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Session 2007 - 08 Publications on the internet General Committee Debates Finance Bill |
Finance Bill |
The Committee consisted of the following Members:Alan
Sandall, James Davies, Committee
Clerks attended the
Committee Public Bill CommitteeTuesday 17 June 2008(Afternoon)[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 154Power
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
feelingI hopethat some progress will be made this
afternoon. We were dealing with clause 154 stand part, and I believe
that the spokesman for Her Majestys 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 concessionsin other words, the
ending of the extra-statutory concession regimeor 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 legislationperhaps a
clause in the Billto 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 unlawfulthat it was operated ultra
virescould 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 Ministers 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?
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 operations
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 personallyyet againto 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. Gentlemans description of the clause was absolutely right.
A decision of the courts in the Wilkinson case made clear that the
scope of HMRCs 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 askforgive me for doing sofor 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 makethis
has been clarified by the court caseare 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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©Parliamentary copyright 2008 | Prepared 18 June 2008 |