Draft Revenue and Customs (Amendment of Appeal Provisions for Out of Time Reviews) Order 2014
The Committee consisted of the following Members:
† Bebb, Guto (Aberconwy) (Con)
† Bray, Angie (Ealing Central and Acton) (Con)
† Dakin, Nic (Scunthorpe) (Lab)
† Drax, Richard (South Dorset) (Con)
† Gauke, Mr David (Exchequer Secretary to the Treasury)
Godsiff, Mr Roger (Birmingham, Hall Green) (Lab)
† Hames, Duncan (Chippenham) (LD)
† Hepburn, Mr Stephen (Jarrow) (Lab)
† Luff, Sir Peter (Mid Worcestershire) (Con)
† Mahmood, Shabana (Birmingham, Ladywood) (Lab)
† McDonnell, John (Hayes and Harlington) (Lab)
† Newton, Sarah (Truro and Falmouth) (Con)
Rotheram, Steve (Liverpool, Walton) (Lab)
† Rudd, Amber (Hastings and Rye) (Con)
† Russell, Sir Bob (Colchester) (LD)
Skinner, Mr Dennis (Bolsover) (Lab)
† Wheeler, Heather (South Derbyshire) (Con)
Wilson, Sammy (East Antrim) (DUP)
Fergus Reid, Committee Clerk
† attended the Committee
Third Delegated Legislation Committee
Monday 12 May 2014
[Hywel Williams in the Chair]
Draft Revenue and Customs (Amendment of Appeal Provisions for Out of Time Reviews) Order 2014
6 pm
The Exchequer Secretary to the Treasury (Mr David Gauke): I beg to move,
That the Committee has considered the draft Revenue and Customs (Amendment of Appeal Provisions for Out of Time Reviews) Order 2014.
It is a great pleasure to serve under your chairmanship, Mr Williams.
The draft order contains a technical change to the appeals provisions for a range of indirect taxes and financial services—specifically, for appeals brought where there is an out-of-time review. Currently, taxpayers who are unhappy with certain decisions taken by Her Majesty’s Revenue and Customs have 30 days to ask HMRC to review its decision, or to appeal to the tribunal. If they requested a review, they may still appeal to the tribunal within 30 days of the review’s conclusion.
If taxpayers do not appeal to the tribunal within 30 days, they may appeal beyond the time limit only if they obtain permission from the tribunal—this is called a late appeal. The tribunal will consider the reasons for the delay in appeal and may or may not give permission to proceed with a late appeal. If taxpayers ask for a review beyond the 30-day limit, HMRC will consider whether they have a reasonable excuse for not requesting a review within the time allowed. If HMRC is satisfied that there is a reasonable excuse and the taxpayer came forward without delay after the excuse ended, HMRC must undertake a review.
On conclusion of the review, taxpayers will have 30 days to appeal to the tribunal if they wish. However, even if HMRC is not satisfied that there is a reasonable excuse and decides not to carry out a late review, the current legislation gives taxpayers another 30 days from the date of the refusal to appeal to the tribunal. The system is therefore open to manipulation, as those making a request for a review out of time gain an automatic further right of appeal to the tribunal, subject to another 30-day limit, regardless of how long ago the original decision was made or why the review was not requested earlier.
The draft order will remove that anomaly. As a result, taxpayers who ask for a review after the 30-day limit has elapsed but are refused will need to obtain permission from the tribunal to have a late appeal considered. The change will ensure a level playing field for all taxpayers. It will stop taxpayers gaining a further automatic right to appeal simply by making a request for a late review. This change will also provide finality in the time limits set out by Parliament, as taxpayers will no longer be able to appeal years after the original decision was made, unless HMRC or the tribunal accepts that they have a good reason to do so.
In conclusion, taxpayers will continue to have the right to appeal to an independent tribunal about tax decisions. They will need to do so within the statutory time limit, unless HMRC agrees that there is a reasonable excuse and undertakes a review; or unless they obtain permission from the tribunal to make a late appeal. There will be certainty for the Exchequer, as revenue collected cannot be disputed many years down the line. The tribunal will be able to exercise its discretion in all cases on whether to accept late appeals. I commend the draft order to the Committee.
6.3 pm
Shabana Mahmood (Birmingham, Ladywood) (Lab): It is a pleasure to serve under your chairmanship, Mr Williams.
As the Minister has explained, the draft order will require taxpayers who request a review of an HMRC decision outside the statutory time limit, but where HMRC has not agreed to undertake such a review, to persuade a first-tier tribunal to accept their appeal out of time before it can proceed. Currently, through a variety of indirect tax and financial services appeals provisions, seeking an out-of-time review of a decision by HMRC provides a new window of 30 days in which to make an in-time appeal. The window is not related to the time at which the original decision was made. We agree that that is problematic, because it presents a risk to revenue that has already been collected. It should not be used as a means to reopen cases that have been closed for years, thereby undermining the certainty of the tax system. We will therefore support the draft order.
It would be helpful, however, to get an assurance from the Minister. He said that when HMRC makes a decision on whether it will conduct a review out of time, if conditions are met, it must conduct the review. It would be helpful to know whether that is a matter of case law or general practice or whether it is written into the legislation, to ensure that HMRC cannot begin routinely to refuse requests for out-of-time reviews, thereby forcing taxpayers to go to a first-tier tribunal even where there is a legitimate and genuine excuse for the delay. To give us an idea of how many people the change will affect each year, can the Minister tell us how many out-of-time reviews are unsuccessful at the HMRC stage?
The provision will require more work on the part of the first-tier tribunal. What assessment has been made of the additional resources that the first-tier tribunal might require? I am guessing that more sitting days of the tribunal might be required. A tribunal has a particular set-up in terms of experts and legal personnel. Have enough people and sitting days been gridded in to take account of the additional work that the order will create? I would be grateful for the Minister’s clarification on those points.
6.6 pm
Mr Gauke: May I begin by thanking the hon. Member for Birmingham, Ladywood for her support for the measure? She has set out the rationale clearly, and I appreciate that she recognises the need to address the anomaly that we have discussed. She asked a number of questions, which I will attempt to address. She
asked about the definition of a reasonable excuse. Each case is considered on its own merits after the relevant factors are established. A reasonable excuse is usually an unusual event that is either unforeseeable or beyond the taxpayer’s control, which prevented them from meeting the requirement, when they otherwise would have done so, to request a review within 30 days of the original decision. HMRC must undertake a review if there is a reasonable excuse, and that is set out in statute.On the question of how many taxpayers will be affected by the change, in truth, it is not possible to give an answer. There is no evidence that the rule has been exploited up until now, but we cannot predict how
many or which future tribunal decisions might have meant that taxpayers would seek to take advantage of the rule.In terms of the pressures on the tribunal, the Ministry of Justice is aware of the changes, and it has raised no particular concerns about the order. We do not expect a significant increase in sitting days as a consequence of the measure. I hope that those points of clarification are helpful to the Committee, and that the Committee will support the order.