Jane
Kennedy: The clause will allow HMRC officers to use the
procedure for taking control of goods outlined, as the hon. Gentleman
correctly says, in schedule 12 to the Tribunals, Courts and Enforcement
Act 2007 when that comes into effect. The current safeguards on
destraint are not being weakened under the TCEA but rather the
opposite. It makes sense for officers of HMRC to be subject to the same
statutory rules as other enforcement agents rather than the present mix
of statute, common law and administrative discretion.
Amendment No.
281 is in two parts. The first would disapply HMRC’s ability to
take control of goods where regulations made under section 12 of the
TCEA may require less than five days in which an action should take
place. I think it is premature to restrain HMRC in this way before the
regulations have been drawn up and consulted on, but I appreciate the
reasons why and I will explain what I anticipate will happen in the
coming weeks and
months. The
second part of the amendment concerns the right of any enforcement
agent, including officers of HMRC, to enter premises for the purposes
of taking control of goods. This point was also raised in
representations on the Bill, but I believe that the amendment is based
on a misinterpretation of paragraph 14 of schedule 12 to the Tribunals,
Courts and Enforcement Act 2007. That confers a right to be present on
those premises without prior judicial authority, for example, as a
defence against trespass. I can understand that the Committee might
believe that HMRC currently requires a warrant before entering any
premises, and that that protection is being removed. That is not so: a
warrant is required by HMRC only when it seeks to enter premises by
force, and that requirement will be extended to all enforcement agents
under TCEA.
1.15
pm The
amendment would prevent HMRC from bringing clause 122 into effect until
it had laid before the House a report on how it would use the
procedure. The 2007 Act is the responsibility of the Ministry of
Justice; it is not tax legislation. The enforcement law reforms in the
Act require the development of underpinning rules and regulations. The
Ministry of Justice is carrying out a scoping exercise involving a
series of meetings with relevant stakeholders, including HMRC, which is
closely involved in those
discussions. Clause
122 cannot be brought into effect until schedule 12 to the 2007 Act is
in effect. No order will be laid until the Ministry of Justice’s
public consultation has run its course. The Ministry of Justice, not
HMRC, will make the regulations. Guidance will be drawn up and
published by HMRC in the light of the outcomes of the public
consultation. Under the circumstances, the amendment would add little
to the current situation. I hope that my explanation of where and when
the scrutiny of the detail will take place satisfies the hon.
Gentleman’s concerns, which are understandable in the
circumstances.
Mr.
Gauke: I am grateful for the Financial Secretary’s
comments. She accepts that our concerns are reasonable. I will not
press for a Division, but I think that it is unfortunate that we can
see the powers and the deterrents, but cannot yet see the safeguards.
We have touched on that theme before under part 7. I understand that
there is an ongoing consultation process in the Ministry of Justice,
but this is another example of the safeguards being left behind. We
have to take those safeguards on trust, which is regrettable, given
that this is the best opportunity for Parliament to scrutinise and
review them. I am keen to put it on the record that this situation is
regrettable, but I beg to ask leave to withdraw the
amendment. Amendment,
by leave,
withdrawn. Clause
122 ordered to stand part of the
Bill. Clauses
123 and 124 ordered to stand part of the
Bill. Schedule
43 agreed
to.
Clause
125Set-off:
England and Wales and Northern
Ireland
Mr.
Browne: I beg to move amendment No. 197, in
clause 125, page 77, line 36, after
‘Commissioners’, insert ‘or the person
concerned’.
The
Chairman: With this it will be convenient to discuss the
following amendments: No. 283, in
clause 125, page 77, line 36, at
end insert— ‘(2A) Where
there is more than one debit in relation to a person, any set-off under
subsection (2) shall be treated as reducing those debits in the manner
and in the order which will result in the greatest reduction of the
person’s indebtedness to the
Commissioners. (2B) On making
any set-off under subsection (2) in relation to a person, the
Commissioners shall forthwith notify the person in
writing.’.
No. 284, in
clause 125, page 78, line 15, at
end insert ‘and a sum is
payable only when it is agreed between the parties to be payable or
where the person has exhausted all possible appeal
routes.’. No.
285, in
clause 125, page 78, line 26, at
end add— ‘(10) The
Commissioners may not set a credit that is a tax credit payment against
any debit. (11) The
Commissioners may not set a credit against any debit that is a tax
credit overpayment without the consent of the person or persons from
whom the Commissioners seek to recover the
overpayment. (12) In subsection
(10) above, a “tax credit payment” is a payment of
working tax credit or child tax credit under the Tax Credits Act
2002. (13) In subsection (11)
above, a “tax credit overpayment” is an amount that is
liable to be repaid to the Commissioners under section 28 of the Tax
Credit Act
2002.’.
Mr.
Browne: As I understand it, in June 2007 the Treasury
consulted on offset measures, which is the matter before us in clause
125. On 10 January 2008, a document was published entitled,
“Payments, Repayments and Debt: Responses to Consultation and
Proposals”, and the clause is the result of that process. It
allows HMRC to offset sums that it owes to a taxpayer against amounts
owed to HMRC by that taxpayer. It is logical that if HMRC owes the
taxpayer money and the taxpayer owes HMRC money, there is a facility to
offset those two arrangements. The clause throws up a few questions
that I would like the Minister’s response to. Amendment No. 197
touches on one aspect of that. I will not speak to amendment No. 198
now, because it is in a separate group, but it touches on another
aspect of it.
Under the
amendment, the taxpayer would also have the right to choose to offset.
At the moment, HMRC can decide that that is a desirable arrangement,
but it is not open to the taxpayer to make a similar decision if it is
convenient for them and it is possible to apply the rules in a way that
could be of mutual advantage to both parties. While I am on my feet,
may I ask the Minister to shed some light on a few related
issues?
First, HMRC
has stated that it would not offset tax credit and child benefit
payments against a previous liability, but that is not in the Bill. Can
the Minister explain why, and say whether it could be made more
explicit for those who need to have that information readily
understandable to
them? Secondly,
why does the clause not include provisions regarding offset? The
Minister may be able to shed more light on that. If there are separate
debts, is it possible to consolidate and align them in such a way that
the offset mechanism can be used? It may be that I have misunderstood
and that that is a possible arrangement. Having more of an explanation
about how the measures will work in practice would be
helpful.
Finally, will
HMRC be able to delay a payment due to a taxpayer if it expects tax
liability to arise? One can easily envisage a situation in which there
is a small amount of money owed by HMRC to the taxpayer, but, in
anticipation of an offset arrangement kicking in and taking effect in
the near future, HMRC could delay payment. In those circumstances, the
taxpayer could suffer cash-flow problems, for example. It would help to
understand whether HMRC is allowed to use the offset mechanism to
anticipate a taxpayer’s future liabilities. If so, what period
would that process of anticipation be allowed to cover?
Those are wider
points, which perhaps I should have raised in a stand part debate.
However, I have raised them now instead, so I do not need to contribute
then. I have also raised them as a way of introducing the amendment, so
that the Committee has the opportunity to discuss what is proposed in
it.
Mr.
Gauke: In speaking to amendment No. 197 I shall also
address amendments Nos. 283 to 285. The hon. Member for Taunton has set
out many of the issues, both in relation to his own amendments
and—although he referred to this as perhaps being appropriate
for a stand part debate—in touching on some issues in the other
amendments in this group, where we are looking at the rights of offset
between amounts owed to and from a taxpayer and HMRC.
At the outset,
we are certainly sympathetic to amendment No. 197. If it is possible
for HMRC to offset, there needs to be a good reason why the taxpayer
should not be able to; the challenge is for the Financial Secretary to
provide that good reason or to accept the amendment. If offsetting is
to occur, it is only right and fair that it is done in the best
possible manner for the taxpayer. There is no particular reason why the
taxpayer should be disadvantaged by how offsetting occurs, as such
arrangements can sometimes be quite complicated, and how it is done can
make a substantial difference to the end financial result. If HMRC is
to make use of these powers, there should be an obligation on it to do
so in the best possible manner, which is the purpose behind amendment
No. 283.
On amendment
No. 284, we are keen to ensure that a sum becomes payable only where it
is “agreed between the parties”. There is a real concern
that HMRC might try to use the power to offset amounts that it believes
to be owed by the taxpayer. That could, for example, be where HMRC has
made an error—entirely innocently, but none the less not beyond
the realms of possibility—or where there is still a valid
dispute. In those circumstances, given our debates on the various
appeal procedures and so on, it would clearly be unacceptable for those
procedures effectively to be overridden by an attempt to offset debts
at that point. I understand that HMRC has indicated that any debts
offset should be agreed, but we would like some assurance, ideally in
legislation.
There is also
the issue of tax credits that the hon. Member for Taunton touched on.
Again, the Government have said throughout that tax credits could not
be offset: quite an important point, yet it is not in the legislation,
and we suggest that it should be. Clearly, assurances from the
Government would assist on that, and we look forward to what the
Financial Secretary will say. At the outset, then, we are probably most
determined on amendment no. 284, but we will wait to hear what she
says.
1.30
pm
Jane
Kennedy: Before I respond on the amendment, perhaps I
might make some brief comments about what clause 125 seeks to achieve.
I am not sure whether the hon. Gentleman said he was hoping for a stand
part debate on that, but if he is not then I may speak a little broadly
at this point.
Set-off is a
normal business principle. Under common law or by request, HMRC may
already set off sums payable to taxpayers against amounts they owe to
it.
[Interruption.] Something other than cricket appears to be of
interest to Members of the Committee at this moment; hard to believe,
but that much seems to be the case. HMRC and its principle of set-off
sit easily within some taxes but less so across others. This clause
gives a specific power to HMRC to make set-off across all of the
different taxes and duties that it administers, at its discretion. HMRC
would set-off repayments only against established debt. An established
debt is one that is correctly payable, either based on a return from
the taxpayer or agreed, or as assessed, with the time for appeal having
passed or the appeal having been determined. A taxpayer can request
set-off to take place now, and HMRC considers each request on its
merits. That will remain
unchanged. Amendment
No. 197 would set in statute that taxpayers could also require the use
of set-off. However, the amendment does no more than restate the
existing position. Taxpayers can already request set-off, and nothing
in the clause would change that. An unfettered right to require
set-off, in whatever amount, risks tying up HMRC resources on small,
individual debts that are uneconomical to resolve in that
manner. There
is no objection in principle to the first part of amendment No. 283.
The purpose of the measure is to reduce indebtedness in a sensible way.
The majority of set-offs are likely to involve a single debt and a
single repayment where the issue would not arise. However, HMRC could
not be expected to know in every case what particular allocation of a
repayment might be to the debtor’s advantage, as that might
depend on information that only the debtor held. Instead, HMRC will
continue to apply its long-established rules on appropriation, as it
does when making set-off now. Those rules are in HMRC’s
published guidance and provide a framework that aims to ensure that
payments are allocated to the taxpayer’s best
advantage. As
now, HMRC will consider particular circumstances where a taxpayer
raises concerns and where a set-off has been made and it will continue
to consider those circumstances on a case-by-case basis. That process
has not been changed by the measure. In light of our debate
today—I knew that the clause would raise a degree of
interest—HMRC will shortly publish its policy on set-off and, in
due course, the operational guidance for its
staff. The
second part of amendment No. 283 would require HMRC to notify the
taxpayer in writing once the set-off is made. HMRC will confirm, as
now, that the taxpayer must always be told in writing that set-off has
taken
place. Before
I deal with amendment No. 284, may I address a couple of questions that
have been raised? First, I shall deal with the question that the hon.
Member for Taunton asked about the time periods. He is somewhat
distracted, Sir Nicholas, so I shall explain to you and to the other
Committee members. Tax repayments may be held back for a short
period—usually only 14 days or so—but they could be held
longer, depending on the tax concerned. The hon. Gentleman is right in
saying that that could
happen. The
hon. Member for South-West Hertfordshire asked what would happen if
HMRC made a mistake, but it is hard to imagine instances in which HMRC
might get it wrong. The same remedies would apply as now. For example,
if HMRC made a mistake, it would apologise,
put things right and explain what went wrong, and consider refunding
reasonable costs directly caused by their mistakes or by unreasonable
delays. Amendment
No. 284 would set in statute that set-off will take place only where
the party concerned and HMRC agree that a sum is payable to the
commissioners or where the person concerned has exhausted all appeal
routes. I am not attracted by this amendment, as it would do no more
than restate the existing position. Set-off will be applied only where
both the repayment and debt are established. An established debt is one
that is beyond challenge, whether the appeal has been settled or the
time for appeal has passed. [Interruption.] It seems to be my
phone, Sir Nicholas. I thought I had turned everything off. I
apologise.
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