Sarah McCarthy-Fry: This group of amendments is concerned with the definition of appropriate tax accounting arrangements and introduces new wording to make it absolutely clear that the measure does not require a higher standard than that already required to sign off tax returns as correct and complete. It also makes it clear that HMRCs focus will be on significant weaknesses and not on small or insignificant amounts.
The hon. Member for Fareham spoke at length about Government amendment 294, which changes the definition of appropriate tax accounting arrangements and adds the words in all material respects. The wording is careful because the intention is not to introduce the concept of audit or accountancy materiality, as it is not a tax concept. We have to separate them, as the hon. Gentleman said. I make it clear that the legislation
The hon. Member for Fareham asked if we could be more specific in guidance as to what the measure will mean in practice. He will be aware that this is draft guidance. We have been working with interested parties to develop the solution that is reflected in Government amendment 294, and we will continue to consult on the draft guidance.
Mr. Hoban: I am trying to think what is left as a consequence of all the amendments. The Minister is saying that the standard is no different from the one that already applies in signing off returns and computations. That almost begs the question, why do we need the certificate if all that is happening is that the senior accounting officer will reconfirm what people signed off when they submitted returns to HMRC?
Sarah McCarthy-Fry: I come back to the point that I made about using the definition of accountancy and audit materiality. That has never applied for tax. What happens in practice is that accounts are prepared according to materiality, but that is unpicked when the tax finance people prepare their computations and returns. The amendment makes it absolutely clear that the legislation does not raise the tax bar in respect of what is required to sign off returns. That is an important protection for senior accounting officers.
The hon. Gentleman spoke about significance. We can provide more examples of significance within the guidance; as I said, it is part of the ongoing consultation. I welcomed the hon. Gentlemans support for draft guidance on appropriate tax accounting arrangements and, again, that will be subject to further consultation.
Moving to amendment 295, the thrust of the schedule is to help maintain fiscal sustainability by making the senior accounting officers of the very largest companies and groups responsible for ensuring that they have appropriate tax accounting arrangements in place and, as currently drafted, the measure applies to all liabilities regardless of relative importance. However, in some instances the associated administrative burden, while not significant in relative terms, might be disproportionate in relation to the size of those liabilities, which are relatively small, therefore amendment 295 restricts the measures scope to specify mainstream taxes and duty.
Mr. Hoban: At the end of what has been a lengthy debate on four groups of amendments, I am left wondering what is left. The Minister has now said that the standard of accuracy applied to the certificates is no different to the standard already applied to tax returns and computations. We are effectively asking a senior accounting officer to confirm that what has been submitted and said was and is still materially accurate.
Sarah McCarthy-Fry: The difference is that this is about the process and the systems behind the taxes paid, and not about the amount of tax itself.
Mr. Hoban: That is part of the issue. A senior accounting officer could sign off the computation as being materially accurate only if they were content and only if their systems were accurate. We know that HMRC has access to the systems of large companies and that it does a risk assessment. As a senior accounting officer, I could not sign off a tax return if I knew that the underlying systems were not robust or able to produce correct and accurate financial information.
I am at a loss to think of what is left. I almost feel that the four amendment groups have made schedule 46 a hollowed out husk. Expense will be imposed on companies, depending on their size, but not other types of business combination. The amount of additional comfort that senior accounting officers are given is minimal. Given the nature of the relationship between HMRC and large companies, which are already risk- assessed, the Government will not get more value out of this measure. HMRC already has access to systems as part of the Varney review.
We will end up with a compliance burden on companies without, as far as I can see, additional value to HMRC. Companies may be grateful that the Minister has listened to them, but I am not convinced where the measures value rests. I am grateful that the Government have listened to the concerns about materiality, because that certainly was not the message from the Financial Secretary in the debate in the Committee of the whole House, and that is a sign of movement. However, moving so far on so many issues has left me questioning what the Government have got out of schedule 46 and clause 92. As they have addressed the issue in amendment 264 with amendment 294, I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Amendments made: 294, in schedule 46, page 343, line 3, leave out from enable to end of line 4 and insert
the companys relevant liabilities to be calculated accurately in all material respects..
Amendment 295, in schedule 46, page 343, leave out lines 7 and 8 and insert
( ) Relevant liabilities, in relation to a company, means liabilities in respect of
(a) corporation tax (including any amount assessable or chargeable as if it were corporation tax),
(b) value added tax,
(c) amounts for which the company is accountable under PAYE regulations,
(d) insurance premium tax,
(e) stamp duty land tax,
(f) stamp duty reserve tax,
(g) petroleum revenue tax,
(h) customs duties, and
(i) excise duties..
Amendment 296, in schedule 46, page 343, leave out lines 10 to 15 and insert
Meaning of qualifying company
17 (1) A company is a qualifying company in relation to a financial year if the qualification test was satisfied in the previous financial year (subject to any regulations under sub-paragraph (2)).
(1A) The qualification test is that the company satisfied either or both of the following requirements
(1B) If the company was not a member of a group at the end of the previous financial year
(a) relevant turnover means the companys turnover, and
(b) relevant balance sheet total means the companys balance sheet total.
(1C) If the company was a member of a group at the end of the previous financial year
(a) relevant turnover means the aggregate turnover of the company (C) and any other company that was a member of the same group as C at the end of Cs previous financial year, and
(b) relevant balance sheet total means the aggregate balance sheet totals of C and any such company.
(1D) If the financial year of a company that was a member of the same group as C does not end on the same day as Cs previous financial year, the figures for that company that are to be included in the aggregate figures are the figures for that companys financial year ending last before the end of Cs previous financial year.
(1E) Turnover, in relation to a company, has the same meaning as in Part 15 of the Companies Act 2006 (see section 474 of that Act).
(1F) Balance sheet total, in relation to a company and a financial year, means the aggregate of the amounts shown as assets in the companys balance sheet as at the end of the financial year..
Amendment 297, in schedule 46, page 343, line 17, leave out large and insert qualifying.
Amendment 298, in schedule 46, page 343, leave out lines 20 to 22 and insert
( ) Senior accounting officer, in relation to a company that is not a member of a group, means the director or officer who, in the companys reasonable opinion, has overall responsibility for the companys financial accounting arrangements.
( ) Senior accounting officer, in relation to a company that is a member of a group, means the group director or officer who, in the companys reasonable opinion, has overall responsibility for the companys financial accounting arrangements.
( ) Group director or officer, in relation to a company, means a director or officer of the company or of a relevant body that is a member of the same group as the company.
( ) A person may be the senior accounting officer of more than one company..
Amendment 299, in schedule 46, page 343, leave out lines 29 to 32.
Amendment 300, in schedule 46, page 343, line 35, leave out from company to end of line 36 and insert
has the same meaning as in the Companies Acts (see section 1(1) of the Companies Act 2006) but does not include a company that is an open-ended investment company (within the meaning of section 468A of ICTA) or an investment trust (within the meaning of section 842 of ICTA);.
Amendment 301, in schedule 46, page 343, leave out lines 39 and 40.
Amendment 302, in schedule 46, page 344, line 2, at end insert
relevant body means a company or other body corporate but does not include a limited liability partnership;.
Amendment 303, in schedule 46, page 344, leave out lines 3 to 5.
Amendment 304, in schedule 46, page 344, line 7, at end insert
(2) For the purposes of this Schedule
(a) a relevant body is a member of a group if
(i) another relevant body is its 51 per cent subsidiary, or
(ii) it is a 51 per cent subsidiary of another relevant body, and
(b) two relevant bodies are members of the same group if
(i) one is a 51 per cent subsidiary of the other, or
(ii) both are 51 per cent subsidiaries of a third relevant body.
(3) Section 838 of ICTA (meaning of 51 per cent subsidiary) applies for the purposes of this Schedule as it applies for the purposes of the Corporation Tax Acts (subject to the modification in sub-paragraph (4)).
(4) It applies as if references in that section to a body corporate were to a relevant body..(Sarah McCarthy-Fry.)
Schedule 46, as amended, agreed to.
The Chairman adjourned the Committee without Question put (Standing Order No. 88).
Adjourned till this day at half-past Four oclock.
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