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.
We are
looking for reassurance that HMRC officers will not be over-aggressive
in laying down the law or say,
“We are going to come in on a particular day, whether you like it
or not”, but will seek to accommodate the reasonable requests of
the taxpayer. A key point for the Financial Secretary to address in her
response is reassurance that those powers will be used in exceptional
circumstances, rather than as a matter of
course. 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” to “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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