The
Committee consisted of the following
Members:
Blizzard,
Mr. Bob
(Lord Commissioner of Her Majesty's
Treasury)
Breed,
Mr. Colin
(South-East Cornwall)
(LD)
Brown,
Lyn
(West Ham)
(Lab)
Browne,
Mr. Jeremy
(Taunton)
(LD)
Campbell,
Mr. Ronnie
(Blyth Valley)
(Lab)
Cruddas,
Jon
(Dagenham) (Lab)
Duddridge,
James
(Rochford and Southend, East)
(Con)
Efford,
Clive
(Eltham) (Lab)
Gauke,
Mr. David
(South-West Hertfordshire)
(Con)
Greenway,
Mr. John
(Ryedale)
(Con)
Kirkbride,
Miss Julie
(Bromsgrove)
(Con)
Pound,
Stephen
(Ealing, North)
(Lab)
Strang,
Dr. Gavin
(Edinburgh, East)
(Lab)
Timms,
Mr. Stephen
(Financial Secretary to the
Treasury)
Turner,
Dr. Desmond
(Brighton, Kemptown)
(Lab)
Yeo,
Mr. Tim
(South Suffolk)
(Con)
Sara Howe, Committee
Clerk
attended the
Committee
The following also attended,
pursuant to Standing Order No.
118(2):
Robertson,
John
(Glasgow, North-West)
(Lab)
Drew,
Mr. David
(Stroud)
(Lab/Co-op)
Fourteenth
Delegated Legislation
Committee
Thursday 19
March
2009
[John
Bercow in the
Chair]
Draft
Revenue and Customs Appeals Order
2009
8.55
am
The
Financial Secretary to the Treasury (Mr. Stephen
Timms): I beg to
move,
That
the Committee has considered the draft Revenue and Customs Appeals
Order
2009.
May
I bid you a warm welcome to the Chair of our Committee on this
beautiful morning, Mr. Bercow?
We debated
the Transfer of Tribunal Functions and Revenue and Customs Appeals
Order 2009 on 16 December. That order took a big step in the
reform of the tribunals that consider tax appeals under the Tribunals,
Courts and Enforcement Act 2007. Under that Act, existing tribunals,
the general commissioners, the special commissioners and the VAT and
duties tribunals are being brought together into a single, two-tier
tribunal structure, which will be manifestly independent of Her
Majestys Revenue and Customs. That means that from 1 April all
tax appeals will be dealt with by the same
tribunal.
The
original order introduced a right to an optional statutory review of
appealable decisions across the great majority of HMRC decisions. The
main purpose of this order is to provide for reviews in the particular
case of HMRC decisions under the Counter-Terrorism Act 2008 and to
bring those arrangements into line with the December order. The 2008
Act gives the Treasury new powers against terrorist financing, money
laundering and the development of chemical, biological, radiological
and nuclear weapons. The Treasury may issue directions to persons
operating in the financial sector to require them to take action in
response to those threats. Schedule 7 of the Act gives HMRC
supervisory and enforcement functions in relation to compliance with
the directions issued by the Treasury. That includes the power to
impose penalties. The schedule provides for reviews of, and appeals
against, those penalty decisions. The provisions of the order ensure
that the review and appeal procedures under schedule 7 mirror those for
other HMRC matters. They could not be included in the original order
because the Act received Royal Assent only on the day when the order
was
laid.
The
order also corrects two errors that have been identified in
consequential amendments made by the original order. Those corrections
will restore rights to appeal tribunal decisions relating to oil
taxation and statutory payments, which the amendments inadvertently
removed. The order is made under powers contained in section 124 of the
Finance Act 2008 and comes into force on 1 April. It is subject to the
affirmative procedure in the
House.
Final
preparations for implementation of the tribunal changes continue to
benefit from close co-operation between HMRC, the Ministry of
Justices tribunal service, the judiciary and a wide range of
interested parties
outside the Government. Together with the Under-Secretary of State for
Justice, my hon. Friend the Member for Lewisham, East (Bridget
Prentice), I am grateful to all those who have been helping
us.
8.58
am
Mr.
David Gauke (South-West Hertfordshire) (Con): It is a
pleasure to serve under your chairmanship once again, Mr.
Bercow.
I thank the
Minister for his explanation of the order. As he said, it is in some
respects a follow-up to the Transfer of Tribunal Functions and Revenue
and Customs Appeals Order 2009, which we debated on 16
Decembera date that is clearly etched in my mind, as the right
hon. Gentleman will
recall.
It
would be fair of me to acknowledge at the beginning of our proceedings
that the contents of the order are not controversial. Nevertheless, I
have a few questions. Before turning to HMRCs counter-terrorism
powers, I acknowledge that the order ties up errors in the original
order, which, according to the explanatory note, if left uncorrected
would have resulted in the removal of existing rights of further
appeal. That relates to rights of appeal under the Social Security
Contributions (Transfer of Functions, etc.) Act 1999 and specifically
the Social Security Contributions (Decisions and Appeals) Regulations
1999. It would be helpful if the Minister could elaborate on what those
rights of appeal would have been and what rights of appeal were to be
lost under the original order. Could he shed some light on how these
errors came to light? I acknowledge that that point was not picked up
by the Committee in December, but it would be helpful for us to know
how it
happened.
On
the review and appeal procedures with regard to HMRCs powers
under the Counter-Terrorism Act 2008, I appreciate the
Ministers point that it was not possible for that to be dealt
with under the order that we debated in December because that Act
achieved Royal Assent on the same date. However, would it not have been
possible for there to have been some co-ordination to ensure that it
achieved Royal Assent before we debated the order, perhaps by moving
the debate back by a day or so? Was it not possible for the Act to be
drafted to cover or refer to the new regime that will be in effect from
April? I should be grateful for an explanation of the mechanics. There
may be good reasons why we need to have this separate order, but that
issue was not raised in December and some clarity might help the
Committee.
I
seek clarification as to the extent of the order with regard
to HMRCs powers under the 2008 Act. Paragraph 7.3.1
of the explanatory note states that the
Act
confers
supervisory and enforcement functions on HMRC, including the power to
impose penalties for non-compliance with directions issued to certain
persons in the financial sector...Such directions may impose
requirements or restrictions on business relationships with persons in
countries of concern. Provision is made for review of and appeals
against decisions to impose
penalties.
I
understand that the right of appeal exists only in respect of penalties
imposed as a consequence of non-compliance with the requirements and
restrictions, but there is no review process in place to allow for
objections to the requirements and restrictions in the first place. In
other words, if a taxpayer seeks to deal with an entity in a country
about which HMRC has concerns, and HMRC imposes some requirements and
restrictions that the
taxpayer wishes it to review, the only opportunity for them to achieve
that under these provisions is to be in breach of the requirements and
restrictions, face a penalty, and then seek a review. It is not
possible to seek a review at an earlier stage in the process. I may be
reading too much into this element of the explanatory notes, but it is
consistent with what the Minister told the Committee a moment ago.
Again, there may be good reasons for it to work in that way, but why,
if my interpretation is correct, is it not possible to review the
original requirements and
restrictions?
Amended
paragraph 26F of schedule 7 of the 2008 Act states
that
An
appeal under paragraph 26 is to be made to the
tribunal.
The
Minister will recall that in December we debated the fact that for
direct taxes an appeal is made to HMRC by the taxpayer, while for
indirect taxes the appeal is made directly by the taxpayer to the
tribunal, and questioned why two different systems were in place. Why
is something equivalent to the indirect taxation system in place for
the provisions relating to counter-terrorism penalties, where the
appeal goes directly to the
tribunal?
On
the counter-terrorism provisions, the explanatory notes
state:
HMRC
guidance products, for both staff and customers, are in preparation and
will be available, as needed, before 1 April 2009.
I appreciate that the
notes were published some time ago. However, given that there are now
only 12 days until 1 April it would be helpful if the Minister could
give the Committee some information as to whether those guidance
products have been published and are available and, if not, when they
will be made available.
In December,
I asked whether we were generally on track with the new appeals and
tribunals system for HMRC decisions, and the Minister gave the
Committee several assurances that progress was being made. It might be
helpful if I give him the opportunity to update us on that progress. In
particular, I pressed him for details of when the finalised rules for
the new tribunals would be published, and he assured us that it would
happen in the new year, in good time for 1 April. To be fair to him,
those new rules were finalised and published on 5 February. However,
could he update the Committee more generally and assure us that
everything is set for 1 April, which is less than two weeks
away, and that he is satisfied that there will be a smooth transition
to the new system?
Subject to
those comments and questions, we have no intention of dividing the
Committee.
9.6
am
Mr.
Colin Breed (South-East Cornwall) (LD): I do not wish to
detain the Committee, because these are relatively uncontroversial
tidying-up measures.
The most
interesting comment in the explanatory notes was that the tribunals
would be manifestly independent. I have a feeling that
that might be quoted in appeals in the not-too-distant future, because
in a previous life, when attending some of those tribunals, I noted the
feeling that perhaps they had not been manifestly independent. If they
are now to be so, that will be a major step forward.
I, too, was
concerned about guidance needing to be available to people. I suspect
that reviews are in place and that much of the guidance is already
known and just has to be codified, but we are getting very close to 1
April. Such reviews have sometimes taken a very long time and totally
disrupted businesses, particularly small businesses, which have
suddenly been caught up in them and in tribunals. These tribunals and
reviews often have a great effect, so manifest independence and, I
hope, speed of operation will be extremely
helpful.
9.8
am
Mr.
Timms: I am grateful to both hon. Gentlemen for their
general assent to the proposal.
The hon.
Member for South-West Hertfordshire asked about the errors that we are
correcting and the effects if we did not do so. The corrections will
restore rights to appeal against tribunal decisions on oil taxation and
statutory payments, which consequential amendments inadvertently
removed. There was never any intention of removing them, and it became
apparent only subsequently that the legislation had that effect. There
would have been no right of further appeal without the change. The hon.
Gentleman asked me how we became aware of the issue. It came to light
during work with the Ministry of Justice to finalise the practice
direction for the new tribunal, so it was as a result of internal work
rather than of any external alert.
The hon.
Gentleman makes a perfectly fair point in asking why we could not have
done everything in one go in the order in December instead of all
having to come back here this morning. I checked that before I came
here. The Counter-Terrorism Act 2008 was given Royal Assent on 26
Novemberright at the end of the parliamentary
Sessionand the order had to be laid on that day as well. Royal
Assent happened before the debate, but I am advised that because the
order was laid on the same day it was not possible to get around the
need to deal with this matter
separately.
The
hon. Gentleman is right to say that the arrangements set out in this
case, arising from the 2008 Act, follow the indirect tax model, which
is generally seen as satisfactory. He is also correct to say that the
tribunal rules have been published: they are on the Tribunals Service
website. I am grateful to him for giving me the opportunity to confirm
that we are on track for 1 April. I am not aware of any particular
outstanding difficulties that are likely to affect
us.
On
HMRC guidance, the fact sheet was published on 6 February. The
transitional guidance was also published recently. Full guidance has
been consulted on and will be published shortly. I can also give that
reassurance to the hon. Member for South-East Cornwall. The rules have
been finalised and published, and we are in good shape for the changes
that will take effect on 1 April. Some hearings in the new tribunal
have already been
arranged.
Question
put and agreed
to.
Resolved,
That
the Committee has considered the draft Revenue and Customs Appeals
Order
2009.
9.12
am
Committee
rose.