(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
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 HMRCs 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 statutorI can never pronounce that word.
Mr. Browne: I thank the hon. Gentlemana 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
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 Ministers 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 HMRCs 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 expressedwe have spoken to a range of amendments suggested by a number of interested outside bodiesshe will indicate the Treasurys 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 HMRCs 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
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 HMRCs 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 HMRCs 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 mindedagain, there are someto 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 HMRCs 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 taxpayers 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.
HMRCs 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.
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 casesI know that this has already happenedtaxpayers 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.
|©Parliamentary copyright 2008||Prepared 11 June 2008|