Finance Bill

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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 125

Set-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.
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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