House of Commons
|Session 2007 - 08|
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General Committee Debates
The Committee consisted of the following Members:
Alan Sandall, James Davies, Committee Clerks
attended the Committee
Public Bill Committee
Thursday 12 June 2008
[Sir Nicholas Winterton in the Chair]
(Except clauses 3, 5, 6, 15, 21, 49, 90 and 117 and new clauses amending section 74 of the Finance Act 2003)
The Chairman: I am delighted to be in the Chair for this sitting. I fear that you will have to put up with my presence this afternoon as well. The weather is cooler than it has been, and I am confident therefore that we shall make even speedier progress with todays deliberations.
Disclosure of tax avoidance schemes
Mr. David Gauke (South-West Hertfordshire) (Con): I beg to move amendment No. 296, in schedule 38, page 383, line 31, at end add
Amendment of Tax Avoidance Schemes (Information) Regulations 2004
(8) The Tax Avoidance Schemes (Information) Regulations 2004 (S.I. 2004/1864) shall be amended by adding after regulation 8(10) the words and if the accounting period or year of assessment in which the reference number is received differs from the accounting period or year of assessment in which the first transaction forming part of the arrangements is entered into, then the reporting requirement in this regulation shall relate to the later of those two periods (unless a tax advantage arises in an earlier period in which case the reporting shall be in that earlier period)..
May I say on behalf of the whole Committee not only that it is a pleasure for you to be here, Sir Nicholas, but that it is a pleasure for us that you are here. We look forward to your presence for the rest of the day.
The amendment relates to representations that the Treasury has received from PricewaterhouseCoopers, which has identified an issue regarding the tax avoidance scheme disclosure rules. Taxpayers have to put the scheme reference number on their tax returns, and a difficulty arises where there is a delay, which can sometimes be substantial and is not uncommon, between making an arrangement available to a client and the commencement of implementation. As a result, a client in receipt of a scheme reference number may reach the filing date with no obligation to report that scheme reference number on the return, as implementation has not commenced. However, if he starts implementation after filing the return, he has to file an amended return to report the reference number.
For example, suppose a notifiable arrangement giving a PAYE-related advantage is made available to a client in March of this year but is implemented in September. If the client receives the reference number in Septemberwithin the statutory time limitthe
There does not seem to be a policy reason for HMRC to receive the reference number earlier than on the return for the year in which it would have appeared had the promoter provided the reference at the end of the statutory time limit. Therefore, amendment No. 296 proposes that regulation 8 requiring the taxpayer to report the reference number should refer to the return for the later of the accounting period or year of assessment for which the reference number is received, and the accounting period or year of assessment in which the first transaction forming part of the arrangements is entered into. That avoids the requirement to amend a return that has already been submitted, but it does not disadvantage HMRC. It will still get notification of the scheme reference number when it needs it.
The amendment is somewhat technical and is designed to be helpful. We look forward to the Financial Secretarys comments.
The Financial Secretary to the Treasury (Jane Kennedy): Good morning, Sir Nicholas. The draft regulations that we are considering today are limited to the changes necessary to implement the measures in the Bill. There is concern in respect of the point raised by the hon. Gentleman. HMRC has said, in its published response to a constructive consultation on this area, that it will hold further discussions with interested parties over the coming months on how the current system of reporting scheme reference numbers by users might be improved and simplified. The issue addressed by the amendment is a fair representation of the concern but it deals with only one aspect of a broader range of issues that it is sensible to deal with as a package at a later date.
HMRC is considering changing the rule to reporting the scheme reference numbers when the scheme is implemented. Therefore, it has taken on board the point raised by PricewaterhouseCoopers. However, there are further issues, including transitional issues and the timetable for amending the return forms on which most SRNs are notified.
I hope that, with those reassurances, the hon. Gentleman will note that we have accepted the concerns that have been raised, but there are one or two other areas that we would like to be resolved all at the same time and in a tidier way than the amendment would allow for.
Mr. Gauke: I appreciate the Financial Secretarys response and her recognition that this is a legitimate issue. In light of that, and in the expectation that the matter will be addressed, I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Schedule 38, as amended, agreed to.
Clause 112 ordered to stand part of the Bill.
Time limits for assessments, claims etc
Mr. Gauke: I beg to move amendment No. 280, in clause 113, page 70, line 25, after provision, insert
under which the amendments can take effect only in relation to claims and assessments for a fiscal year starting after the date in which the order is made.
Clause 113 implements schedule 39 and relates to the time limits for assessments and claims. We are changing the period of time in which assessments on claims must be made. There is concern that, for example, a person who believes that he has five years, 10 months to make an existing claim and decides not to do so until the end of that period because he cannot foresee whether his circumstances may change, may now find himself time-barred because the time limits are reduced to four years. That is unfair. The Institute of Chartered Accountants has raised the issue of legitimate expectations.
In light of that concern, we propose in the amendment, essentially, a transitional arrangement. The amendment will only come into effect in relation to claims and assessments for a fiscal year starting after the date on which the order is made. Therefore, the circumstances that I have outlined will not apply and transitional arrangements will address those. That is the issue behind the amendment. Again, we should be grateful if the Minister responded.
Jane Kennedy: Schedule 39 aligns when HMRC can make assessments to bring tax into charge if too little has been paid or too much claimed. It also aligns the time limits for taxpayer claims. There has been extensive consultation, and it is worth telling the Committee that that Law Society has said:
We applaud HMRCs attempts to align time limits structures across IT, CT, VAT, PAYE and NICs
income tax, corporation tax, VAT, pay-as-you-earn and national insurance contributions. It continued:
It is our view that this makes a great deal of sense and will make, it is hoped, compliance with tax laws somewhat easier and provide greater certainty.
That has encouraged us that the route that we are taking is right.
The schedule sets a four-year time limit for assessments, which is a change from six years for a number of taxesinheritance tax, corporation tax and capital gains taxand from three years for VAT. It also sets a six-year time limit for assessments if the taxpayer has failed to take reasonable care, which is a change from 20 years for income tax, capital gains tax and corporation tax, and a 20-year time limit for assessments by HMRC in certain circumstances.
The amendment would constrain the transitional provisions that will be contained in the Treasurys order introducing the new time limits. The transitional arrangements that we envisage are that we will lay the commencement order by 1 April 2009 to introduce the
A further reason not to accept the amendment is that it ignores the aim of aligning taxes. Giving taxpayers extensive notice of a change in time limits, as we propose, is a fair way to introduce such a change. The time limits will be confirmed in legislation a year in advance, giving taxpayers time to make claims for earlier years. HMRC will use the period in between to publish extensively the changing time limits and situations in which taxpayers may be able to make claims. If the time provided does not prove enough for taxpayers claims, we will consider delaying the introduction of the new time limits.
Given the strong support that I have mentioned for this package of measures to align time limits, it is right that taxpayers should see the benefits of them as soon as is reasonably possible. Our proposals meet that challenge, and I hope that the hon. Gentleman will withdraw the amendment.
Mr. Gauke: We do have some specific concerns to turn to when we debate the next group of amendments, but I am grateful to the Financial Secretary for her comments that HMRC will seek to raise awareness of the change in the time limits for assessments and so on, and that it will keep the matter under review. On that basis, I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
(4) No order may be made under subsection (2) in respect of the amendment made by paragraph 12 of Schedule 39 unless
(a) the Commissioners of Her Majestys Revenue and Customs have laid a report before the House of Commons
(i) demonstrating that they can identify all individuals who have overpaid income tax in previous years, and
(ii) stating what arrangements they will make to refund them the tax they have overpaid, and
(b) the House of Commons has by resolution approved those arrangements..
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