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Session 2007 - 08 Publications on the internet General Committee Debates Finance Bill |
Finance Bill |
The Committee consisted of the following Members:Alan
Sandall, James Davies, Committee
Clerks † attended the
Committee Public Bill CommitteeThursday 12 June 2008(Morning)[Sir Nicholas Winterton in the Chair]Finance Bill(Except clauses 3, 5, 6, 15, 21, 49, 90 and 117 and new clauses amending section 74 of the Finance Act 2003)9
am
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 today’s
deliberations.
Schedule 38Disclosure
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
September—within the statutory time limit—the
reference number will be put first on the 2008-09 P35, submitted in May
2009. However, if, as encouraged by Her Majesty’s Revenue and
Customs guidance, the promoter sends the reference number to the client
in March of this year, when he receives it from HMRC, the client is
placed in an awkward position. When he submits the 2007-08 P35 in May
2008, there is no obligation to put the number on the P35 because the
arrangement has not been implemented, and a decision to implement may
not have been taken. However, when implementation subsequently takes
place in September, an obligation is created to report the reference
number on the P35 return for the year of assessment in which the number
was received, that is the previous year. Therefore, an amended P35
return must be
submitted. 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 Secretary’s
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 Secretary’s
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.
Clause 113Time
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 HMRC’s 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 taxes—inheritance tax,
corporation tax and capital gains tax—and 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 Treasury’s 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
time limits for claims and assessments from 1 April 2010. The new time
limits will therefore apply to claims made after that date. The
arrangements will ensure that it is clear to everyone which time limits
are changing and when. The main reason for not making the change
suggested in the amendment is that it would introduce significant
complication. It would mean that different sets of rules applied to
different periods in matters as basic as a claim or an
assessment. 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 Majesty’s 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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