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
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.
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 Secretarys 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 difficultieswe shall seebut 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
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 Secretarys 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.
Time limits for assessments, claims etc.
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 Secretarys 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 Ministers 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 initiallyno doubt the Financial Secretary will have noted thisthat 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
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 Ministers 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,
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 professcarelessness can extend the various limits available to HMRCand I am not certain whether the taxpayer benefits from the same rights. None the less, we acknowledge the Financial Secretarys comments and some of the practical difficulties, so I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
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 Secretarys 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. Gentlemans 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.
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