Jane
Kennedy: The clause forms part of the package of measures
to stemming from the review of
powers— 6.30
pm Sitting
suspended for Divisions in the
House.
7
pm On
resuming—
Jane
Kennedy: Clause 109 forms part of a package of measures
stemming from the review of powers, and, in essence, brings together
existing provisions in two separate Acts, one applying to the former
Inland Revenue, and the other to Customs and Excise. It ensures that
documents include electronic versions of documents, and allows HMRC
access to computers holding information required for a tax check. The
hon. Member for South-West Hertfordshire asked whether guidance will
follow the legislation. Indeed it will. We are bringing together two
existing provisions, and where existing guidance is not adequate, new or
amended guidance will be published, on which we will, of course,
consult. The
clause extends beyond schedule 36 matters and applies to other taxes,
to excise and to criminal prosecutions, hence the understandable
concerns expressed in Committee. The hon. Member for Cities of London
and Westminster sought a broader statement of the intent behind the
clause. All the safeguards in schedule 36 prevent the clause from being
used to bypass protections applying to written documents. When HMRC
wishes to gain access to computers, as opposed to written documents, I
would expect it to telephone the taxpayer and make the request, in the
way discussed earlier, and to agree a time at which to inspect or
remove the documents. In so far as it is possible, that will be done
with the co-operation of the taxpayer. Where it is not agreed, the
safeguards that we debated in earlier clauses will apply equally to the
treatment of
computers. The
only change is to the penalty provisions. The existing law has worked
well, having first been introduced in 1985, which means that it
predates this Government. However, it is important that I say a word or
two about the penalty requirements. The Government amendments that
bring together the equivalent provisions elsewhere in legislation will
realign the separate penalties for obstructing an HMRC officer. The
maximum penalty has been set at £300—lower than the
previous maximums. Under the former Inland Revenue provisions, the
penalty was £500, and under the Customs and Excise provisions,
obstruction or failure is a criminal offence with a penalty, on
conviction, of £2,500, which is a significant sum of
money—a level 4 penalty on the standards scale. A fixed penalty
is more easily understood and fits better with other HMRC fixed-penalty
provisions. In the case of a serious obstruction, it would still be
open to HMRC to prosecute under section 31 of the Commissioners for
Revenue and Customs Act 2005. It would make sense to have a single,
aligned provision dealing with access to computer records and would
represent a simplification in that the two existing provisions will be
repealed. Question
put and agreed
to. Clause
109, as amended, ordered to stand part of the
Bill. Clause
110 ordered to stand part of the
Bill.
The
Chairman: May I again seek to assist the Committee in the
longer term? We are expected to conclude our deliberations on 19 June,
which means that we will have six sittings left after this one. Because
I am involved with the selection of amendments, I know that a
considerable number of amendments have been tabled by the Government
towards the end of the legislation, and that a considerable number have
also been tabled by Her Majesty’s
Opposition. I
hope that colleagues are aware of the expectation that we should
complete by 19 June, and, if that is the case, that they will consider
how they handle the rest of the Bill, and whether every speech is
necessary or merely padding out the debate. I do not want to limit the
debate. I want proper debate, but I want debate on the
issues that are of importance to the Bill, and particularly to Her
Majesty’s official Opposition and other Opposition
parties. Schedule
37Record-keeping
Mr.
Gauke: I beg to move amendment No. 294, in schedule 37,
page 376, line 30, after ‘regulations’, insert
‘made under paragraph
2(3A) and (3B) of Schedule 11 to the Value Added Tax Act 1994 or such
other specific provisions as Parliament may from time to time
determine’.
The
Chairman: With this it will be convenient to discuss the
following amendments:
No. 191, in
schedule 37, page 377, line 9, leave
out from ‘cases’ to end of line
13. No.
275, in
schedule 37, page 377, line 13, at
end insert— ‘(5D)
Regulations under subsection (3A) may not be made unless a draft of
them has been laid before, and approved by resolution of, the House of
Commons.’. No.
276, in
schedule 37, page 377, line 42, at
end insert— ‘(6A)
Regulations under sub-paragraph (2A) may not be made unless a draft of
them has been laid before, and approved by resolution of, the House of
Commons.’.
Mr.
Gauke: Thank you, Sir Nicholas, for your guidance. I shall
try to present my comments on the four amendments in as brisk and
workmanlike a manner as
possible. Schedule
37 is about record-keeping requirements. Amendment No. 294 relates to
the provisions contained in paragraph 2(4), which allow commissioners
for HMRC to make regulations specifying additional records and
supporting documents that are to be kept and preserved. The concern
that we have—this will run through my comments on the other
amendments—is whether Parliament is surrendering too much power
in the
circumstances. The
concern in respect of paragraph 2(4) is that if powers are given to
make regulations to impose enhanced record-keeping requirements, those
powers should be limited. I believe that the intention behind the
powers is to have enhanced record-keeping requirements relating to
missing trader intra-Community fraud, which is an important issue. We
do not for a moment want to impede the Government’s desire to
tackle MTIC fraud. However, if that is the concern, the provisions
should be limited to that area. Hence, amendment No. 294, which was
proposed by the Institute of Chartered Accountants, would make the
additional requirements that may be produced through regulation more
specific. In essence, it would limit them to VAT
matters. Amendment
No. 191 was tabled by the Liberal Democrats, and I have no doubt that
the hon. Member for Taunton will speak on it. We are sympathetic to it
because it would address the power that schedule 37 gives HMRC
to “make
provision by reference to things specified in a notice published
by...Her Majesty’s Revenue and Customs in accordance with
the regulations”.
We
are discussing regulations that will not be made by Parliament, whether
through affirmative or negative resolution, but, as far as one can see,
simply through guidance produced by HMRC. There will be no opportunity
for Parliament to scrutinise them in those
circumstances. There
is also a practical concern for taxpayers who are seeking to comply
with their record-keeping requirements. Where those requirements are
changed simply in relation to HMRC guidance, it will be increasingly
difficult for taxpayers and professional advisers to monitor what those
changes might be, so this is not purely about parliamentary
accountability. The Minister may be able to address those
concerns. A
practical point must be borne in mind. Amendments Nos. 275 and 276
relate to further powers under schedule 37 and both would require a
resolution to be made under the affirmative procedure. During this
debate, we have not taken a dogmatic approach on whether affirmative or
negative resolution should be in place, but we would like to test the
Government’s position on those matters. We look forward to
hearing what the Minister
says.
Mr.
Browne: Amendment No. 191 is in my name and that of my
hon. Friends. We are concerned that the provisions in schedule 37
provide too much power for HMRC. For example, paragraph 2 allows HMRC
to make regulations, but for reasons of certainty and scrutiny that
should be done by Parliament. Without the amendment, the provision
would amount to tertiary legislation. The Institute of Chartered
Accountants in England and Wales, among other bodies, has indicated
that that would allow HMRC guidance booklets to be considered as
legislation, creating great uncertainty for the taxpayer, who will not
reasonably be able to keep up with the rules that they need to abide
by. We are concerned about that. I should be grateful for any
reassurances that the Minister can
provide.
Jane
Kennedy: It might be worth talking briefly about schedule
37 generally, so that my response to the amendments is in context. The
schedule aligns existing record-keeping rules for the main taxes:
income tax, corporation tax, capital gains tax and VAT. Those rules
have been the subject of extensive consultation, including draft
guidance. Records
are essential both for taxpayers to make accurate returns and claims
and for HMRC to be able to check those. Where there is poor record
keeping, errors often follow. Therefore it is right that HMRC works to
promote good record keeping. However, the overall aim of the schedule
is not to add to what currently happens. We need to align and clarify
the rules across the main taxes as HMRC moves, increasingly, to new
ways of working across taxes. Representative bodies told us that
taxpayers need clarity, but that they do not want HMRC to tell them
exactly what records to keep. Instead, taxpayers should usually decide
what to keep in the light of their own circumstances. It does not
matter if the records are kept in a shoebox, so long as they are
complete. Some
people worry that HMRC’s expectations on record keeping are
unrealistic, particularly for small businesses. The hon. Member for
South-West Hertfordshire is right: guidance will address that matter
and consultation with the main representative bodies will be invaluable
in ensuring that the guidance is both user-friendly and
realistic.
I
have been listening to the representations made by both hon. Gentleman,
They both mentioned the Institute of Chartered Accountants and I have
noted what they said about its views. The guidance published with the
consultation was produced early and welcomed by many. It is not always
possible to consult in advance, but on this occasion HMRC worked hard
to do so. The fact that it did so, and the way that it responded to
representations, has been
welcomed. The
amendments concern the power to make regulations on keeping records.
HMRC will be able to specify what does and does not need to be kept.
That can be a useful way of providing clarity and can act as a taxpayer
safeguard. There is no immediate need to make regulations to give that
added clarity. We took the view that it was sensible to take the power
now, against any future need, particularly as we expect such needs to
be identified in the course of consultation on the guidance and that,
if draft regulations are needed, they will be published in advance to
allow representative bodies to make clear their
views. 7.15
pm Amendment
No. 294 is an attempt to narrow the regulation-making power in the way
described. I say to the hon. Member for South-West Hertfordshire that
it seemed to us that that was a difficult way of doing
it—linking the power to an existing power in an Act about a
different tax. We thought that if we were amending it in that way, a
more conventional route would have been to amend section 12B. The
amendment would negate the whole point of the attempt to align the
record-keeping requirements across taxes. It would also mean that HMRC
would be unable to provide clarity on what records did not need to be
kept, which is why guidance would be appropriate. It would add
unwelcome complexity, and there is concern about whether it would
provide effective future proofing, which is partly what the hon.
Gentleman is seeking to
provide. Amendment
No. 191 would remove one instance of the power to make tertiary
legislation. That power allows HMRC to use public notices to supplement
regulations and to specify records. It means that HMRC can make
decisions on routine administrative matters rather than taking up
parliamentary time. That may alarm some people, but that flexibility
allows HMRC to respond quickly to changes and it is already a familiar
feature in VAT. Regulations must be laid before HMRC can specify by
notice. The amendment would perpetuate differences between taxes. It
would hamper the alignment that is integral to the merged HMRC. It
makes sense to align here, particularly as the same records are
relevant for several different taxes.
Finally, I
turn to amendments Nos. 275 and 276. The normal protocol for tax is to
use the negative resolution procedure for regulations that deal with
routine administrative matters. Affirmative resolution is usually
reserved for more contentious matters or those that directly affect the
amount of tax due—for example, changing a VAT rating. The
existing VAT regulations that specify records are made under the
negative resolution procedure. Using the affirmative procedure for any
of those provisions would be contrary to the normal practice for tax
matters.
I note the
concern expressed, and I am in regular conversation with the Institute
of Chartered Accountants. I believe that the amendments are
unnecessary, although I want to keep the matter under review,
particularly if the guidance proves later to be
controversial.
Mr.
Gauke: I acknowledge the Minister’s comments on
amendments Nos. 275 and 276, so I shall not press them. I was
interested to hear what the hon. Member for Taunton had to say about
amendment No. 191. I am still not entirely convinced by the
Government’s position on the matter, based on parliamentary
scrutiny and practicality, but there we are.
I note the
Minister’s concern that amendment No. 294 would hamper the
direction that the Government want to take on greater harmonisation and
alignment. That shows up one of the tensions that exist within any
alignment or harmonisation project. There are certain aspects for which
the Government may seek special rules—for example, relating to
VAT, as it is subject to fraud, and regulations would need to be in
place requiring particular documents to be kept as a
consequence.
I am not
sure whether the Minister is saying that including the provisions of
the amendment in the Bill would hamper that or whether there would be
flexibility within the system to make specific record-keeping
requirements that would essentially apply to a particular tax because
they were seeking to tackle a particular tax fraud. I acknowledge that,
although I am not entirely convinced by that position. However, I shall
not press it to a Division. I beg to ask leave to withdraw the
amendment.
Amendment,
by leave, withdrawn.
Mr.
Browne: I beg to move amendment No. 192, in
schedule 37, page 377, line 31, leave
out ‘in
writing’.
The
Chairman: With this, it will be convenient to discuss the
following amendments: No. 295, in
schedule 37, page 377, line 31, after
‘writing’, insert
‘in relation to
a particular
taxpayer’. No.
193, in
schedule 37, page 377, line 32, at
end insert ‘and received
in writing by each taxpayer to whom the duty under sub-paragraph (1)
applies.’.
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