Schedule
56Penalty
for failure to make payments on
time
Ian
Pearson: I beg to move amendment 312, in
schedule 56, page 406, line 38, column 3, leave out from
‘Amount’ to end of line 41 and insert
‘charged in an assessment under
paragraph 11(1) of Schedule 2 to OTA
1975’.
The
Chairman: With this it will be convenient to discuss
Government amendments 313 to
320.
Ian
Pearson: The amendments correct a technical deficiency in
schedule 56 that could lead to participators in the petroleum revenue
tax regime being liable to penalties for late payment from the wrong
date. The amendments align the date that a participator will become
liable to a penalty with the other taxes in the table in schedule
56. Our
intention is that for all annual and occasional taxes, including PRT,
the penalty date for principal amounts of tax will be 30 days after the
due date for payment. If extra tax comes into charge after the due
date, the taxpayer should become liable to a penalty only if they fail
to pay within 30 days of the due date for the additional tax. The only
exception to that is if the taxpayer has failed to submit a return
where the penalty date should be the original due date for the tax.
That is to ensure that taxpayers do not gain an advantage by avoiding
their filing
obligations. The
amendments ensure that the new penalties will operate as intended, and
I hope that the Committee will accept
them. Amendment
312 agreed
to. Amendments
made: 313, in
schedule 56, page 407, line 7, at
end
insert— ‘
15A | Petroleum
revenue
tax | Amount
charged in an assessment made where participator fails to deliver
return for a chargeable
period | The
date falling 6 months and 30 days after the end
of the chargeable
period’. |
Amendment
314, in
schedule 56, page 407, line 9, column 2, leave
out ‘or 9 to 11’ and insert ‘, 9 or
10’. Amendment
315, in
schedule 56, page 407, line 38, at
end insert—
‘
20A | Petroleum
revenue
tax | Amount
charged in an assessment, or an amendment of an assessment, made in
circumstances other than those set out in items 11 and
15A | The
date falling 30 days after— (a) the date by which the
amount must be paid, or (b) the date on which the assessment or
amendment is made, whichever is
later’. |
Amendment
316, in
schedule 56, page 407, line 40, column 2, leave
out ‘or 9 to 11’ and insert ‘, 9 or
10’. Amendment
317, in
schedule 56, page 407, line 44, column 3, leave
out ‘or 9 to 11’ and insert ‘, 9 or
10’. Amendment
318, in
schedule 56, page 407, line 45, column 2, leave
out ‘or 9 to 11’ and insert ‘, 9 or
10’. Amendment
319, in
schedule 56, page 408, line 4, leave
out ‘11’ and insert
‘10’. Amendment
320, in
schedule 56, page 408, line 31, at
end insert ‘or (c)’.—(Ian
Pearson.) Schedule
56, as amended, agreed
to.
Clause
107Suspension
of penalties during currency of agreement for deferred
payment Question
proposed, That the clause stand part of the
Bill.
Ian
Pearson: I do not want to pass clause 107 without
commenting briefly on what it will do. The clause will ensure that
penalties and surcharges for late payment of tax will not be charged to
those who anticipate temporary payment difficulties and contact HMRC
before the penalty or surcharge becomes due. They will be able to agree
a time to pay their tax.
I am
enormously proud that as a Government we have provided real help to
companies in financial difficulties. Since 24 November 2008, when the
HMRC business payment support package was introduced, we have agreed
time to pay for more than 130,000 businesses, helping them to defer
more than £2.6 billion worth of tax. The clause will help HMRC
to support businesses with temporary payment difficulties. I wanted to
note it because it is an important
clause. Question
put and agreed
to. Clause
107 accordingly ordered to stand part of the
Bill. Clause
108 ordered to stand part of the
Bill. Schedule
57 agreed
to.
Clause
109Recovery
of debts using PAYE
regulations Question
proposed, That the clause stand part of the
Bill.
Mr.
Gauke: The clause and schedule 58 relate to the recovery
of debts using PAYE payments. The provision enables HMRC to collect
small debts of no more than £2,000 across all the taxes it
administers from taxpayers
through the PAYE system. The provision specifically excludes HMRC from
using the PAYE system to collect debts in respect of tax credits or any
debts due from an employer during the current tax year. Regulations can
be made through secondary legislation to effect the
proposal. It
is intended that the provision will be used by HMRC as a last resort in
the event that a debt cannot be paid in full or through a time to pay
arrangement. I would be grateful if the Minister confirmed that the
provision is a last resort—there is no specific safeguard in the
legislation or in PAYE regulations to say that that is the case.
Currently, small sums relating to self-assessment liabilities from
previous years are collected through the PAYE system on a regular
basis. Given
that £2,000 is a large sum for many taxpayers, it would be
appropriate to have some form of statutory safeguard in the
regulations, such as a referral to a more senior officer, to ensure
that the mechanism is utilised only as a last resort. I would be
grateful if the Minister provided assurances that regulations will
reflect that, or at least that the provisions of the clause and
schedule 58 will not be used as a routine method of collecting small
debts.
Ian
Pearson: The clause introduces schedule 58, which allows
HMRC to collect certain debts owed to it through the pay-as-you-earn
system. HMRC faces a particular problem with small debts, which
represent a large percentage of what it is owed by volume, but only a
small percentage by value. That makes its traditional methods of
enforcement—going to court to obtain judgment or seizing goods
to sell at auction—increasingly less cost-effective. Those
traditional methods can cause the debtor stress and extra expense. The
clause allows HMRC to use the PAYE system it administers to collect
small debts over time. Doing so reassures compliant taxpayers by
ensuring that tax debt is pursued, while offering debtors an easy way
to spread their payments.
The hon. Member for South-West
Hertfordshire asked whether such matters can be appealed on grounds of
hardship. The PAYE coding rules are designed to prevent hardship being
caused through excessive deductions, either on a single pay day or
through the year as a whole. If a taxpayer feels that a coding change
will cause hardship, they should object by contacting HMRC immediately.
HMRC also offers help to older people, those with disabilities, people
on low incomes and those from diverse backgrounds, in a variety of ways
as part of its day-to-day work. It recognises the need for
clear and strong communications with those groups, and talks regularly
to voluntary groups, including TaxAid and the Low Incomes Tax Reform
Group, about problems faced by particular groups of debtors, such as
the financially vulnerable. I understand that some hon. Members’
representations come from that source.
Moving on to
statutory safeguards and limits on how much can be coded out, the
amount that can be coded out will remain subject to the normal limits,
which prevent excessive deductions. The limits are £2,000 a year
or 50 per cent. of gross taxable income. The £2,000 is in the
clause and the 50 per cent. is in the existing PAYE regulations. That
gives important safeguards.
As the hon.
Member for South-West Hertfordshire is aware, my right hon. Friend the
Financial Secretary has written to the Committee about the order-making
powers, which I hope provides
clarification.
Mr.
Brian Jenkins (Tamworth) (Lab): Just for clarification,
when the Minister says 50 per cent., does he mean 50 per cent. of
income or 50 per cent. of income less national insurance contributions?
What is the tax take? How much income do such people have
left?
Ian
Pearson: My understanding of the safeguards is that the
limits are £2,000 a year or 50 per cent. of gross taxable
income. As I explained, the £2,000 figure is in the clause and
the 50 per cent. figure is in the current PAYE regulations. I do not
believe that the regulations have caused problems for those who comment
on such tax matters.
I hope that
I have been able to address the points that the hon. Member for
South-West Hertfordshire raised.
Question
put and agreed to.
Clause
109 accordingly ordered to stand part of the Bill.
Schedule
58 agreed to.
Clause
110Managed
payment
plans 7
pm Question
proposed, That the clause stand part of the
Bill.
Mr.
Gauke: A moment ago the Minister referred to
representations received from the Low Incomes Tax Reform Group during
the passage of the Bill. I rise to raise points from that group on
managed payment plans.
Clause 110
is welcome, but I have a few questions about its details. The clause
gives HMRC the ability to set out further requirements for managed
payment plans in regulations. However, it appears that much of the
detail will be set out in non-statutory guidance, a draft of which has
been published and is on the HMRC website.
In the
original consultation document, HMRC proposed to limit MPPs to payment
by direct debit and to online filers. Following representations from
the Low Incomes Tax Reform Group, HMRC offered the following points of
reassurance in its consultation response, both of which are vital for
low income taxpayers to take advantage of MPPs. First, HMRC said that
it
was: “exploring
other methods of payment for MPPs (ie not limiting them to direct
debit) and have agreed to accept standing
orders.” Secondly,
HMRC
said: “Paper
tax return filers will be allowed to set up
MPPs.” The
draft guidance appears to cover both these points. It confirms that
HMRC will accept both standing orders and direct debit, but suggests
that direct debit is preferred, one of the requirements being
to:
“Make
payment by Direct Debit or Standing Order. HMRC will need some
assurance that payments will be made at a precise time and be posted to
the correct record, and this is best achieved through Direct
Debit.” Can
the Minister give some indication of what information will be sought
from those people who use standing orders? The LITRG’s concern
is that such people will be pressured into agreeing to a direct debit.
It would be helpful if the Minister outlined what HMRC’s policy
will be in those circumstances.
Another
concern that the LITRG has mentioned to us is that paper filers will
also fare worse than those filing online. Again, the LITRG quotes from
the draft guidance, which
says: “Those
who cannot file online, or do not wish to do so, will still be able to
set up a payment plan by filing a paper return but will have to
calculate their self-assessment
themselves.” As
paper filers tend to be older people, some of whom may be lacking the
technological sophistication to file online, or those on low incomes
who cannot readily afford access to the internet, there is a concern
that that guidance may be somewhat unfair. The regulations or perhaps
even the guidance itself, should require HMRC to provide those people
with help in making their calculations, on request. I would be grateful
if the Minister responded on that point.
There
is also the question of penalties in the event of failure to maintain a
payment plan. In the event of a taxpayer failing to keep up agreed
payments, subsections (6) and (7) of clause 110 allow HMRC to give
notice to the taxpayer that he is relieved from penalties that would
otherwise arise. However, that safeguard appears to operate at
HMRC’s discretion, so that it would be reliant on the guidance
and individual officers applying that guidance in practice. The LITRG
argues that there should be a statutory right of appeal if HMRC refuses
to give such a notice. If there is no such right, the taxpayer would
have no recourse against HMRC if it exercised its discretion
wrongfully, except by way of judicial review, which is no real remedy,
as the Minister will know, because it is well beyond the means of the
majority of individual taxpayers and certainly beyond the means of most
of the taxpayers that we are talking about. Again, I would be grateful
for the Minister’s comments.
Finally the
LITRG has highlighted to us that Budget note 88 tells us that MPPs will
not be introduced before April 2011, because changes are needed to
HMRC’s systems. I seek some reassurance from the Minister that
HMRC’s systems will be able to cope, given the increased
pressures on its finances. Also, has any consideration been given to
trialling the new scheme prior to widespread and national
implementation in
2011?
Ian
Pearson: I welcome the Opposition’s overall support
for MPPs. As the Committee will be aware, entry to a plan will be
wholly voluntary. First, the taxpayer must agree to pay the tax in
instalments and HMRC must agree to accept payments in that way.
Secondly, instalments paid before the normal date must be balanced by
those paid afterwards. I believe that MPPs are an important way in
which we can help taxpayers to manage their money.
The hon.
Gentleman asked a number of detailed questions. First it is right, as
he will appreciate, that the guidance that we published in draft sets
out a framework
for MPPs and how the HMRC will operate them. Clearly, most of the detail
is contained in the guidance, on which we have been consulting, rather
than in the Bill. The detail of any particular payment plan will be in
the terms and conditions under which HMRC makes it available and the
taxpayer chooses to accept. We do not believe that it is necessary for
such a level of detail to be in regulations. If a default
occurs—obviously, we hope that such cases will be few and far
between—the taxpayer would be in breach of the terms of their
own plan and would therefore be liable for the consequences of their
late payment. Subsection
(7) allows HMRC to relieve the taxpayer from penalties following a
failure to make agreed payments, where that is appropriate. It is not
an entitlement, but may be offered to taxpayers where they continue to
pay by agreed instalments. That will happen where the taxpayer has
approached HMRC before the payment date and has either made good the
deficient payment within a few days, or arranged time to pay the
balance Independent
research commissioned by HMRC and by others shows that direct debit is
favoured by many, including most businesses. Although it is
HMRC’s preferred method of payment, its officers will not put
pressure on taxpayers to pay in that way. Following representations
made in the consultation, HMRC will offer MPPs for some of the
electronic payment methods, such as standing orders. Assorted
information that HMRC would require would include fully completed pay
slips showing the correct taxpayer reference, year, and amount of
payment.
On statutory
rights of appeal, it is not the case that there is a statutory right of
appeal. We certainly want to encourage anyone in difficulties to
approach HMRC. As I have indicated, where the taxpayer has approached
HMRC before the payment date and has either made good the deficient
payment within a few days, or set up an arrangement for time to pay the
balance, HMRC would want to respond favourably. Of course, all late
payment penalties can be appealed in the usual way.
We are
confident that HMRC’s systems will be able to cope with
implementation. Strong governance will be provided by a dedicated
implementation team, overseen by an implementation forum of leading
officials and industry figures. HMRC will continue to look at whether
it will be appropriate to trial the changes in the course of
development, but we believe that MPPs are an important initiative and
that is why they have been included in this year’s Finance
Bill.
Question
put and agreed
to. Clause
110 accordingly ordered to stand part of the Bill.
Clause
111 ordered to stand part of the Bill.
| 
