I understand the concerns behind amendment No. 285 and why it was tabled. I am conscious that questions were raised during the consultation about the extent to which the provisions will apply to tax credits and child benefit. I acknowledge that this is a matter of concern for many who have made representations on the Bill. I want to reassure the Committee that HMRC will not seek to use an ongoing tax credit award or a child benefit award to satisfy other tax debts that may have arisen. Section 45 of the Tax Credits Act 2002 and section 187 of the Social Security Administration Act 1992 make entitlement to tax credits and child benefit an inalienable right. We have no intention whatever of moving away from that principle.
Secondly, except in very limited circumstances, which I will explain, HMRC will not set a tax repayment against a tax credit or child benefit overpayment. Where a tax credit or child benefit award has been made, and an overpayment subsequently arises, HMRC will not upset procedures for instalment plans or for recovery from an ongoing award. However, as explained there may be certain circumstances, as now, where at the request of the customer, HMRC will set off a tax repayment against a tax credit or a child benefit overpayment. We have had requests for that in the past.
As set out in the discussion paper Tax Credits: Improving Delivery and Choice, which I published last month, from next April, HMRC will begin a small trial to offer tax credit customers in employment the option of having their overpayment recovered by a deduction in their wages through an adjustment of their pay-as-you-earn code. This is a small pilot designed to improve choice for tax credit customers. It is a suggestion that I have heard over the last year from tax credit customers. It seemed a sensible idea to trial.
We will make no changes to the policy I have outlined without first coming back to the House. I do believe, however, that there are circumstances where a customer would like the flexibility to offset a tax repayment against a tax credit overpayment and where that is the case it ought to be possible for us to accommodate that. The discussion document includes examples of other Administrations, such as those in New Zealand and Australia, which use a similar arrangement. That is something that we should consider offering to tax credit
Mr. Mark Field (Cities of London and Westminster) (Con): I will detain you, Sir Nicholas, and the rest of the Committee only very briefly. Some quite deep concerns have come out in the course of this debate. Although the Minister has to an extent assuaged some of the concerns where there is consent between the Revenue and taxpayer on some sort of set-off arrangement, most taxpayers still have a deep concern that all too often the authorities do not get this right. That applies particularly in relation to the amendment where we discussed the working tax credit system, which has become almost notorious for its unreliability.
Where there is consent between a taxpayer and the authorities it is absolutely fine, but this is not about consent. It is about imposing a system. There is deep concern on the part of the taxpayer where there is a lack of reliability or a perceived lack of reliability, as is often the case, not least where there are potential interest payments. It always seems to be a one-sided situation: late payments from the Revenue do not seem to attract interest to the taxpayer, whereas they do in the opposite direction. There is quite some concern about the notion that set-off now becomes the norm, irrespective of the consent or arrangements where there has been a complicated tax situation between the taxpayer and the Revenue. It is not for me to suggest that this might go to a Division, but these are deep concerns. For my part at least, I am not sure that the Minister has been able to assuage them.
The Chairman: I say to the Financial Secretary that an ability to blush is a sign of an honest person.
Mr. Gauke: Thank you very much, Sir Nicholas, and I must say that you are looking very rosy-cheeked yourself, which I think confirms your dictum.
The Financial Secretarys remarks are helpful in assuaging our concerns about tax credits. She has been very explicit on that, although I am still not convinced that the proposal could not be put in the Bill. I also note her comments on amendment No. 283, which is of a practical nature. However, as I indicated in my opening remarks, we are particularly concerned about the matter addressed in amendment No. 284, which talks about sums being payable only when they are agreed. My hon. Friend the Member for Cities of London and Westminster eloquently set out the reasons for our concerns, and so we seek to press that amendment to a Division.
The Chairman: The hon. Gentleman has to make a request for a Division, because amendment No. 284 is not the lead amendment. I shall give the matter some consideration, but I now intend to call the hon. Member for Taunton, who is responsible for the lead amendment.
Mr. Browne: Thank you, Sir Nicholas. Your guidance on such matters is instructive. I am happy to withdraw amendment No. 197, which will pave the way for the hon. Member for South-West Hertfordshire to move his amendment, as I understand it. I beg to ask leave to withdraw the amendment
The Chairman: The hon. Gentlemans remarks have persuaded me to grant a Division on amendment No. 284. First, however, I must call amendment No. 198. We will come to amendment No. 284 a little later, at which point I shall put it to a Division.
Amendment, by leave, withdrawn.
(2A) The person concerned may appeal to the First-tier Tribunal against a decision by the Commissioners under subsection (2) if that decision can be reasonably shown to have had a significant adverse effect on the financial stability of the person concerned..
The Chairman: With this it will be convenient to discuss amendment No. 286, in clause 125, page 78, line 26, at end add
(14) A person may appeal to the First-tier Tribunal against any decision of the Commissioners under subsection (2).
(15) Notice of an appeal must be given
(a) in writing, and
(b) before the end of the period of 30 days beginning with the date on which the Commissioners notification under subsection (2B) was issued.
(16) On an appeal under subsection (14), the First-tier Tribunal may
(a) confirm the decision,
(b) cancel the decision,
(c) substitute for the decision another decision that the Commissioners had power to make having regard to subsection (2A)..
Mr. Browne: Unsurprisingly, the amendments overlap to a degree and touch on some of the issues discussed in the previous group. I shall be brief and specific. Amendment No. 198 would insert a new subsection to allow a person to appeal to the first-tier tribunal against a decision by HMRC to offset. Currently the clause gives no right to the taxpayer to contest a decision by HMRC, and the Institute of Chartered Accountants, and other bodies, have expressed concern that offset could damage businesses and force insolvency if exercised in inappropriate circumstances.
Clause 126, to which I shall not speak now, but which we shall come to shortly, would prevent set-off where insolvency procedure has been applied already. Providing an appeal route for the taxpayer, in clause 125, would allow a taxpayer to raise concerns and prevent set-off causing insolvency. As a safeguard, the amendment would allow an appeal only if the
decision can be reasonably shown to have had a significant adverse effect on the financial stability of the person concerned.
The purpose of the amendmentthis is the same point that I sought to make 10 minutes or so ago, and similar to the one made by my hon. Friend the Member for Cities of London and Westminsteris to address the balance between the power held by HMRC and that held by the individual taxpayer, who should have the opportunity, should he or she wish, to make a formal appeal if they feel that the behaviour and procedures followed by HMRC are unfairly to their disadvantage.
Mr. Gauke: With regard to the previous group of amendments, I am grateful to the Liberal Democrats for standing aside and helping us on this point of principle.
Mr. Gauke: The hon. Gentleman gets exactly what I am alluding to. I am grateful to him for making it more explicit.
Amendments Nos. 198 and 286 both essentially insert a right of appeal in the context of set-off. Our amendment No. 286 provides slightly more detail than No. 198 but both seek to achieve the same objective and provide the safeguards that Opposition Members think may be necessary with regard to matters of set-off.
Jane Kennedy: Set-off will initially take place manually rather than as a bulk process, and the customer will be informed at the time that set-off is made.
I understand the concerns expressed but set-off will be made in the course of HMRCs day-to-day dealings with taxpayers in debt, so there will be the opportunity for dialogue. It will be made only in respect of established debt where the normal appeal routes concerning the amount of debt have run their course.
It would be wrong to allow debtors a further opportunity to reopen a dialogue in the courts on how much they have to pay. An appeal process as suggested could undermine the whole benefit of set-off by unnecessarily complicating and delaying the time it takes to collect debts and to make repayments to taxpayers. It would prolong uncertainty and thereby potentially add to the taxpayers financial instability.
Appeals with little prospect of success could be used as delaying tactics. A successful appeal would leave a collectable debt which HMRC would then pursue perhaps even through the civil courts. The debt would still be collected but through a far more burdensome process. That is not fair to the general taxpayer and HMRC.
Clearly, there has to be some channel for discussion. As now, HMRC would consider particular circumstances, where the taxpayer raises concerns where set-off has been made. HMRC would continue to consider these on a case-by-case basis. That has not been changed by this measure.
I found this debate helpful, Sir Nicholas, in understanding the concerns around set-off and I want to keep this matter under review, but I think we have the balance right in the Bill as it stands and that the amendments are unnecessary.
Mr. Gauke: We continue to have concerns. The amendment we have yet to vote on would address a lot of our concerns in general with regard to set-off but, given that we are to have one Division on this set-off issue, we will not request another.
Mr. Browne: I am happy to beg leave to withdraw my amendment as we are to have a Division on an aspect of the clause and that would be helpful for testing the opinion of the Committee.
Amendment, by leave, withdrawn.
Amendment proposed: 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..[Mr. Gauke.]
Question put, That the amendment be made:
The Committee divided: Ayes 8, Noes 14.
Division No. 14]
Question accordingly negatived.
Clause 125 ordered to stand part of the Bill.
No set-off where insolvency procedure has been applied
Mr. Gauke: I beg to move amendment No. 287, in clause 126, page 78, line 31, leave out that and insert a.
The Chairman: With this it will be convenient to discuss amendment No. 288, in clause 126, page 78, line 32, at end insert
or a post-insolvency debit against a pre-insolvency credit.
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