Finance Bill

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Dr. Palmer: There will be cases in which a business is no longer operating and, even if it is not formally defunct, there is nobody about. How would the hon. Gentleman pursue the issue in that case?
Mr. Browne: It is not my job to pursue it, but I can see why the hon. Gentleman asks the question. The safeguard we are trying to enshrine in law is that, in the circumstances that he described, the person against whom the notice has been issued would not be presumed to have failed to comply if they did not realise they had received the notice in the first place. He gave an example in which a notice could be put in a prominent place in premises, although the intended recipient of that notice may not be there to receive it. In those circumstances it would be difficult to conclude that someone was failing to comply with HMRC investigations, if they did not even know that HMRC required them to comply. The task would then be for HMRC to identify and track down the individual concerned. The intention of the amendment is that it ought to do so. In most cases, however, the Committee will agree that it would be far more straightforward, and would involve pressing the documentation into the hand of the recipient, rather than assuming that they had received it. I accept that in some particular and exceptional cases that may present the HMRC with a greater challenge to achieve their objective.
Amendment No. 169, which is the final Liberal Democrat amendment in this group, protects the rights of the individual. Paragraph 10(5) requires the penalties of obstructing an officer to be explained in the notice, but it says nothing at all about the rights of the taxpayer against whom the notice is issued. The amendment would remove that provision, and insert a requirement for the notice to explain the rights of the occupier whose premises are searched and the rights of any person falling under the requirements of paragraph 10(1). In other words, the person whose tax position is the subject of the search can expect their legal rights in those circumstances to be formally explained to them.
The underlying concern, as touched on by other Members, is that occasionally, HMRC—and I shall put this delicately—has a zealous desire to fulfil its duties as effectively as possible. While that is admirable in many respects, it can mean that the person who is on the receiving end of that zeal feels that they are being unfairly and harshly treated, and that it is not sufficiently clear to them what their rights are in those circumstances. That is what amendment No. 169 seeks to address.
Government amendment No. 220 will restrict access for inspection, so that the tax position of the person whose business it is can be inspected, rather than “any person”, which was the original intention. It is specifically the owner of the business who will be required to comply. While my party welcomes attempts to add clarity and to specify the recipient of the notice, the change has raised some questions in my mind and in the minds of my colleagues, and it would be usefully if the Financial Secretary addressed them. Will documents relating to employees be excluded from inspection because they do not own the business? If we move, as the Government envisage, from “any person” to the person whose business it is, what is the status of people who are related to, or employed by, the business? Under a literal interpretation of Government amendment No. 220, such people will no longer be required to comply in the way that I think the Government would want.
I seek to be helpful in making a point about Government amendment No. 222. As I have already said, I welcome the extension of the notice period required for an inspection from 24 hours to seven days. Liberal Democrat amendment No. 166 was designed to extend that period, and the Government have more than doubled the period that we sought. We are grateful for the step that the Government have taken, but the Government amendment will not remove lines 24 to 26 of paragraph 10, which allow the notice period to be bypassed by an authorised officer of HMRC. Although Government amendment No. 222 is an extremely welcome step in the right direction, it would be helpful if the Financial Secretary addressed my reservations.
The Chairman: Before I call the hon. Member for South-West Hertfordshire, may I draw attention to amendment (a) tabled by Her Majesty’s Opposition? It is an amendment to a Government amendment. Should the Opposition wish to press it, although it appears on the amendment paper after Government amendment No. 222, it would have to be taken before it.
Mr. Gauke: Thank you, Sir Nicholas, for your guidance to the Committee.
Like the hon. Member for Taunton, we welcome the Government’s flexibility on paragraph 10. It is an important provision that will give HMRC the power to inspect business premises. It has produced a fair amount of comment. We welcome the increase in the notice period before an inspection of premises from 24 hours to seven days. As you mentioned, Sir Nicholas, we have tabled amendment (a), which would extend that to 14 days. I hope that the Financial Secretary will not consider that this is an example where, if the Government give an inch, we seek a mile. I hope that we are not being unduly unreasonable.
It is always a question of judgment when assessing what is a reasonable period for any purpose. We started with 24 hours, the Liberal Democrats proposed 72 hours, the Government have said seven days and the Law Society and the Institute of Chartered Accountants have suggested 14 days. That is reflected in amendment (a). Where do we draw the line? Should it be 28 days, or even 42 days? I thought about tabling an amendment for 42 days and saying that we were adamant that that should not be reduced because it was a matter of confidence, but we decided not to pursue that route. However, there is an issue when people are sent a notice while on holiday, because the period may elapse while they are still away. That is the argument for extending it beyond seven days, but I do not want to be in any way churlish about the fact that the Government have moved from 24 hours, which would have been wrong.
Mr. Browne: I wonder whether the hon. Gentleman’s concern about people on holiday might be addressed were the Government to concede the point that I was trying to make earlier about the notice being issued to the recipient in person, rather than just put in their premises so that they might happen to chance upon it.
Mr. Gauke: Possibly. The hon. Gentleman makes a reasonable point in mentioning that as a way of addressing the issue. In these circumstances, the Government are worried that the person in question would receive the notice and then start destroying documents and concealing evidence. In that case, 24 hours leaves the Government vulnerable to that, as would seven days, 72 hours or 14 days. That is not what the Government have in mind. The concern here is an administrative one about how quickly they can come along, inspect the premises and look at documents contained there. There is no matter of principle on how long the period is, as it is just a matter of administrative convenience. In those circumstances, and in light of the representations that have been made by the Institute of Chartered Accountants and the Law Society, we urge the Government to show even greater flexibility and consider whether 14 days would be more appropriate. We look forward to what the Minister has to say on that.
With regard to paragraph 10 and the relevant amendments in this group, I encourage the Financial Secretary to give as much comfort as possible that the powers outlined will not be used over-aggressively. By that I mean that, where the taxpayer is looking to co-operate, HMRC will agree a date on which business premises will be inspected as a matter of course and that HMRC officers will be expected to reach agreement and not behave in a heavy-footed and determined way.
Jane Kennedy: Jack-booted.
Mr. Gauke: I did not want to use the expression jack-booted, but perhaps it was what I was looking for.
Some of the amendments that we tabled, as was the case with those of the Liberal Democrats, have been rather swept up in subsequent Government amendments. However, I would like to highlight Government amendment No. 221, which includes the reference that we mentioned earlier about premises being
“used solely as a dwelling”.
I reiterate that I am not sure that that provides as much comfort as the Government perhaps wanted, as working patterns are changing and more people do some work from home. The definition of premises that are
“used solely as a dwelling”
is not as effective as it might be, given that the Government acknowledge the sensitivity about going to people’s homes. It is particularly acute in paragraph 10—more so than when we were referring to it in relation to the earlier group of amendments—when HMRC officers are going to be storming around someone’s home. There is a sensitivity there, which the Government recognise, given the first words of amendment No. 221, but is that sensitivity fully addressed when we have a tight definition of premises
“used solely as a dwelling”
as opposed to “solely or substantially used as a dwelling”?
11.45 am
Government amendment No. 225 reiterates wording that was in the original paragraph 10, which includes within the definition of premises “any means of transport”. I would be grateful if the Minister enlightened the Committee about what that means. Does it give HMRC the power to inspect people’s cars? What happens if a car is in a garage, for example? How would the amendment work and is it an exceptional provision? When will HMRC consider it necessary to inspect people’s cars?
Amendment No. 269 relates to regulations made under paragraph 58(3) for the Government to provide a definition of when someone is carrying on a business. I would like to know when the Government envisage that that will be necessary. To what circumstances does the provision relate?
On amendment No. 169, tabled by the Liberal Democrats, the hon. Member for Taunton raised the valuable point that the existing wording refers to the consequences of obstructing an HMRC officer, but does not say anything about the rights available to a taxpayer. I have no particular objection to the notice informing a taxpayer of the consequences of obstructing an HMRC officer, so I do not support deleting that reference, but it would be valuable for the rights available to the taxpayer to be known and for the taxpayer to be informed of them. Perhaps the Minister could provide some comfort in Committee by saying that people will be informed of their rights in the circumstances that we are considering. I reiterate that we are grateful for the Government’s showing some flexibility, but we seek reassurance that HMRC will use those powers only in exceptional circumstances and that it will seek to reach agreement with taxpayers about when business premises should be inspected.
Stewart Hosie (Dundee, East) (SNP): The Minister’s approach to Government amendment No. 221 is sensible: she has tabled it and is now listening to the comments on it. It, too, relates to powers to inspect or enter any part of the premises that is,
“used solely as a dwelling”.
I am concerned about the word “solely”. I can think of several trades or professions about which tax inspectors often have concerns—at a very low level, but none the less concerns. They include taxi drivers and semi-professional musicians who may be paid in cash. We all know about such things. I am concerned that someone might take a booking for a band for a wedding on a house phone, or phone up to organise insurance for the taxi on a house phone, and that that would negate the family home’s being
“used solely as a dwelling”.
I would like the Minister to confirm that the very low level use of a private house to carry out a small business transaction would not negate the description of the dwelling as being,
“used solely as a dwelling”,
and would not make it a business premises, which could then be entered. Other hon. Members have expressed anxieties about that. I would like confirmation that the guidelines will be robust, and that making a modest business transaction from the family home will not turn it from being solely a dwelling into a business premises, which can be entered or inspected under the powers in the schedule.
Dr. Palmer: Government amendment No. 222 leaves out from “this” to the end of line 22. Do they not mean to the end of line 23? Amendments Nos. 168 and 253 seem to leave a gap for someone who has slightly dubious records, which they would not like to be subject to inspection. If I am conducting a business and I have such records, which I keep in my garage, so long as I am not present in my garage, the authorities would not be allowed to inspect them under amendment No. 168. Under amendment No. 253, the Government would not be allowed to inspect them at all because the garage is primarily used to park my car or store other materials. Those seem to me to be difficulties.
Mr. Brooks Newmark (Braintree) (Con): Earlier in our deliberations on this part of the Bill, my hon. Friends the Members for Cities of London and Westminster and for South-West Hertfordshire lamented the fact that the new powers proposed in clause 108 and schedule 36 have appeared in a money Bill rather than in one sponsored by the Home Office. I share their concern that this territory should perhaps have been covered by the Solicitor-General or another Law Officer and been subject to debate in another place.
However, my hon. Friend the Member for Cities of London and Westminster also mentioned that he had served time—[Interruption.]
The Chairman: Is the hon. Gentleman going to rephrase that?
Mr. Newmark: I was hoping to finish the sentence. I paused to catch my breath. My hon. Friend served time on the Bill that created the Serious Organised Crime Agency and that experience proved useful. As luck would have it, last year I had the pleasure of serving on the Committee that considered the Tribunals, Courts and Enforcement Act 2007 and looked at several of the wider human rights issues that are in play here. I remember, for instance, our attempts to get assurances from the Government that bailiffs would be prevented from undertaking enforcement actions against premises where the occupants were women on their own, young children or other particularly vulnerable people.
Bailiffs and tax inspectors are two of the three classes of people least appreciated when they knock on doors, and their activities and powers should receive proper scrutiny. It is tempting to say that politicians out canvassing for votes are the third class of unwanted doorstep visitor, but I can only say that that was not my experience in Crewe and Nantwich or yesterday in Henley.
I admire the measured way in which the Financial Secretary has so far addressed this part of the Bill and I am sensitive to the fact that the new powers that it confers will be used by an agency for which she is the Minister directly responsible. Nevertheless, I am struck by the parallels between many of our concerns during consideration of the Tribunals, Courts and Enforcement Bill and the issues that are before us today.
The Financial Secretary said at our last sitting that HMRC’s consultative committee had evaluated the compliance of the new powers with the Human Rights Act and subsequently made changes. However, I want to place those provisions in the context of last year’s scrutiny of similarly invasive powers. For that purpose, the commentary of the Joint Committee on Human Rights on the Tribunals, Courts and Enforcement Bill, as it then was, is particularly helpful, not least because it expresses an opinion shared by the upper House, which is denied to us on the Finance Bill.
I want to quote briefly from the Joint Committee’s comments on the Government’s use of the sort of powers with which we are dealing. It said:
“In cases where the State is using, or authorising the use of, intrusive powers such as entry, search and seizure, we consider that the case for including minimum safeguards (such as the requirement that an enforcement agent should identify himself and the authority for his entry”
“the premises to an occupier without need for a request; the minimum period of notice required; the requirement that entry take place at a ‘reasonable’ time, and protection for material subject to legal professional privilege) on the face of primary legislation is particularly strong.”
I want to pick a couple of themes out of that warning. First, there is a need for sharp focus in primary legislation and, specifically in schedule 36, a sharp focus on precisely what will be regarded as carrying on a business, what qualifies as business premises and what will be regarded as business records. The Government’s position, as I understand it, is that only the use of premises solely as a dwelling lies outside the scope of the powers. As we have heard, that is a very uncompromising position and likely to drag huge—
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