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Finance Bill

Finance Bill

The Committee consisted of the following Members:

Chairmen: Frank Cook, Mr. Jim Hood, † Sir Nicholas Winterton
Atkins, Charlotte (Staffordshire, Moorlands) (Lab)
Blackman-Woods, Dr. Roberta (City of Durham) (Lab)
Blizzard, Mr. Bob (Waveney) (Lab)
Bone, Mr. Peter (Wellingborough) (Con)
Breed, Mr. Colin (South-East Cornwall) (LD)
Browne, Mr. Jeremy (Taunton) (LD)
Cable, Dr. Vincent (Twickenham) (LD)
Chapman, Ben (Wirral, South) (Lab)
Eagle, Angela (Exchequer Secretary to the Treasury)
Efford, Clive (Eltham) (Lab)
Field, Mr. Mark (Cities of London and Westminster) (Con)
Gauke, Mr. David (South-West Hertfordshire) (Con)
Greening, Justine (Putney) (Con)
Hall, Patrick (Bedford) (Lab)
Hammond, Mr. Philip (Runnymede and Weybridge) (Con)
Hands, Mr. Greg (Hammersmith and Fulham) (Con)
Hesford, Stephen (Wirral, West) (Lab)
Hoban, Mr. Mark (Fareham) (Con)
Hosie, Stewart (Dundee, East) (SNP)
Joyce, Mr. Eric (Falkirk) (Lab)
Kennedy, Jane (Financial Secretary to the Treasury)
Morden, Jessica (Newport, East) (Lab)
Newmark, Mr. Brooks (Braintree) (Con)
Palmer, Dr. Nick (Broxtowe) (Lab)
Penrose, John (Weston-super-Mare) (Con)
Pound, Stephen (Ealing, North) (Lab)
Pugh, Dr. John (Southport) (LD)
Sharma, Mr. Virendra (Ealing, Southall) (Lab)
Simon, Mr. Siôn (Birmingham, Erdington) (Lab)
Thornberry, Emily (Islington, South and Finsbury) (Lab)
Todd, Mr. Mark (South Derbyshire) (Lab)
Ussher, Kitty (Economic Secretary to the Treasury)
Viggers, Sir Peter (Gosport) (Con)
Wright, David (Telford) (Lab)
Alan Sandall, James Davies, Committee Clerks
† attended the Committee

Public Bill Committee

Tuesday 17 June 2008


[Sir Nicholas Winterton in the Chair]

Finance Bill

(Except clauses 3, 5, 6, 15, 21, 49, 90 and 117 and new Clauses amending section 74 of the Finance Act 2003)

Clause 154

Power to give statutory effect to concessions
Question proposed [this day], That the clause stand part of the Bill.
4.30 pm
Question again proposed.
The Chairman: I am delighted to be back in the Chair. I am sorry that I could not be with you this morning. I was attending a thanksgiving service for the late right hon. Lord Pym, who had been a Conservative Government Chief Whip, Foreign Secretary, Secretary of State for Northern Ireland and Secretary of State for Defence. If you can have a thanksgiving service that is enjoyable, it was indeed enjoyable.
I regret to say I have been advised that somewhat slow progress was made this morning. I am not looking at either party when I say that, because clearly debate and discussion is important, but I have a feeling—I hope—that some progress will be made this afternoon. We were dealing with clause 154 stand part, and I believe that the spokesman for Her Majesty’s Opposition was on his feet, and I ask him to rise again and to be succinct in his comments to the Committee. I call Mr. Philip Holland.
Mr. Philip Hammond (Runnymede and Weybridge) (Con): Hammond. We have been colleagues for only 11 years, Sir Nicholas. I think that I can assure you that progress will be made this afternoon, as you require. I am trying very hard not to take the situation before the start of the sitting regarding the quorum as being any reflection on the gravity of the matters we are discussing.
This morning, I was asking the Minister whether the provision was designed to deal with all extra-statutory concessions—in other words, the ending of the extra-statutory concession regime—or whether it was designed to deal only with those extra-statutory concessions that fall foul of the Wilkinson judgment. No doubt the Minister will explain precisely the circumstances in which it will be used in due course. I was making the point that the definition of an existing HMRC concession under the clause is
“a statement made by the Commissioners...and having effect at that time, that they would treat persons as if they were entitled to...a reduction”.
The essence of the Wilkinson judgment is that some of these statements clearly were ultra vires, and I am asking whether extra-statutory concessions that have operated, but have now been demonstrated to have been ultra vires from the beginning, can be the subject of the powers in this clause to turn them into statutory concessions. Following that thought process, why it was not decided to use primary legislation—perhaps a clause in the Bill—to legislate on the extra-statutory concessions that are in use, but that are thought perhaps to fall foul of the Wilkinson judgment, in a way that would be rather more transparent than this order-making power. Why cannot we just have a clause in the Bill that lists the various provisions so that we make proper primary legislation to give effect to them? Could it be that Ministers fear attempts to amend them, given that the orders will clearly not be amendable? Will the Minister clarify the process that is being used?
Are there any circumstances in which the fact that an extra-statutory concession has been unlawful—that it was operated ultra vires—could give rise to a demand on a taxpayer? I do not claim to be an expert on tax law, but I have at the back of my mind the case of a well-known proprietor of a famous grocery store in which the courts held that an arrangement that the Revenue had made with regard to the tax payable was unlawful and ordered that the Revenue essentially negate the arrangement.
I wonder whether the process of identifying extra-statutory concessions as possibly being without foundation in law until such time as the processes set out in the clause are used to determine statutory concessions could give rise to a taxpayer finding the concession effectively withdrawn retrospectively because it had never been lawful, with an additional liability thus arising on the taxpayer. If the Minister is able to confirm that there will be no such circumstances, that would reassure a great many people who have benefited from extra-statutory concessions.
John Penrose (Weston-super-Mare) (Con): If the Minister is not able to give that reassurance, perhaps she will indicate that if she does discover any circumstances of this kind, she will extend a retrospective amnesty to anybody affected so that they are not required to come up with a retrospective payment.
Mr. Hammond: I like to push the envelope, but I suspect that asking Ministers to grant retrospective amnesties might be pushing the envelope a bit too far. I am sure that everyone on the Committee is anxious to hear the Minister’s response.
Will the Minister clarify something about the way in which the clause will be operated that is not clear from reading the Bill or the explanatory notes? Is this a one-off provision to deal with the stock of unlawful ESCs?
The Financial Secretary to the Treasury (Jane Kennedy) indicated assent.
Mr. Hammond: The Minister nods, which implies that that is the case. Can we therefore take it as read that once the backlog is cleared, there will be no use of a procedure whereby something is delivered as an extra-statutory concession and then formalised into a statutory concession through the processes set out in clause 154? Is this exercise a one-off clearing of the backlog?
Will the Minister tell us about the consultation process? Presumably there will be consultation over the ESCs that are proposed to be enshrined in statute. The clause gives a power to introduce them in a form that is amended as HMRC thinks fit. This is not simply a question of the industry and Parliament rubber-stamping existing concessions. There is clearly an opportunity for HMRC to tweak the concessions that have operated and to enshrine them in statute in a slightly different form. I understand that it is intended that there will be consultation with tax professionals on any proposed orders to be made under this clause. Will the Minister give a sense of the time scale and the period of consultation that would be allowed?
There will be some important issues to consider because, almost by definition, an extra-statutory concession is more flexible than a piece of statute. If these rules from the Revenue practice manual, as operated without statutory basis, are to be enshrined in statute, they will have to be defined, perhaps in a language and in a way that is more formal and prescriptive than the manual requires. Therefore, when the drafts are published, there will be issues at the margin about the extent to which the concession is being extended, or the scope to which it is being reduced. There will be considerable desire within the profession for an opportunity to study and comment on them.
The Minister has indicated that she will be able to say something about the number of extra-statutory concessions and the timetable for reviewing them. That will give the Committee a sense of the operation’s scale. Will she tell us how many of them are expected to be enacted into statute through the use of this clause?
The Chairman: Before I call the Financial Secretary, I apologise profusely and personally—yet again—to the hon. Member for Runnymede and Weybridge for my error in respect of his surname. I give a commitment that I shall do my best not to make the mistake again during this Public Bill Committee.
Jane Kennedy: It is a pleasure to be under your chairmanship this afternoon, Sir Nicholas, and I look forward to scampering through the clauses with you. You should not apologise too profusely; it keeps the hon. Member for Runnymede and Weybridge humble if he has to respond to other names occasionally.
The hon. Gentleman’s description of the clause was absolutely right. A decision of the courts in the Wilkinson case made clear that the scope of HMRC’s administrative discretion was somewhat narrower than had previously been supposed. That decision triggered the review of the extra-statutory concessions that have been a feature of the tax system for decades. In the course of the review, HMRC has identified approaching 500 extra-statutory concessions, the vast majority of which, I am advised, are within discretion, as the law defines them, and which the Wilkinson court case allowed. They are perfectly okay. They will continue and do not need the clause we are discussing.
This clause enables us, in a relatively short period of time, to come forward with the remaining extra-statutory concessions that can be brought back within the law using this procedure, but it is possible that we will not be able to bring a small number of extra-statutory concessions that remain on to a statutory footing. We need to consider what we will do in the event of those concessions being considered to be valuable and of benefit to the taxpayer and to the Government.
Mr. Hammond: Will the Minister tell the Committee the status regarding current practice for the small number to which she referred? What is the message to taxpayers who are benefiting from them at the present time?
Jane Kennedy: I hope that you will allow me, Sir Nicholas, to ask—forgive me for doing so—for support for this clause without being drawn too far into the detail because the review is ongoing. I will want to think very carefully about some of these concessions and the way in which we respond, particularly regarding those that appear difficult to fix, in the sense of putting them on a statutory footing. Some concessions will be widely supported among the public, and we will need to think about how we respond to the effect of the court judgment. There are about 20 or so for which that might be the case, and there are tens of others that we think need to be brought back on to a statutory basis as a result of this clause.
Mr. Hammond: I understand that a review is in progress, but it is clearly important for taxpayers to know whether they can rely on an extra-statutory concession on which they have been advised in the past. It would have been very easy for the Financial Secretary to say, “I assure taxpayers that they will be safe; they have nothing to worry about.” However, she did not say that, so I wonder whether we should read anything into that.
Jane Kennedy: I was going to come to that point. The concessions that have already been given will stand. No tax decision that has already been taken is affected by this, but going forward, we need to put on a statutory basis those concessions that need to be put on to a statutory basis, and we will then need to consider what we do about the others. The normal concessions that HMRC can make—this has been clarified by the court case—are very small in monetary terms, but they might be of significance to the individual. For example, HMRC would normally not be expected to pursue £100 of tax if gathering the revenue was going to cost £200. It is perfectly lawful for HMRC to make those sorts of concessions. We will need to consider how we deal with others that have become the practice and for which I think there may be public support.
4.45 pm
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