House of Commons
|Session 2007 - 08|
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General Committee Debates
The Committee consisted of the following Members:
Alan Sandall, James Davies, Committee Clerks
attended the Committee
Public Bill Committee
Tuesday 10 June 2008
[Sir Nicholas Winterton in the Chair]
(Except clauses 3, 5, 6, 15, 21, 49, 90 and 117 and new clauses amending section 74 of the Finance Act 2003)
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.
Information 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 Macclesfields 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 Majestys 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.
We expect Her Majestys 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
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. Gentlemans comment strengthens the case for amendment No. 245, so I am grateful for his intervention.
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 taxpayers adviser, and seek to obtain information or documents that way. It is worth drawing the Committees 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 Governments 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 documentsit would be difficult to comply with them if they did notthe 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 dwellings 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 Parliaments constituency office or a small businesss administration office?
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