The
Chairman: With this it will be convenient to discuss
amendment No. 277, in
schedule 39, page 385, line 21, leave
out paragraph
12.
Mr.
Gauke: These amendments have been suggested to us by the
Low Incomes Tax Reform Group, an organisation that we have mentioned a
number of times of late in the Committee. Paragraph 12 of schedule 39
reduces the time limit for reclaiming overpaid tax from five years and
ten months to four years. The LITRG makes the point that it has no
objection to alignment when it is for the better operation of the tax
system, but
that it should not take place for its own sake, particularly if it will
cause an erosion of the rights of unrepresented
taxpayers. There is a
general concern about overpaid tax, so it would be helpful if the
Minister were to give some details of any estimate that HMRC and the
Treasury have made of the levels of overpaid
tax.
9.15
am To
illustrate the scale of the problem of unrepresented taxpayers, in
particular, not claiming back tax that they have paid, but which they
do not owe, in 2004-05, the pensioner tax back project repaid 50,000
pensioners some £20 million. It is also worth mentioning the
arrangements for the 10p tax rate for savings income. Some people are
concerned that there will be large amounts of overpaid tax, because the
savings rate will not be claimed. In those circumstances, there is
considerable and understandable concern that reducing the time in which
people have a right to claim from five years, 10 months, to four years
might leave innocent taxpayers who have overpaid out of pocket and not
in a position to reclaim. I acknowledge the Financial
Secretary’s more general remarks about schedule 39, but that
specific matter has raised genuine
concerns. There are
two approaches to that matter, as set out in the amendments. The
simplest approach is set out in amendment No. 277, which would simply
delete paragraph 12 of the schedule, so that we retain the existing
position. Of course, there would not be full alignment, but as the
LITRG says, alignment for its own sake is perhaps not the strongest
argument. Alternatively, if the Government are determined to align all
these matters along four years, the LITRG has proposed that no order to
change the assessment time limit be made unless HMRC can satisfy the
House of Commons that it can identify all the individuals who have
overpaid income tax in previous years, and state the arrangements to
refund them. That might cause some administrative
difficulties—we shall see—but it gives the Government the
opportunity to continue their policy of alignment while addressing the
concerns that I have tried to outline this morning. If the Financial
Secretary is minded to accept one amendment over the other, we would be
more than happy to
oblige.
Jane
Kennedy: Amendment No. 277 would remove the long-standing
symmetry between assessment and claim time limits, and allowing a
longer time limit for claims and assessments would present a
significant risk to tax revenues. For that reason, if for no other, I
am not attracted to it. It would result in a one-way flow, because HMRC
would forego its right to assess underpaid tax, but taxpayers would be
allowed to make late claims. Under the clause and the schedule,
taxpayers will still be able to make income tax claims beyond the time
limit if they have a reasonable excuse for not making the claim on time
and if they make the claim without unreasonable delay once that excuse
has been accepted.
Amendment No. 278 would require
HMRC to identify all taxpayers, as the hon. Gentleman described, who
have overpaid tax, and to make arrangements to refund them. He ought to
think carefully about what
that would mean: it is not possible with self-assessed tax, because HMRC
does not have the information necessary to identify how much tax
everyone in the UK should, and does, pay, and therefore any difference
between the two figures. Requiring everyone in the UK by law to send
HMRC full details of their earnings would represent a significant
administrative burden, not just for HMRC, but for everybody, and would
be of no benefit to most people. Instead, therefore, HMRC promotes the
ability to claim through communications with taxpayers, advertising and
so on. HMRC will make
sure that all taxpayers are informed of the change in time limits. It
will work with taxpayers’ representatives, including the low
incomes tax reform group ,to identify which groups of people are likely
to be able to make which kind of claims. It will use publicity on the
new time limits to advise them how to make a claim, and it is planning
another tax back campaign along the lines of the one in 2000 to which
the hon. Gentleman alluded, to encourage individuals to claim overpaid
tax. It will target pensioners in
particular. Mr.
Peter Bone (Wellingborough) (Con): Will the Minister tell
us how much overpaid tax will not be refunded to taxpayers as a result
of the
change?
Jane
Kennedy: I was going to come on to the two questions of
detail. I do not have that sort of information with me, but I will find
it, in so far as it is available, and provide it to the
Committee. I cannot
say much more. I understand the motivation behind the amendments, but,
if tax has been overpaid, individuals can reclaim it and HMRC is
committed to ensuring that people are aware that they can do so. HMRC
will work to promote and advertise such rights over the coming weeks. I
hope that the hon. Member for South-West Hertfordshire will accept that
reassurance that we take his concerns
seriously.
Mr.
Gauke: I welcome the Financial Secretary’s remarks,
but there is still serious concern about overpaid tax. We will not
press the amendments, but we may return to the issue at a later stage.
I beg to ask leave to withdraw the
amendment. Amendment,
by leave, withdrawn.
Clause 113
ordered to stand part of the Bill.
Schedule
39Time
limits for assessments, claims
etc.
Mr.
Gauke: I beg to move amendment No. 297, in schedule 39,
page 384, line 9, at end insert
‘except that for claims relating
to tax years up to and including 2007/08 the reference to “4
years” shall be “6
years”.’. The
schedule raises similar issues to clause 113. I would be grateful for
the Financial Secretary’s comments on the time limit for claims
for error or mistake being reduced from six years to four years, and
how she seeks to justify the measure. The amendment probes further what
we have already debated.
Jane
Kennedy: The amendment raises two issues that we have
already touched on. First, it would leave an unbalanced situation.
Until 5 April 2014, taxpayers could make claims relating to tax for six
years, but HMRC could assess claims only for four years, unless the tax
loss was careless or deliberate. The amendment would remove the
long-standing symmetry between assessment and claim time limits.
Allowing a longer time limit for claims than for assessments would
involve a high risk for tax revenues. It would mean in some years
forgoing underpaid tax when taxpayers could still make late claims. I
have described that as a one-way flow of revenue. Secondly, the
amendment would need complicated transitional rules as to what time
limits applied. I hope that with that short response the hon. Gentleman
will accept that we are alive to his concerns, but that the proposals
in the Bill are
sensible. Mr.
Gauke: I note the Minister’s comments on it being a
one-way street or one-way flow and her point about symmetry, although
we are talking about a relationship between HMRC and the taxpayer that
is not entirely symmetrical. Taxpayers are often hard pressed,
unrepresented and in a difficult position, so I continue to believe
that there is an issue in this regard and, as I have said, we might
return to it at a later stage. I beg to ask leave to withdraw the
amendment. Amendment,
by leave, withdrawn.
Mr.
Gauke: I beg to move amendment No. 298, in
schedule 39, page 384, line 30, after
‘a’, insert
‘deliberate’.
The
Chairman: With this it will be convenient to discuss
amendment No. 299, in
schedule 39, page 384, line 33, after
‘has’, insert
‘deliberately’.
Mr.
Gauke: I should explain initially—no doubt the
Financial Secretary will have noted this—that amendment No. 299
should use the word “deliberate”, rather than
“deliberately”, so I should clarify that grammatical
point. The amendments relate to assessments involving a loss of income
tax or capital gains tax which has been brought about deliberately by
the person. The provisions in paragraph 9 stipulate that that loss of
income tax or capital gains tax must be
“attributable to a failure by the
person to comply with an
obligation” or “attributable
to arrangements in respect of which the person has failed to comply
with an obligation.” The
amendments are in part probing. They seek a better explanation of what
the word “failure” means in those two contexts and of
whether that covers simple carelessness or means something stronger.
The attempt to insert “deliberate” is intended to tighten
that definition so that the provisions in paragraph 9 will not come
into effect if someone is simply careless. We would be grateful for the
Minister’s views on those
matters.
Jane
Kennedy: Taxpayers have a long-standing obligation to
notify HMRC that they are liable to tax. If a taxpayer does not provide
such notification, HMRC might not find out for some time. HMRC,
therefore, needs time to investigate their affairs and quantify the tax
due. Amendments Nos. 298 and 299 would make the extended time limits
apply only if the failure to notify liability or use of a scheme was
deliberate, but they ignore the fact that that provision is not a
penalty. It requires the taxpayer to pay the tax, if they have not paid
because they did not notify HMRC. HMRC owes it to those taxpayers who
come forward and arrange to pay tax not to allow those who do not do so
to have a significant competitive advantage.
If the amendment were made,
HMRC would have to prove that a taxpayer or a company had deliberately
failed to notify it of their tax liability, and it should be clear to
everyone that that would be extremely difficult. Even if a taxpayer has
deliberately failed to notify HMRC of business activity or the use of a
disclosable scheme, evidence to prove that that is the case would have
to be given by HMRC. Those difficulties would genuinely arise if the
amendment were made, so I hope that the hon. Gentleman will accept that
that would lead me to resist the amendment if it were
pressed.
Mr.
Gauke: Again, we will not be pressing the amendment, but I
think that it was an important point to raise. I am not sure that the
symmetry between the taxpayer and HMRC is necessarily present in the
way the Government profess—carelessness can extend the various
limits available to HMRC—and I am not certain whether the
taxpayer benefits from the same rights. None the less, we acknowledge
the Financial Secretary’s comments and some of the practical
difficulties, so I beg to ask leave to withdraw the
amendment. Amendment,
by leave,
withdrawn. 9.30
am Mr.
Jeremy Browne (Taunton) (LD): I beg to move amendment No.
194, in
schedule 39, page 385, line 37, leave
out from ‘discovers’ to ‘that’ in line 38
and insert ‘within four
years of that information having been
provided’.
The
Chairman: With this it will be convenient to discuss
amendment No. 300, in
schedule 39, page 385, line 38, after
‘later’, insert
‘during the period within which it
is possible for an assessment to be raised to recover the tax
lost’.
Mr.
Browne: It seems strange to make a contribution when there
is no test match starting today. However, we can look forward to the
shallower pleasures of limited-overs cricket for the next few
weeks. The amendment
refers to paragraph 15 on page 385, which has already been touched on,
because we have discussed more minor amendments on the same point.
Sub-paragraph (5)
states: “For
the purposes of this Act a loss of tax or a situation is brought about
carelessly by a person if the person fails to take reasonable care to
avoid bringing about that loss or
situation.” Sub-paragraph
(6)(b) states that “the
person who provided the information, or the person on whose behalf the
information was provided, discovers some time later that the
information was inaccurate”.
Our concern is that a period “some
time later” is a rather vague basis for the taxpayer to know
their position. The amendment would change that phrase
to “within four years of
that information having been
provided”. The
amendment is as simple as that, and I am interested to hear the
Financial Secretary’s response. I ought to say that we are not
wedded to a period of four years. If she thinks that another figure is
preferable, the Committee may well be persuaded. However, the principle
of a specified time limit as opposed to the expression, “some
time later” is of value. With your indulgence, Sir Nicholas, may
I say that, although amendment No. 195 is not in this group, it relates
directly to this matter? It would put the measure in place from 6 April
2009, so that there would be a period for people to adjust to the
proposal. Having made that point, I will not feel the necessity to make
it
later.
Mr.
Gauke: I endorse the hon. Gentleman’s words: test
cricket is a far superior game to Twenty20 cricket. I share his view
that there is a problem with the measure. Amendment No. 300, which I
tabled with my hon. Friends, reminds me of the Conservative amendment
with regard to deceased persons that the Financial Secretary graciously
accepted last Tuesday. We agreed in the Committee that there was no
point in the time period within which information should be provided
being any longer than the period in which tax could be assessed.
Amendment No. 300 makes a similar point regarding the period of time in
which it is possible for an assessment to be raised to recover lost
tax. There is a parallel to be drawn: given that I was successful with
our earlier amendment, I thought that that would be a particularly
persuasive argument for the Financial Secretary, but we shall
see.
The
Chairman: We will see whether that argument falls on
favourable ground.
[Interruption.]
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