development. One of the first things that I
did in respect of HMRC was to suggest that we might start to call those
who come into contact with it “customers”. There was a
severe intake of breath. “Nobody wants to
be a customer of the tax authority, Minister”, I was told.
However, I believe that it is right and proper that we have the concept
of customer care when dealing with people who interact with HMRC, the
vast majority of whom comply thoroughly and want to comply with their
tax
liabilities. I
hope that I have demonstrated, in my brief response to the amendments,
that great care has been taken to ensure taxpayer safeguards are woven
into the fabric of the package. I believe that we have arrived at the
right balance between individual liberties and giving HMRC effective
powers to do its difficult and occasionally dangerous job. The
amendments are therefore unnecessary. I hope that they will not be
pressed.
Mr.
Gauke: I am grateful for the clarification and further
explanation of paragraph 33, which was helpful. I am still not entirely
convinced by the Minister’s argument, but I will not press my
amendment to a vote. The position is similar with paragraph 14,
although I note that—I think for the first time—she used
the argument that the powers already exist for VAT and PAYE. Here we
have our first explicit example of a case of levelling up. None the
less, her comments were helpful. I will not be pressing that amendment
to a vote, or the amendment on paragraph 57, on authorised persons,
although I still think that there is an issue here. The Minister went
some of the way, but perhaps during the debate she will go further
about the emphasis on training and ensuring that the right staff, with
the right experience and expertise, are in the positions of
responsibility. I take the point that a lot of this is done by a lot of
people, but that is an important point. I will not press any of my
amendments. 4
pm
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