Mr.
Gauke: Amendment No. 287 is to some extent a probing
amendment. Clause 126(2) states:
“The
Commissioners may not use the power under section 125 to set that
post-insolvency credit against a pre-insolvency debit”
and I would be grateful
for an explanation as to why the word is “that”, as
opposed to “a” so that it would be “a” case
of post-insolvency
credit. Amendment
No. 288 is a consequence of representations received from the Institute
of Chartered Accountants, which expresses its concern that by
specifically excluding from set-off in this clause
“post-insolvency
credits against pre-insolvency debits, the rules are implicitly, (or
perhaps even explicitly) allowing the set-off of pre-insolvency credits
against post-insolvency
debits.” It
makes the point that
“while this may
not be particularly important in many corporate insolvencies, there
will be many cases (and all cases of personal insolvency) where such a
set-off would be detrimental to the creditors
generally”.
In its words, this
would
“fly in the face
of all the basic principles of insolvency.”
Therefore, I would be
grateful if the Minister would explain the wording of clause
126(2).
Jane
Kennedy: Clause 126 offers a safeguard. Without it,
HMRC’s discretionary right of set-off under clause 125 would
take priority over set-off in insolvency, whereas it is not the
intention to disturb the normal insolvency rules. It also provides that
the earliest of a series of insolvency procedures brings that safeguard
into operation. However, the routes into and out of insolvency are many
and varied, and setting out all the circumstances that might apply
would result in inordinately lengthy legislation to address seldom-met
cases. The two amendments together would prevent HMRC setting-off a
pre-insolvency credit against a post-insolvency
debt. The
amendments are technically deficient, but I understand why they have
been tabled and am grateful for the opportunity to clarify further.
This is not a situation that HMRC often comes across in practice. The
power in clause 125 is discretionary, not mandatory. It is hard to
think of circumstances where HMRC would want to apply it in the way
that the amendment envisages. HMRC does not seek to set pre-insolvency
credits against post-insolvency debts under the current
legislation—schedule 81 of the Value Added Tax Act 1994. If such
a credit arose, HMRC would expect to pay it to the insolvent’s
estate for the benefit of all creditors. HMRC will continually review
its guidance to ensure that commonly met circumstances are fully
addressed. The amendments would not be of benefit to the
Bill.
Mr.
Field: Will the Financial Secretary therefore explain the
purpose of clause 126, if set-off is almost inconceivable in an
insolvency situation? What is the purpose of the clause, other than to
codify what is already the case, unless a new regime has come about,
for example as a result of the change in insolvency law under the
Enterprise Act
2002?
Jane
Kennedy: Clause 125 broadens HMRC’s set-off
abilities. Clause 126 limits those abilities in particular
circumstances, and makes it clear that the powers in clause 125, to
set-off sums payable to a taxpayer against an amount owed to HMRC by
that same taxpayer, limit those sums where there is insolvency. So, the
purpose of clause 126 is to underscore the current position. HMRC
applies set-off in insolvency cases according to legislation laid down
elsewhere. We do not seek to disturb the principles that underpin those
rules, but tax legislation is inconsistent and does not align precisely
with insolvency legislation. This clause makes that alignment. I hope
that that makes it clear that we have not included the clause for no
good purpose. It serves a useful purpose, and will be welcomed. Clearly
the guidance that will help practitioners to manage the legislation
will seek to give the clarity that perhaps is not immediately obvious
to the hon. Member for South-West
Hertfordshire.
Mr.
Gauke: This is a highly technical area, and I have no
doubt that those with greater expertise than I will look at it.
[Interruption.] I have a feeling that a
message is being sent that there is something
wrong.
David
Wright (Telford) (Lab): A message from the right hon.
Member for Haltemprice and Howden (David
Davis). Mr.
Brooks Newmark (Braintree) (Con): We have the electrodes
on right
now.
Mr.
Gauke: My hon. Friend is proving to have expertise on the
way that the Whips work. I think that we should move
on. I
have no doubt that experts in this area will look closely at what the
Financial Secretary has said, and I hope that she will listen to
representations that arise as a consequence of our exchange. A
legitimate issue has been raised, but I do not intend to press the
amendment to a Division. I beg to ask leave to withdraw the
amendment. Amendment,
by leave,
withdrawn.
The
Chairman: I am sure that the Committee will continue,
despite the modest noise being created by a light bulb that is about to
explode.
Clause 126
ordered to stand part of the
Bill. Clauses
127 to 129 ordered to stand part of the
Bill.
Clause
130Fee
for
payment
Mr.
Browne: I beg to move amendment No. 199, in
clause 130, page 83, line 1, leave
out from ‘section’ to end of line 2 and add
‘may not be made unless a draft of
the regulations has been laid before, and approved by a resolution of,
the House of
Commons.’.
The
Chairman: The doorkeeper is trying to isolate the bulb,
but I am sure that the Committee’s wish is that we continue
while that goes on. I call Mr. Jeremy Browne, who is used to
interruptions.
Mr.
Browne: I am indeed used to interruptions, but let there
be light, at least for the remainder of our proceedings.
The amendment
is not hugely significant in the grand scheme of things, but it
addresses precisely the type of smaller concern that often leads people
to feel, when dealing with the state in many of its forms, that the
powers of the authorities are unfairly weighed against those of the
individual citizen. It provides for positive resolution when
determining fee levels under clause 130. It would be helpful to explain
to the Committee why my hon. Friends and I feel that that is an
appropriate way forward. Subsection (1) allows HMRC to make regulations
to charge a fee for payment by specified methods of a person’s
financial obligations to HMRC. HMRC commissioners will be allowed to do
that only when they “expect” that they will have to pay a
fee or charge in connection with the payment they are
receiving.
Therefore, in
anticipation of additional transitional costs associated with the
payment by the taxpayer, HMRC will be able to levy a charge to
compensate itself financially for that payment, even if there is only
an expectation that it will have to meet that payment in the future.
Any regulations will be made under a statutory
instrument and be subject to negative procedure, which the amendment
seeks to
address. The
explanatory notes state that credit cards are thought likely to become
the first specified method of payment, but I understand that currently
HMRC does not generally accept credit card payments. I have tabled the
amendment because there is a specific issue to discuss. It enables
greater discussion about the wide-ranging impact of the clause and
specifically seeks reassurance from the Minister on how HMRC will
address a number of questions.
I have three
questions in particular. First, is legislation necessary for that to
occur? As I understand it, HMRC can decide to use credit card payments
or any other method for procuring the money owed to it by the taxpayer
without Parliament having to give it those powers through legislation.
Secondly, what kinds of payment does HMRC envisage extending those
powers to? Under the provisions of the clause as drafted, HMRC will be
able to levy charges in anticipation of those costs being incurred
later in proceedings. Does that mean that charges for handling cheques
or bank charges could be passed on to the taxpayer as part of the
procurement of their tax
liability? Finally,
when HMRC takes money from taxpayers in anticipation of future charges,
does it expect to reimburse them if the charges are not as great as it
anticipated or if no charges arise? It is possible that HMRC will be
unduly pessimistic in assuming that charges will have to be
levied. These
matters are not hugely significant in the grand scheme of things. We
are almost certainly talking about rather modest sums of money, but
these sorts of issues provide symbolic demonstrations of HMRC holding
powers over taxpayers that they might regard as unreasonable. That is
particularly true if taxpayers have to deal with long, drawn-out
processes with HMRC in which they feel somewhat embattled. That is what
I am trying to get at with the amendment and in debating clause 130
more
widely.
The
Chairman: It is perhaps appropriate to suspend the sitting
for five to 10 minutes so that the maintenance department can remove
the offending bulb. I congratulate the hon. Member for Taunton on his
tolerance and thank him for undertaking his speech with the background
noise. The suspension will allow us to get back to normal and will also
enable hon. Members to discuss the news that has broken while we have
been deliberating this sensible Bill.
[Interruption.] We will suspend until 2.15
pm. 2.5
pm Sitting
suspended. 2.17
pm On
resuming—
The
Chairman: We will begin our deliberations again although,
unfortunately, we are still plagued by this noise. The maintenance
department has failed to provide the standard of attention that I would
have expected. Could Members who contribute to the debate raise their
voices, as I am doing now, so that we can continue to make progress? I
should like to make good progress
this afternoon as there is still a great deal to be discussed. I had put
the question on amendment No. 199 and I was going to ask the Financial
Secretary to respond to the remarks of the hon. Member for
Taunton.
Jane
Kennedy: I will battle on, Sir Nicholas.
The normal
protocol for tax is to use negative resolution for regulations that
deal with routine administrative matters. Affirmative resolution is
usually reserved for more contentious matters. The Committee has seen a
draft of the regulations to be made under clause 130. They specify that
the payment method will be the use of a credit card and then set the
amount of the fee that HMRC will
charge. The
hon. Member for Taunton asked whether other methods beside credit cards
were being considered. HMRC will be able to pass on the fee for a
specified payment method only when it expects to be charged a fee for
the transaction. That is not the case for the normal cost of payment
processing. Any payment method must be specified in regulations
approved by Parliament. Draft regulations to pay a fee in connection
with the amounts paid by using a credit card have been published, but
there are currently no plans to pass on any charges other than credit
cards. New
ways of paying continually arise and it makes sense to future-proof the
legislation.
[Interruption.]
The
Chairman: Order. No interruptions. Hansard needs to
be able to hear the
Minister.
Jane
Kennedy: Legislation supports a range of payment methods,
but HMRC cannot accept payment by credit card other than in limited
circumstances such as at ports and airports. Early consultation by HMRC
has shown that many small businesses use credit cards to manage their
short-term cash flow and taxpayers regularly ask HMRC whether they can
pay by credit card. Clause 130, therefore, provides for HMRC to receive
payment and then to make regulations to charge a fee for payment made
by such methods.
I was asked
whether the taxpayer will have to bear the cost of paying by credit
card. Only those taxpayers who choose to pay in this way will bear the
cost of the transaction, rather than the cost falling on all taxpayers.
The hon. Gentleman asked a series of questions, one of which involved
the refund of transaction fees. Where either HMRC or the payer makes a
mistake, which is immediately corrected, both tax and transaction fees
will be refunded through the card to the card holder. For mistakes by
the taxpayer that are picked up later, or a change in taxpayer’s
circumstances giving rise to a reduced liability, the fee is not
refundable. This is as advised at the time of payment, so repayment
will be made to the taxpayer through whatever repayment channel is
appropriate as happens now. For HMRC error, where it is decided to
refund the transaction fees, the refund will be paid out of
HMRC’s redress budget through whatever repayment channel is
appropriate.
The hon.
Gentleman asked the very sensible question whether legislation is
needed at all. The answer is that, because of the functions laid down
in the Commissioners for Revenue and Customs Act 2005, collecting these
fees is not included. They are not a tax so they are not specified by
that Act. We therefore have to legislate separately for it. As I have
said, HMRC accepts payment by credit card at ports and airports. This
is for customs duties at points of entry and road-fuel testing units up
to a transaction limit of £1,000. In light of the
representations that HMRC has made, however, it is sensible to
introduce this opportunity for HMRC to respond to customer demand.
Having raised the level of my contribution to one of which our dear
departed Friend the former Member for Crewe and Nantwich, Gwyneth
Dunwoody would have been proud, I hope the hon. Gentleman will not
press these amendments to a vote. Mr.
Browne: It is always flattering to be described as
very sensible by the Financial Secretary. That is not the only reason,
however, why I will seek your leave to withdraw my amendment because
she also engaged with many of the points that have been raised and
provided some reassurance for taxpayers. On that basis, I beg to ask
sleave to withdraw the
amendment. Amendment,
by leave,
withdrawn. Clause
130 ordered to stand part of the
Bill. Clause
131 ordered to stand part of the
Bill.
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