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 amendmentsI shall not go into it in any detail at all at this pointis 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 definitionanybody 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
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 persons 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 ones 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.
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 Departments 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 differentit 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 takenand this brings me to the point made by a number of hon. Members, in particular that made by the hon. Member for Dundee, Eastif requested to do so, rather than those that might be reasonably required. It is HMRCs 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.
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 obstructivethat 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,
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 HMRCs 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
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 Ministers argument, but I will not press my amendment to a vote. The position is similar with paragraph 14, although I note thatI think for the first timeshe 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.
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