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Session 2007 - 08 Publications on the internet General Committee Debates Finance Bill |
Finance Bill |
The Committee consisted of the following Members:Alan
Sandall, James Davies, Committee
Clerks † attended the
Committee Public Bill CommitteeTuesday 10 June 2008(Morning)[Sir Nicholas Winterton in the Chair]Finance Bill(Except clauses 3, 5, 6, 15, 21, 49, 90 and 117 and new clauses amending section 74 of the Finance Act 2003)10.30
am
The
Chairman: I welcome all Committee members to the 17th
sitting of the Committee, and I hope that they have had a good,
productive and restful weekend. Last Friday evening I attended a dinner
on the race course at Chester. It was the Chester and Cheshire tourism
awards, and my borough of Macclesfield picked up three of the 15
awards, so I am pleased—[Hon. Members:
“Hear, hear.”] Anyway, back to
business.
Schedule 36Information
and inspection
powers
Mr.
Gauke: I beg to move amendment No. 244, in
schedule 36, page 352, line 40, leave
out ‘has’ and insert ‘and the taxpayer
have’.
The
Chairman: With this it will be convenient to discuss the
following amendments: No. 245, in
schedule 36, page 353, line 1, after
‘opportunity’, insert
‘to produce the information or document
and’. No.
246, in
schedule 36, page 353, line 3, leave
out ‘a summary
of’. No.
247, in
schedule 36, page 353, line 15, at
end insert— ‘(6) No notice
shall be given by the First-tier Tribunal unless the person to whom the
notice is addressed and the taxpayer have been given notice of a
hearing at which the Tribunal is to consider the issue of the notice
and have been given an opportunity to attend the hearing and make
representations.’. No.
248, in
schedule 36, page 354, line 13, leave
out ‘may’ and insert
‘must’. No.
249, in
schedule 36, page 354, line 22, at
end insert ‘(such period
to be at least 30
days)’. No.
250, in
schedule 36, page 354, line 30, after
‘solely’, insert ‘or
substantially’. No.
251, in
schedule 36, page 355, line 4, after
‘period’, insert
‘(such period to be at least 30
days)’.
No. 270, in
schedule 36, page 371, line 45, leave
out ‘present and future liability’ and insert
‘or present liability or any
future liability to the extent that it depends in whole or in part to
any past or present
transactions’.
Mr.
Gauke: No doubt it would have been a greater pleasure to
call my hon. Friend the Member for Runnymede and Weybridge, Sir
Nicholas, to speak to the amendment, but I am delighted to serve under
your chairmanship once again. I am grateful for your reminder us that
this is the 17th sitting, although that shows how time slips by when
one is having fun. I had not realised that our considerations have been
so lengthy. I am also delighted to hear about Macclesfield’s
success at Chester, where I spent a happy year at law school. Having
spent a little more time there in recent weeks, I know it to be a fine
county. [Interruption.] It is the finest county,
although Oxfordshire is also pleasant. I confess that I am struggling
slightly with a cold, Sir Nicholas, so if the volume of my speech drops
below a certain level, I am sure that you will not be remiss in
requesting that I speak
up. Last
week, we debated paragraphs 1 and 2 of schedule 36, and I
said that although the powers were rather broad with regard to taxpayer
notices and third party notices, our main concern was that the
safeguards under paragraph 3, to which many of the amendments relate,
are key in determining whether the opening paragraphs of schedule 36
strike the right balance between the ability of Her Majesty’s
Revenue and Customs to issue notices requesting information and
documents and the rights of taxpayers and third parties to protect
their
position. Paragraph
3 sets out the circumstances in which taxpayer notices and third party
notices may be issued and provides a framework for that. It is worth
focusing on two points in the amendments tabled by my hon. Friend the
Member for Runnymede and Weybridge and myself. With regard to
amendments Nos. 244 and 245, it is worth explaining how paragraph 3(3)
will work. Paragraph 3(3)(c) states that a first-tier tribunal may not
approve the giving of a taxpayer notice or third party notice
unless “the
person to whom the notice is addressed has been told that the
information or documents referred to in the notice are required and
given a reasonable opportunity to make representations to an officer of
Revenue and
Customs”. In
circumstances in which a taxpayer notice is served, that paragraph
appears to be reasonable, because the taxpayer will be given that
notice and will have a reasonable opportunity to make representations.
However, professional bodies have highlighted their concerns about
circumstances in which that relates to a third party notice. In other
words, the third party must be notified that information or documents
are required, and be given a reasonable opportunity to make
representations to a Revenue and Customs officer. As the provision
stands, in such circumstances, the taxpayer will not be informed of the
notice or have the opportunity to take any action in response to it.
Consequently, the amendment suggests that not only the third party, but
the taxpayer, should be informed of the issue, have a reasonable
opportunity to make representations and the opportunity to produce the
information or
documents. This
discussion leads me to one of the broader themes with regard to
paragraph 3. I said last Thursday that this is an important part of the
Bill. It deals with everything to do with powers, particularly schedule
36.
This is a good opportunity for the Minister to make it clear how these
powers will be used in practice. We expressed our view that it would be
better if some of the protections and the difficulties with guidance
were contained in statute. None the less, comments from Ministers with
regard to those powers provide useful
guidance. We
expect Her Majesty’s Revenue and Customs, where possible, to
work co-operatively with taxpayers and third parties when using the
powers conferred under paragraphs 1 and 2 and the framework of
paragraph 3. When notices are issued, we expect that HMRC will be keen
that the taxpayer should co-operate and provide documents or
information on a voluntary basis. We hope that HMRC will not use all
its powers in the most aggressive manner as a matter of course, and
that they will be used as a last resort when the taxpayer does not
co-operate. We recognise that there are be circumstances in which
taxpayers do not co-operate, and that is the purpose of the
powers. As
I mentioned on Thursday, having talked to a former senior official at
HMRC, often the tendency is for an investigating officer to use the
powers available to the limits, which is why we are concerned about
these powers. In responding to my comments on amendments Nos. 244 and
245, it may be appropriate for the Financial Secretary to address the
general issue of how HMRC will use the powers, and whether it will
expect taxpayers and third parties to co-operate before using the
powers to their
utmost. Amendment
No. 246 leads us to the important issue of rights of appeal. It is
worth noting that paragraph 3(1)
states: “An
officer of Revenue and Customs may not give a third party notice
without (a)
the agreement of the taxpayer,
or (b)
the approval of the First-tier
tribunal.” The
first option deals with my point about co-operation. However, when the
approval is granted by the first-tier tribunal, there is no particular
right of appeal. In such circumstances, it is important that we have
the necessary protections in paragraph
3. I
have two points to make on amendment No. 246. First, the first-tier
tribunal should obtain all the facts when determining whether
permission should be granted to HMRC. It is not acceptable, therefore,
that under the current provisions, the first-tier tribunal receives
only a summary, prepared by HMRC, of representations from the relevant
person. Why should the first-tier tribunal not have the representations
as a whole? What is the purpose behind the word
“summary”? It does not appear to save HMRC any time. Why
should such a full representation not be given to the first-tier
tribunal? The
broader issue is addressed in amendment No. 247, which
states: “No
notice shall be given by the First-tier Tribunal unless the person to
whom the notice is addressed and the taxpayer have been given notice of
a hearing at which the Tribunal is to consider the issue of the notice
and have been given an opportunity to attend the hearing and make
representations.” Given
that there is no real right of appeal, the initial decision at least by
the first-tier tribunal should be made in such a way that there is due
process. There should be an opportunity for the relevant parties to
make representations to attend a hearing and then the first-tier
tribunal can make the decision. If the decision
is that the notice is correct and appropriate, so be it. At the moment
we have a system where, essentially, we go straight to the first-tier
tribunal. The only representations it will receive from somebody who
disputes the process will be through a summary prepared by HMRC of the
representations made by one of the
parties.
I referred
earlier to amendments Nos. 244 and 245.
Dr.
Nick Palmer (Broxtowe) (Lab): Before the hon. Gentleman
moves on to the next group of amendments, does he not agree that they
are addressed by paragraph 4? Amendment No. 244 requires
that, if a third party is approached, the taxpayer should be informed,
but that requirement is specifically covered under paragraph 4 on page
353.
Mr.
Gauke: There is a requirement, which can be disapplied, to
provide a copy of the notice, but it does not go on to give the
taxpayer the opportunity to produce the information or documents or to
make representations. Amendment No. 244 must be read in conjunction
with amendment No. 245. In a way, the hon. Gentleman makes a valuable
point in favour of amendment No. 245. If the taxpayer is to be given
that notice, he should have the opportunity to make representations, or
to produce the information or document. For the sake of completeness,
amendment No. 244 is still valid. The hon. Gentleman’s comment
strengthens the case for amendment No. 245, so I am grateful for his
intervention. 10.45
am A
potential objection to amendments Nos. 244 and 245 is that providing
the information to the taxpayer may prejudice the assessment or
collection of tax. If there is a concern that the taxpayer is involved
in fraudulent activity, the view could be taken that he should not be
told about that concern, and one would go to the third party, whether a
bank or the taxpayer’s adviser, and seek to obtain information
or documents that way. It is worth drawing the Committee’s
attention to paragraph 3(4) which
states: “Paragraphs
(c) to (e) of sub-paragraph (3) do not apply to the extent that the
First-tier Tribunal is satisfied that taking the action specified in
those paragraphs might prejudice the assessment or collection of
tax.” There
is therefore a protection in the Bill that addresses a legitimate
concern on the Government’s
part. Amendment
No. 248 deals with what should be in an information notice, which
covers taxpayers and third parties. Paragraph 6 says that
the “information
notice may specify or describe the information or documents to be
provided or
produced.” Given
that the purpose of such notices is to specify that information or
those documents—it would be difficult to comply with them if
they did not—the word “may” is inappropriate, and
we suggest that it be replaced with “must”. If the
Financial Secretary can describe circumstances in which a notice would
not include that information, we will happily withdraw the amendment.
However, that wording appears to be
controversial. Amendment
No. 249 addresses the question of how long a period someone has to
provide information or produce a requested document. At the moment they
have as
long “as
is reasonably specified or described in the notice.”
No doubt there will be
some guidance to flesh that out, but we see no reason why some
certainty should not be included. Parliament should have the
opportunity to specify the time period. We suggest at least 30 days. We
are not wedded to a particular period, but I would be grateful if the
Financial Secretary told us why none is
specified. Amendment
No. 250 refers to the first mention in the schedule of
“a place that
is used solely as a
dwelling.” We
will perhaps return to that at greater length under paragraph 10. Lots
of properties are dwellings, but are not used solely as such. More and
more people work from home. I suspect that most of us take work home,
and therefore our homes would not satisfy the test of being solely used
as dwellings. Perhaps the Financial Secretary could expand on
that. Mr.
Philip Hammond (Runnymede and Weybridge) (Con): I am
listening carefully to my hon. Friend. I understand that in planning
law, it is established practice that one room can be used for business
purposes without changing that dwelling’s planning status. Does
my hon. Friend think that that definition should be applied: a dwelling
used as a dwelling, but in which up to one room is used as, for
example, a Member of Parliament’s constituency office or a small
business’s administration
office?
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