Clause
132Certificates
of
Debt
Mr.
Gauke: I beg to move amendment No. 289, in
clause 132, page 83, line 36, at
end insert ‘in the
absence of evidence to the
contrary’.
The
Chairman: With this it will be convenient to discuss
amendment No. 290, in clause 132, page 83, line 38, leave out from
‘enactment’ to end of line
39.
Mr.
Gauke: I shall also try to keep the volume up in order to
deal with the background noise. I venture to suggest that this may not
be the first occasion during these proceedings when the events in this
Committee Room are somewhat above the heads of Members of the
Committee, but I have two points to make with regard to certificates of
debt. First, proposed new section 25A to the CRCA in clause 132
states: “A
certificate of an officer of Revenue and Customs that, to the best of
that officer’s knowledge and belief, a relevant sum has not been
paid is sufficient evidence that the sum mentioned in the certificate
is
unpaid.” We
see no reason why that should not be rebuttable. We therefore suggest
that we add to the clause the
words: “in
the absence of evidence to the
contrary”. If
there is evidence to the contrary, it is common sense that such a
certificate should not be sufficient
evidence. Amendment
No. 290 relates to concerns about this provision that were raised by
the Institute of Chartered Accountants throughout the consultation
process. The proposal
will “extend
HMRC’s right to proceed against goods to amounts due under a
contract settlement. There is no such right under current law and HMRC
has not indicated why it believes that powers which apply to tax should
be extended to purely civil debts.”
We look forward to the
Financial Secretary providing that
justification. The
ICAEW goes on to
say: “We
believe that HMRC ought to rely on contract law to enforce contracts in
the same way as other parties to a
contract”. There
is also a technical point that the redefinition of a contract
settlement could give rise to certain arguments. An example given by
the ICAEW is
that “a
taxpayer sometimes includes in an offer liabilities that are out of
time for assessment and we doubt that such an amount can be said to be
‘in connection with any person’s liabilities’. An
offer is also sometimes made as a pragmatic way to resolve a dispute
albeit that the taxpayer does not believe that any tax is due. We also
doubt that such an offer is in connection with a liability. We do not
think that taking goods is an appropriate remedy where there is a
possibility of a
dispute.” We
would be grateful for clarification from the Financial Secretary on why
contract settlements should be included in the clause. Does she
recognise any difficulties with the definition? Perhaps she could
identify how the definition will work in the examples that I have
given.
Jane
Kennedy: The clause defines a relevant sum
as “a
sum payable to the Commissioners under or by virtue of an
enactment”. That
includes debts arising from taxes, duties and so on imposed by statute.
Contract settlements are defined in clause 133 as contractual
agreements “made
in connection with any person’s
liability”. That
is usually as a result of the recovery of tax during a number of
years. On
amendment No. 289, HMRC has legislation that permits evidence in
support of a claim for unpaid debts to be presented to the court in a
way that normally avoids the meaningful, lengthy documentation. While
not a necessary requirement, before HMRC takes action to recover a debt
it streamlines the evidence needed by the civil courts across the taxes
that HMRC collects. The amendment is unnecessary as a certificate is
sufficient, rather than conclusive, evidence that the debt is unpaid.
It may be challenged or it might be outweighed by other evidence
brought before the court. If a taxpayer produces evidence that the
facts in the certificate are incorrect, the court can use its
discretion on which evidence to
accept. On
amendment No. 290, contract settlements are subject to enforcement
under contract law, not tax law. Contract settlements are defined as
agreements “made
in connection with any person’s liability to make a payment to
the Commissioners under or by virtue of an
enactment.” Simply
put, they are agreements to pay tax, interest, penalties and so on. It
seems sensible to apply the same HMRC recovery methods to unpaid
contract settlements as to unpaid tax. The extension of certificates to
all debts that HMRC currently collects, including those under a
contract settlement, will help court processes run more smoothly by
introducing greater consistency for HMRC officers and greater certainty
for the debtor. It will also be simpler for HMRC to
administer. Having
made clear the purpose of the changes, I undertake to keep under review
all matters concerning the powers of HMRC. If, on testing the new
provisions, concerns raised here prove to have had more substance than
I gave them credit for, I will be prepared to revisit them, if
necessary.
Mr.
Gauke: In light of the approach set out by the Financial
Secretary, and given that we are very near the end of this part of the
Bill, I shall not detain her any longer. I beg to ask leave to withdraw
the
amendment. Amendment,
by leave,
withdrawn. Clause
132 ordered to stand part of the
Bill. Schedule
44 agreed
to. Clause
133 ordered to stand part of the
Bill.
Clause
134Charge
on termination of interest in possession where new interest
acquired 2.30
pm Question
proposed, That the clause stand part of the
Bill.
Mr.
Gauke: Just because we might run out of time, does not
mean that we should not scrutinise this Bill. I have some brief
questions about the clause. It is worth noting that clauses 134 and 135
tidy up provisions brought in two years ago under the Finance Act 2006.
The provisions were controversial having been produced after very
little, if any, consultation, and substantial amendments were tabled to
them. I served on that Committee, as one or two others here did, and it
was an educative experience. It is perhaps also worth noting the
difficulties that can arise with legislation on which there has not
been adequate consultation, and which provide for substantial changes.
I am sure that we will bear that in mind when we discuss schedule 7
later in our proceedings.
Clause 134 addresses a
person’s interest in possession in a trust where inheritance tax
treats them as having the property in a trust comprised in their
estate. When someone with an interest in possession dies, or if the
interest comes to an end, there is an IHT charge on all the property in
the trust payable by the trustees out of the trust’s assets.
Section 53 of the Inheritance Tax Act 1984 provides some exceptions to
that general rule, and the new rules will allow trustees who become
entitled to an interest before or on 5 April 2008 to reorganise their
interest in possession of a trust without a charge arising. The purpose
of that was to allow the IIP to be changed to a disabled trust or to a
serial interest. For example, the IIP would carry on for the same
beneficiary if, at the age of 30, it was amended so that it rolled into
a new trust to run to the age of 40. However, that did not seem to work
properly and the HMRC’s guidance on it fluctuated.
Clause 134
rewrites the offending subsection. There is no problem with
that—the accountancy profession has welcomed those
changes—but are there any similar issues for which clarification
is needed regarding the operation of the 2006 rules? What is being done
to assess how well they are working, given their complexity? Will the
Minister give sympathetic consideration to the problems as they emerge?
That is all that I wish to say on clause 134, although I have a brief
remark to make on clause
135.
The
Chairman: I am happy to call a stand part debate if the
hon. Gentleman wishes it.
Jane
Kennedy: It would not be in the
interests of good government not to listen to reasonable
representations about the way in which legislation functions. The hon.
Gentleman rightly says that the measure in clause 134 has arisen out of
the two-year transition period that was introduced to enable trustees
to reorganise existing trusts without being subject to the new rules,
because the wording of the transitional provisions has left them open
to different interpretations where the existing trusts are replaced
with new trusts for the same beneficiaries. Clause 135, which we will
discuss in a moment, ensures, as was always intended, that the new
rules will not apply where a replacement of that kind is made in the
transitional period. I am not aware of any other areas that we need to
clarify, but I will keep the matter under review, and I am happy to
receive representations if it becomes clear that such a review is
necessary. The clarification has, as the hon. Gentleman said, been
welcomed by tax professionals as well as by representatives of other
groups.
Question
put and agreed
to. Clause
134 ordered to stand part of the
Bill.
Clause
135Interest
in possession settlements: extension of transitional
period Question
proposed, That the clause stand part of the
Bill.
Mr.
Gauke: I rise simply to ask about the extension to the
transitional period, which is welcome, but the Institute of Chartered
Accountants wanted a longer period. Why have the Government not
conceded to that request? Why have they chosen the time period in the
Bill?
Jane
Kennedy: As I said earlier, the clauses relate to the
“Inheritance tax: rules for trusts etc” in schedule 20 to
the Finance Act 2006. Trustees who are inclined to make changes to
existing trusts will already have given a lot of thought to how they
might do so. However, we accept that the uncertainty regarding the
inheritance tax consequences of one particular course of action might,
in some cases, have prevented trustees from reaching a firm decision.
The six-month extension to the transitional period provides ample time
for them to do that. That step has also been welcomed by tax
professionals and representatives of other groups. I am aware of the
representations that have been made and, as I said earlier, we will
keep the matter under review to see whether six months is problematic.
However, we think that we have got things right, on
balance. Question
put and agreed
to. Clause
135 ordered to stand part of the
Bill. Clauses
136 and 137 ordered to stand part of the
Bill.
Clause
138Vehicle
excise
duty Justine
Greening (Putney) (Con): I beg to move amendment No. 351,
in
clause 138, page 86, line 37, leave
out ‘electronic’.
I will try to
be heard above the din of the very annoying light bulb above us. I
shall go into my amendment No. 351 in detail, but, with your agreement,
Sir Nicholas, I will also cover the issues that I wanted to address in
the clause stand part debate. That way we can progress
faster.
As far as I
can see, this clause is one of two that tackle anti-avoidance of some
form in relation to vehicle excise duty. Amendment No. 351 is a probing
amendment more than anything else, because I wish to understand whether
the phraseology in the clause would work as intended. At the same time,
I will also address a couple of other concerns that I have regarding
the clause, although I fully understand why it is being brought
forward. Clause
138 is designed to stop motorists from surrendering vehicle excise duty
licences early to get a rebate and then renewing the licence before the
rate goes up in the following 12-month period. The motorist would
apparently do that to avoid paying higher rates of vehicle excise duty
later. We understand why they might want to do that and, therefore, why
the Treasury want to bring forward measures to stop them. I have tabled
the amendment because I have concerns about how the measure will work
in practice and about some of the procedures that are in
place—or are not, as the case may be—to stop that sort of
practice from happening in the first place.
The main
problem with clause 138 is that it makes applying for a rebate
unnecessarily restrictive, because it seems to suggest that it can be
done only
“by such
electronic means as may be
specified”. Amendment
No. 351 is a probing amendment to determine whether that approach is
favoured by the Government for a particular reason or whether it is
simply not clear what the Government intend by limiting communication
purely to electronic means. The clause allows the Secretary of State to
set certain conditions that a person applying for a rebate must comply
with. One condition includes the provision of information to the
Secretary of State by electronic means. Will the Minister clarify why
it has to be electronic, and whether it limits applicants to using
e-mail or whether applicants are allowed to post details or provide
them over the phone? We all know that systems breakdown, for whatever
reason, and, therefore, relying on electronic means is an unwise
risk.
Ironically,
another part of clause 138 has the opposite effect to what the clause
intends to achieve, by providing—in my opinion—a
loophole. New subsection (3)(f) allows for a rebate on a vehicle that
has left the UK with a view to it remaining permanently outside the UK.
I understand exactly why the clause has that proviso for somebody being
able to claim a rebate, and it is fine. However, it seems very
difficult for the Treasury to enforce, so will an individual have to
provide proof of his or her move before being able to get the rebate,
and, if so, what kind of
proof? Somebody
may get the rebate for moving, and end up reapplying shortly afterwards
for a licence for the same car, which could happen easily. For example,
they may have thought that they were going to be able to sell their car
to a relative in a different country, back in Poland, for example, and
were planning to buy a new car in the UK, but, for whatever reason,
that purchase did not happen. Therefore, they end up keeping the car in
the
UK and want to establish road tax for it again—quite properly. It
would be difficult for whoever was renewing the vehicle excise duty to
challenge that as an explanation for why it was being renewed early on
the same vehicle. To that extent, I question whether it is possible to
enforce this part of the clause, although I can see the sense of
putting it there in the first place. Perhaps the Minister can clarify
that. 2.45
pm We
can readily understand why the Government think there is a risk of more
people wanting to try to avoid paying vehicle excise duty and higher
rates of it. One of the key measures brought forward in the Budget was
a massive rise in vehicle excise duty for some people. That is
demonstrated by the fact that the Government decided to put in two
clauses to tackle what it saw as a growing risk of people trying to
avoid paying higher road tax. Of course, I would never condone that
behaviour.
Perhaps the
Treasury could explain why it feels that there is suddenly a need to
bring forward this and the following clause in terms of clamping down
on vehicle excise duty avoidance. Is it anything to do with these large
increases that we have
seen? Finally,
can the Minister give the Committee an update on how big a problem this
is? How many people are now avoiding paying road tax? I understand that
in the past the Treasury has taken initiatives to try to tackle, with
some success, people who are avoiding paying road tax. Perhaps the
Minister can give an update on the Treasury’s assessment of how
many drivers and cars are currently avoiding paying road tax and the
loss of revenue, specifically in terms of the Red Book figure of
£735 million in 2010-11 from changes to road tax put forward in
the Budget. Next year those changes amount to £435 million. Is
the impact of this anti-avoidance clause factored into that amount in
the Red Book or is this additional revenue that the Treasury expects to
gain by clamping down on anti-avoidance?
I have asked
numerous questions on vehicle excise duty following the Budget that
have still not been answered by the Treasury. I hope Ministers will
answer questions tabled at the beginning of May in the near future. I
look forward to hearing what the Minister has to
say.
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