Mr.
Gauke: I beg to move amendment No. 264, in
schedule 36, page 364, line 40, at
end insert— ‘(3) A penalty
may not be imposed under this paragraph
until— (a) 30 days after
the penalty under paragraph 37 is imposed,
or (b) if later, 30 days after
any appeal under paragraph 45 against that penalty is
determined.’.
The
Chairman: With this it will be convenient to discuss the
following amendments: No. 178, in
schedule 36, page 365, line 29, leave
out paragraph
41. No.
179, in
schedule 36, page 365, line 43, after
‘Customs’, insert ‘or the First-tier
Tribunal’. No.
293, in
schedule 36, page 366, line 5, at
end insert ‘, and in
particular where the taxpayer satisfies HMRC or on appeal the
First-tier Tribunal that at the time of the failure or obstruction he
did not have access to, and could not afford, professional
advice.’. No.
180, in
schedule 36, page 366, line 43, leave
out from ‘issued’ to end of line 1 on page
367. No.
265, in
schedule 36, page 367, line 1, leave
out ‘HMRC’ and insert ‘the First-tier
Tribunal’. No.
266, in
schedule 36, page 367, line 42, leave
out sub-paragraph (4) and
insert— ‘(4) The proceedings
before the Upper Tribunal shall be conducted in the same way as an
appeal against a tax
assessment. (4A) In particular,
the person shall be entitled—
(a) to appear before and be heard by the Upper
Tribunal,
or (b) to
make representations to the Tribunal in
writing.’. No.
181, in
schedule 36, page 368, line 12, leave
out ‘issued’ and insert
‘received’. No.
307, in
schedule 41, page 406, line 38, at
end insert ‘, and in
particular where the taxpayer satisfies HMRC or on appeal the
First-tier Tribunal that at the time of the failure he did not have
access to, and could not afford, professional
advice.’.
Mr.
Gauke: The amendment relates to the daily default
penalties set out in paragraph 38 of schedule 36. The issue was raised
by the Institute of Chartered Accountants. Paragraph 38 provides for
daily penalties to be imposed after a continued failure to comply, so
once a fixed penalty has been imposed there is nothing to prevent daily
penalties from being levied. However, in the view of the Institute of
Chartered Accountants that would be unfair, especially if the original
fixed penalty were subject to an appeal under paragraph 45. That is a
fair point. The amendment therefore suggests that paragraph 38 be
explicitly subject to a moratorium, so that it may not be invoked until
30 days after the standard penalty is imposed, or 30 days after any
appeal against the standard penalty is determined, if that is later.
There is a potential injustice where the fixed penalty could be subject
to appeal, yet the daily penalties would start to
run. I
will allow the Liberal Democrat Members to speak to their own
amendments, but our amendment No. 265 and their amendment No. 180
relate to the same issue, which is where the notice of appeal should
go. I suspect that the Financial Secretary will refer to her earlier
comments on where notice of appeal should be sent. We again make the
point that it should perhaps be to the first-tier tribunal; however, I
note her comments on the previous group of
amendments. Amendment
No. 266 relating to paragraph 48 of schedule 36, provides some detail
on the appeal proceedings. In particular, it provides for the right of
appeal to the upper tribunal. For these tax-related penalties, a proper
right of appeal to the upper tribunal would be appropriate, and there
should be the chance for representations to be made. That is a
recurring theme in relation to schedule
36. There
is also a point worth drawing out with amendments Nos. 293 and 307.
They essentially do the same thing, which is to look at the question of
reasonable excuse. The amendments have been provided by the low incomes
tax reform group, which does a lot of good work representing low income
taxpayers. It makes the point that for some people, a lot of their
problems are due to their not having access to professional advice. The
group suggests that it would be helpful to have on the statute book a
recognition that, when considering whether someone has a reasonable
excuse, the fact that they cannot afford professional advice should be
taken into account in certain
circumstances. We
tabled the amendments in a slightly probing manner, because I see some
administrative difficulties with the provisions. Whether someone can
afford professional advice becomes a difficult question of judgment.
However, the point is an important one, and when looking at reasonable
excuse, whether it is on the statute book or not, there should be an
acknowledgement that for some people getting professional advice is
difficult or not realistic because of the costs involved, with the
result that those people are in a worse position. HMRC should
acknowledge that in the way those people are treated. There should be a
greater degree of latitude for those who are not able to seek the same
advice as wealthy individuals or larger businesses. Amendments Nos. 293
and 307 are intended to flesh out the definition of “reasonable
excuse” so that it refers explicitly to that
matter. 5.15
pm Mr.
Jeremy Browne (Taunton) (LD): Good afternoon, Sir
Nicholas. I wish to speak to amendments Nos. 178 to 181, which I tabled
with my hon. Friends, and enlighten the Committee about the intention
behind them, if it is not already
apparent. Amendment
No. 178 is intended to remove uncertainty from the Bill. Part 7 deals
with penalties for failing to comply with an information notice, and
paragraph 37 states that a penalty of £300 is payable in those
circumstances. The amendment would delete paragraph 41, which
legislates against the concealing, destroying and disposal of
documents “if
an officer of Revenue and Customs has informed the person that the
document is, or is
likely”— that
is the crucial
part— “to
be the subject of an information
notice”. A
number of groups, including the Institute of Chartered Accountants,
argue that it is unreasonable to expect someone to keep something on
the off-chance that it may be wanted by an officer of HMRC at some
point in the future. People have to make a value judgment as to whether
it is likely that information will be relevant, applicable or of
interest to HMRC at some point. That is an in-built judgment that
people are required to make, and they may feel that they cannot
second-guess HMRC’s future intentions
accurately. Amendment
No. 179 would allow the tribunal to extend the time available.
Paragraph 42 of the schedule excludes someone from liability to a
penalty if an HMRC officer allows them further time to fulfil the
relevant requirements. We are instinctively sympathetic to such
flexibility, but the amendment would also allow the first-tier tribunal
to allow an alternative time frame for compliance. A theme of our
deliberations, both today and previously, is that we are uncomfortable
with relying on HMRC officers to decide matters relating to inspection
powers and appeals, and that it would be more appropriate for the
tribunal to oversee matters of appeal, including by it having the
ability to amend demands from HMRC as it sees
fit. Amendment
No. 180 suggests that an appeal should be made to the tribunal, not to
HMRC. Paragraph 46 of the schedule deals with appeals against a
penalty, and the amendment would delete sub-paragraph (1)(c), which
requires a taxpayer to provide written notice of an appeal to HMRC.
That might seem to be a slightly arcane point, but in our view there is
no need for HMRC to be statutor—I can never pronounce
that
word. John
Penrose (Weston-super-Mare) (Con):
Statutorily.
Mr.
Browne: I thank the hon. Gentleman—a Somerset MP
came to the rescue, and his help is much appreciated. There is no need
for HMRC to have a legal right to be
informed by the taxpayer. Not only is that confusing, but the appeals
procedure will of course require the tribunal to interact with HMRC to
ascertain the circumstances of the case. Our view is that a taxpayer
should not lose the right to appeal because they did not copy that
appeal to HMRC when informing the
tribunal. Amendment
No. 181 is the simplest of our amendments to grasp. It suggests that
the 30-day notice period that applies when an enforcement notice for a
penalty is issued should start on the date on which it is received by
the taxpayer, not on the date on which it is issued. There is, of
course, a period between those dates, and it may be longer than would
be ideal if there are difficulties with the postal service, for
example. I would be grateful for the Minister’s response to
those
points. Mr.
Mark Field (Cities of London and Westminster) (Con): My
hon. Friend the Member for South-West Hertfordshire and the hon. Member
for Taunton suggested that the word “likely” is open to
great uncertainty in this context. Perhaps the Minister will go into
detail about HMRC’s track record, because it would be useful to
have something on the record so that we can see what records need to be
kept. I
suspect that the Minister will suggest, with authority and to her
credit, that taxpayers’ compliance and record-keeping
responsibilities are changing rapidly, because much more data is
maintained electronically. That can, as her Department is aware, create
problems, but it is now easier to retain and store data that is kept
electronically rather than on paper. Will she give a brief overview of
this area of responsibility and the way in which the balance of
responsibility between HMRC and taxpayers has developed? It is
unreasonable to expect any corporate or individual taxpayer to keep
reams of paper records in filing cabinets for a prolonged period, but
in so far as much of the data can be stored electronically on discs and
the like, it is understandable that HMRC should expect rather more data
to be kept. When the Minister comments on the concerns that have been
expressed—we have spoken to a range of amendments suggested by a
number of interested outside bodies—she will indicate the
Treasury’s broad thinking on how the balance of obligation
between taxpayers and HMRC will develop in the years ahead, given the
importance of technological
changes?
Jane
Kennedy: If the hon. Member for Cities of London and
Westminster will allow me, I have more detailed notes on future clauses
to which amendments relating to computer records in have been tabled.
Rather than being drawn into a wider discussion of responsibilities
between taxpayers and HMRC, I shall bear in mind what has been said and
ensure that I refer to it in future
debates. The
purpose of the penalties to which the amendments relate is to deter
those who would otherwise not co-operate with HMRC’s checking.
If they are to be an effective deterrent, penalties must be clear and
transparent, but they should also carry safeguards. For that reason,
all the penalties are set out in primary legislation, and they all
carry a right of appeal. Amendment No. 264 would provide that before
daily penalties are levied, 30 days must have passed since the standard
penalty was levied or an appeal was determined. The effect would be
that after an initial penalty was charged for failure to comply with an
information notice, there would be no incentive
to respond for another 30 days. That does not fit with the aim of
allowing faster checking and not allowing the non-compliant to delay
legitimate checking at little cost to
them. The
provision in the schedule applying daily penalties replicates the way
in which existing legislation works. That avoids making unnecessary
changes that would require taxpayers and their agents to read new
rules, and there have been no representations about HMRC’s use
of the daily penalty regime. I assure the Committee that the schedule
provides for a full right of appeal for taxpayers against both the
applying and the level of daily
penalties. Amendment
No. 178 would remove the requirement on a person not to destroy,
conceal or dispose of documents when they have been told informally
that those documents are subject to a formal information notice. In
many circumstance, compliance checks are carried out without the need
for the formal use of HMRC’s powers, and with the agreement of
the taxpayer. That can be an easier way of working for both the
taxpayer and HMRC. Adopting this amendment would mean that the risk to
HMRC of following an informal approach would increase, particularly
when dealing with people who, it later turns out, deliberately seek not
to pay tax. Those people could simply destroy the information that HMRC
has said that it needs to check a tax position, which is a good reason
for maintaining the proposals as laid out in the Bill.
Amendment
No. 179 seeks to give the first-tier tribunal the power to give
taxpayers further time but, again, that power is not necessary, as the
tribunal will have the power to set aside any penalty if the time frame
allowed is not reasonable. In paragraph 45, a taxpayer may appeal
against a
notice “if
insufficient time has been given”.
The tribunal can set
aside the penalty if it agrees that insufficient time has been given,
so there are provisions elsewhere in the legislation.
Amendment
No. 180 removes the provision requiring notice of an appeal against a
penalty to be given to HMRC. The amendment replicates the existing
legislation. We have had this debate before, and I am going to make the
same point in response. Given that existing procedures are working
well, I do not believe it is necessary to accept the amendment, so I
hope the hon. Member for Taunton will not press
it. Amendment
No. 181 seeks to require a penalty to be paid within 30 days of the
penalty notice. Again, the 30-day period already takes into account
time taken to deliver a notice. If a taxpayer did not receive a notice
until too late, they would have a reasonable excuse for paying the
penalty late, and would therefore not be subject to further penalties
for late payment. If the 30 days did not start until HMRC could
demonstrate that a penalty notice had been received, that would allow
taxpayers who are so minded—again, there are some—to
evade penalties by ensuring they never receive the penalty notice, for
example by not collecting their post. It is therefore better to have
certainty with clear time frames based on the date written on the
penalty notice. That still allows taxpayers with a genuine reasonable
excuse for receiving a penalty notice late to escape penalty for late
payment.
Amendment No. 266 seeks to
apply further procedures to the hearing in cases in which the upper
tribunal may impose a tax-related penalty. That penalty will be used
only rarely, in extreme cases. To get to that stage, the taxpayer must
already have failed to appeal against both the standard penalty and the
daily default penalty. The taxpayer would be able to attend either
appeal hearing or make representations. The penalty is therefore
intended to apply to taxpayers who do not respond to HMRC’s
request for information, and who just accept the penalties that are
charged. It is for the upper tribunal to decide how best to take into
account the taxpayer’s point of view when deciding whether a
penalty should be charged and how much. The upper tribunal, as the hon.
Member for South-West Hertfordshire will know, is equivalent to a high
court. As in any decision by the upper-tier tribunal, there is a right
of appeal for either party, on a point of law, to the Court of Appeal
under the Tribunals, Courts and Enforcement Act
2007. Amendment
No. 293 is one of the most interesting in this group, although that
does not mean that they are not all interesting. It seeks to provide
that a taxpayer will always have a reasonable excuse for their failure
to comply with an information notice if at the time they did not have,
and could not afford, professional advice. Amendment No. 307 has an
identical effect in relation to schedule 41, and I acknowledge the work
of the low Incomes tax reform group.
HMRC’s
intention over time is to create a single, aligned reasonable excuse
provision across all tax legislation to make that vital safeguard
clearer and more consistent in its application. That approach was
strongly supported in the consultation, as was the wording we used in
the Bill after the issue was exposed in consultation. The same wording
is used in paragraph 43 of schedule 36 and paragraph 20 of schedule 41.
The law does not attempt to define what a reasonable excuse is, as that
will vary according to the particular circumstances of the
taxpayer.
5.30
pm However,
if a taxpayer receives a straightforward information notice asking for
a particular document or piece of information, generally there should
be no difficulty in complying with it. Professional advice is not
needed. Of course, there is nothing to prevent HMRC or the tribunal
taking the lack of access to a professional adviser into account in
particular cases, but it would be inappropriate to allow a blanket
exemption from a penalty on those
grounds. Similarly,
the obligation for someone to tell HMRC when they start up in business
is usually not complicated and it does not require professional advice.
Where there is genuine doubt about whether an activity should be
registered, and as a result the taxpayer fails to do so, that might be
a reasonable excuse. Again, HMRC or a tribunal may wish to consider the
issue of access to a professional adviser, but a blanket exemption is
inappropriate.
In many
cases—I know that this has already happened—taxpayers
approach HMRC through the inquiry centres that it has throughout the
country, to clarify questions of that nature when they are considering
what they need to tell HMRC to establish their tax liability.
I hope that,
in making that response to hon. Members’ speeches, I have dealt
with most of their concerns. I will certainly remember the note to
speak perhaps more generally when we consider computer records at a
later time. However, I hope that hon. Members will not press their
amendments to a vote this
afternoon.
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