The
Committee consisted of the following
Members:
Chair:
Dr
William McCrea
†
Anderson,
Mr David (Blaydon)
(Lab)
†
Birtwistle,
Gordon (Burnley)
(LD)
†
Doran,
Mr Frank (Aberdeen North)
(Lab)
†
Doyle-Price,
Jackie (Thurrock)
(Con)
†
Gauke,
Mr David (Exchequer Secretary to the
Treasury)
†
Goodwill,
Mr Robert (Scarborough and Whitby)
(Con)
†
Hanson,
Mr David (Delyn)
(Lab)
†
Harrington,
Richard (Watford)
(Con)
†
Joyce,
Eric (Falkirk) (Lab)
†
Lord,
Jonathan (Woking)
(Con)
†
Mills,
Nigel (Amber Valley)
(Con)
†
Mitchell,
Austin (Great Grimsby)
(Lab)
†
Offord,
Mr Matthew (Hendon)
(Con)
†
Skinner,
Mr Dennis (Bolsover)
(Lab)
†
Smith,
Mr Andrew (Oxford East)
(Lab)
†
Syms,
Mr Robert (Poole)
(Con)
†
Williams,
Stephen (Bristol West)
(LD)
Wilson,
Sammy (East Antrim)
(DUP)
Mark Oxborough, Committee
Clerk
† attended the
Committee
Sixth
Delegated Legislation
Committee
Tuesday 22
March
2011
[Dr
William McCrea
in the
Chair]
Insurance
Premium Tax (Discounted Insurance Premiums: Higher Rate)
Order
2011
10.30
am
The
Exchequer Secretary to the Treasury (Mr David Gauke):
I
beg to
move,
That
the Committee has considered the Insurance Premium Tax (Discounted
Insurance Premiums: Higher Rate) Order 2011(S.I. 2011, No.
661).
The
Chair:
With this it will be convenient to consider the
draft Enactment of Extra-Statutory Concessions Order
2011.
Mr
Gauke:
It is a great pleasure to serve under your
chairmanship, Dr McCrea. As some members of the Committee might be
aware, the orders before us are a further step in Her Majesty’s
Revenue and Customs’ continuing review of extra-statutory
concessions. They put eight HMRC extra-statutory concessions, commonly
known as ESCs, on a statutory footing. The need to legislate to retain
the tax reliefs provided by the ESCs arises following clarification of
HMRC’s administrative powers, which was provided by the courts
in the Wilkinson
case.
There
are two orders before us. The Insurance Premium Tax (Discounted
Insurance Premiums: Higher Rate) Order 2011 retains an ESC that avoids
an excessive rate of insurance premium tax where motor or domestic
appliance warranty insurance is provided by intermediaries at
discounted rates. The draft Enactment of Extra-Statutory Concessions
Order 2011 retains the effect of seven ESCs, of which perhaps the most
well known is the equitable liability concession, at articles 2 to 5 of
the
order.
I
welcomed the previous Government’s decision, during our last
debate on ESCs, to respond positively to representations about the
proposed withdrawal of the equitable liability concession and retain
that useful protection for taxpayers. Therefore, I am pleased to be
able to bring these measures before the Committee for
consideration.
The
Committee will see that the equitable liability concession is to be
legislated as special relief, which forms part of the income tax and
corporation tax self-assessment overpayment relief provisions. Special
relief is designed to preserve a useful safety valve in the tax system,
particularly for vulnerable taxpayers who have difficulty engaging with
the system, and so cannot understand or comply with their obligations.
It provides those taxpayers with a final opportunity to bring their
affairs up to date.
The other six
concessions in the ESC order are also significant as they preserve the
benefits of concessions that, although relevant to only a small
minority of taxpayers, are important safeguards to ensure that tax
operates fairly and consistently. The decision to legislate to maintain
the effect of those six ESCs was welcomed by consultees. The benefit to
the Exchequer if all the ESCs being legislated on today were withdrawn
would be minimal—certainly less than £10 million per
annum. On the whole, they simplify the tax system by removing
anomalies, rather than adding to its complexity. Equitable liability
also provides a useful safeguard for vulnerable
taxpayers.
The
orders have been fully consulted upon, and I am grateful to all who
commented on the drafts for their assistance in improving them. I am
particularly pleased that on equitable liability the Chartered
Institute of Taxation has said
:
“We
are very pleased that this Government has honour(ed) the commitment
given by the previous administration to legislate… this
concession, of all the extra statutory concessions, is one that very
definitely needs to be retained by putting into
statute”.
That
reflects the support that these measures have among taxpayers and their
representatives.
The
Wilkinson review continues, and I expect further such orders and more
withdrawals by HMRC. I cannot yet say when HMRC will complete the
review. Some of these minor tax reliefs started as concessions rather
than legislation precisely because they were difficult to formulate in
law. That makes the work to draft and consult on them time consuming.
If the Committee agrees to the motion, the insurance premium tax order,
being a 28-day order, will come into force on 1 April. The ESC order,
which is in draft, will be made quickly to ensure that it can come into
force on 1 April. That is particularly important for the legislation at
articles 12 and 13, dealing with wear-and-tear allowances, which must
be aligned to a tax year, as they involve an annual
election.
The
two orders are necessary so that worthwhile tax reliefs and useful
safeguards can continue to be available to taxpayers, and I commend
them to the
Committee.
10.35
am
Mr
David Hanson (Delyn) (Lab):
It is a pleasure to serve once
again under your chairmanship, Dr McCrea. As the Minister has
explained, the orders are a further step in the HMRC review of
extra-statutory concessions and they have the broad support of the
Opposition. As he also outlined, the decision of the Court in the
Wilkinson case in the House of Lords has meant that we have had to
consider clarifying the scope of HMRC’s discretion. That
consideration has established that that discretion is narrower than was
previously thought. As a result, there has been a review of the
concessions, and the orders before the Committee, as well as previous
measures, have been designed to regularise that aspect with respect to
the Wilkinson
case.
As
the Minister said, there was a discussion about several of these
matters before the general election. Indeed, I note that when he was in
opposition, we had a discussion on these matters in Committee that
lasted about 14 minutes. We might well beat that time today—who
knows?
The Minister
knows that the equitable liability concession was a key issue, and that
my right hon. Friend the Member for East Ham (Stephen Timms), when he
was a Minister, reviewed that measure and listened to the concerns
raised. Indeed, the measure has been included in the legislation that
we are considering based on that cross-party agreement. We support the
order on that
basis.
I
have one question on the equitable liability concession. A consultation
took place, and the Minister published the responses to it on 8 March.
Concern was expressed about the ability to appeal on the concession in
relation to a claim being rejected either for being incomplete or
because it does not meet the entry tests. I would welcome clarification
of his assessment of the right of appeal on those issues. I read that
those who were concerned about such matters could seek judicial review,
but that approach seems rather heavy handed. I would welcome
clarification as to how appeals will be taken, so that we can at least
put on record the concerns that were addressed in the consultation
review.
I
shall raise one other issue if I may, Dr McCrea. A decision has been
taken to defer A10, which is lump sums paid under overseas pension
schemes’ income tax. I would be grateful if the Minister told
the Committee the timeline—what he expects—for
alternative legislation to be introduced on the deferral of A10. Does
he expect that to be in the forthcoming Finance Bill, which we shall
consider shortly, following the
Budget?
The
Minister anticipated one question that I intended to ask, which is the
cost to the Treasury of the concessions. I am pleased he has dealt with
that. Notwithstanding the two points I have made, we are content with
the orders, which I commend to my hon. and right hon.
Friends.
10.38
am
Mr
Gauke:
I thank the right hon. Gentleman for his support
for the orders. He is right to say that there is a cross-party
consensus. Initially, under the previous Administration, equitable
liability was going to be lost. Considerable concern was raised by some
of the professional bodies, and we raised our concerns on the point. He
is correct that, when I was performing his role, I welcomed the
decision by the right hon. Member for East Ham to ensure that the
equitable liability concession could
continue.
The
right hon. Member for Delyn also raised the issue of appeals in
circumstances where special relief applies, which is how we are taking
this forward. Where HMRC is unsure from the information provided
with a claim whether the taxpayer qualifies for special
relief, it will open an inquiry into the claim. If a taxpayer
disagrees with HMRC’s conclusions at the end of an inquiry, they
will be able to appeal to the tax tribunal. However, if HMRC says an
attempted claim is unsatisfactory, it is not possible to open an
inquiry at that time—for example, if the attempted claim is not
in the correct format and so does not contain all the information
necessary for HMRC to identify it as a claim to special
relief.
In
those circumstances, the taxpayer will be told why their attempt is
unsatisfactory, and so will be able to submit a claim in the correct
format, which may then be inquired into. If the conditions cannot be
met then the claim cannot proceed. As in all cases, the claimant can
complain to HMRC or the adjudicator, or seek a judicial review if he
believes that HMRC has not acted in accordance with the law. I hope
that that provides a little clarity for the right hon.
Gentleman.
The
right hon. Gentleman also raised the issue of ESC A10 not being
legislated for at this time. Since the publication of the consultation
document, it has become necessary to defer plans to legislate to retain
the effect of A10. He is right to draw that to the Committee’s
attention. New legislation being introduced in the 2011 Finance Bill to
tackle third-party arrangements that seek to avoid or defer the payment
of income tax or national insurance contributions due on employment
income has required a substantial reconsideration of the scope of the
draft
legislation.
Legislation
replacing that concession will be introduced at the first appropriate
opportunity. I am afraid that I cannot be more precise than that at the
moment, but in the meantime, ESC A10 may continue to be used in its
current form. I hope that that provides some reassurance to the right
hon. Gentleman and to the Committee. Subject to those points of
clarification, which I hope the Committee has found helpful, I ask hon.
Members to agree to the
motion.
Question
put and agreed
to.
Resolved,
That
the Committee has considered the Insurance Premium Tax (Discounted
Insurance Premiums: Higher Rate) Order 2011 (S.I. 2011, No.
661).
Draft
Enactment of Extra-Statutory Concessions Order
2011
Resolved,
That
the Committee has considered the draft Enactment of Extra-Statutory
Concessions Order 2011.—(Mr
Gauke.)
10.42
am
Committee
rose.
