Mr Howard Flight (Arundel & South Downs, Conservative)

I beg to move amendment No. 47, in page 243, line 27, after `jointly', insert `or separately'.

We broadly welcome the reforms in the machinery of self-assessment, as does business generally. Three amendments have been tabled to the schedule and they deal with specific points on its impact and interaction with previous legislation. Amendment No. 47 would change the part that deals with disputes on self-assessment and related litigation between taxpayers and the Inland Revenue. The procedure is commenced by a notice of referral to the special commissioners, but that must be given jointly by both sides. If they are already in dispute over another matter, why is it necessary to include a requirement for both sides to agree? Surely it would be more sensible to allow either side to start the process.

I want also to ask a question that others have posed, which is related to amendment No. 47. Why is the process reserved for the special commissioners and not included for the general commissioners?

Ms Dawn Primarolo (Paymaster General, HM Treasury; Bristol South, Labour)

Schedule 28 provides for some changes to the self-assessment procedure. I will explain why we undertook them, before responding specifically to amendment No. 47.

The Government received a report on tax inquiries, as part of a consultation that was carried out jointly by the Chartered Institute of Taxation and Inland Revenue. The report's findings were widely discussed with the main representative bodies. The exercise was an excellent example of co-operation, and it has enabled the Revenue to improve the service that it provides to the taxpayer. I want to make it clear to the hon. Gentleman that I specifically requested that any proposed changes were agreed by all, because the aim was to tidy up the process. Given the views that have been expressed about self-assessment, I wanted to ensure that everyone was in agreement.

The measures fall into two main groups. First, it will be possible for the taxpayer and the Inland Revenue to agree to refer a disputed point to the special commissioners, and to the courts if necessary, before the inquiry is completed. I am sure that the hon. Gentleman knows that formal completion of an inquiry can take a long time. The joint report expressed the view that the measure would enable litigation of contentious points while the facts were still fresh and that that would assist in providing the taxpayer with certainty at an early stage.

The second set of changes seeks to make income tax return inquiries simpler and more straightforward. There are four stages at present, but there will be only two in future. The Inland Revenue will state its conclusions and make any necessary amendments to the tax return, and the taxpayer will then have a right of appeal.

The context of the changes was agreement, so I am a little surprised by the amendment. All representations on the amendments came specifically from KPMG. I hope that the hon. Gentleman will accept that I did all that was humanly possible—as did the Revenue—to ensure that there was agreement on what we believed were uncontentious improvements. His amendment is unnecessary and complicates what is already an involved piece of legislation; hence our moves to try to improve it. The information powers can be used only to obtain information and documents that might be relevant to the tax liability. It is very unlikely that documents relating to the conduct of a referral would be relevant to the tax liability.

As I said, the wording of the amendment was suggested in a letter from KPMG. I asked my officials to reply to explain why I thought that it was not necessary. It is extremely unlikely that the protection that the amendment would provide would ever be needed, but if KMPG were able to provide my officials with examples of cases, I would be prepared to consider them further. I am also happy to give the assurance that the Inland Revenue will not use section 20A to obtain documents or information relating to the conduct of a pending referral.

The hon. Member for Arundel and South Downs specifically asked about special commissioners. According to the joint study by the Chartered Institute of Taxation and the Inland Revenue, the new right is necessary because substantial and complex matters will benefit from early consideration by the commissioners. It is appropriate for the special rather than the general commissioners to consider such matters.

I hope that I have answered the hon. Gentleman's questions and that suitable assurances are now on the record. All Governments are constantly encouraged to consult, and we have consulted widely. We regarded this legislative provision as uncontentious, but three amendments were tabled, and the matters raised were settled through correspondence between the Inland Revenue and the relevant company. I wonder what more it is humanly possible for the Government to do than to introduce a measure that has found agreement; the problems came to light later in Committee. In the spirit of consultation and discussion, I hope that the hon. Gentleman will withdraw the amendment.

Mr Howard Flight (Arundel & South Downs, Conservative)

I thank the Paymaster General for her helpful comments. The Law Society as well as KPMG raised the issue. I agree that it is up to those affected to provide significant case evidence to justify pursuing the matter further. The door is open in that respect, so I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Mr Howard Flight (Arundel & South Downs, Conservative)

I beg to move amendment No. 48, in page 249, line 20, at end insert—

`( ) Before 31st December 2001 the Board of Inland Revenue shall present to the Chancellor of the Exchequer proposals to bring the law governing the procedure on completion of enquiries into company tax returns into line with that which applies for income tax self-assessment purposes as a result of paragraphs 8 to 10 above.'

The amendment is in no way critical of the changes in schedule 28, which introduces several welcome improvements in the administration of self-assessment for individuals. It is a probing amendment designed to suggest that a similar process could be introduced for companies in respect of corporation tax self-assessment, and to counter the argument that making such changes would mean administrative upheaval. A half-way house and a review is proposed.

Ms Dawn Primarolo (Paymaster General, HM Treasury; Bristol South, Labour)

I suggest that the hon. Gentleman withdraws the amendment. He knows full well the differences between income tax and corporation tax self-assessment. The administration and timing is complex. He described his amendment as probing, so he may be trying to ascertain our intentions for corporation tax self-assessment.

It is too early to judge whether changes to the process and administration of corporation tax self-assessment are desirable. We need to scrutinise how the system works. The Government have not turned their face against reviewing how the corporation tax self-assessment inquiry has bedded in, and whether that, too, could do with some tidying up. For many reasons, however—one being that we are considering the Finance Bill at the moment—the time is not now. Given that I have said that the Government would want to look at the matter in the not too distant future, I hope that the hon. Gentleman will withdraw his amendment. I am sure that he will want to press us on the subject on future Finance Bills—from the Opposition Benches.

Mr Howard Flight (Arundel & South Downs, Conservative)

As I said, this is a probing amendment, tabled so that when we occupy the Government Benches we shall have some idea of Revenue and Treasury thinking about corporate self-assessment. I thank the Paymaster General for her comments, and I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Mr Howard Flight (Arundel & South Downs, Conservative)

I beg to move amendment No. 49, in page 256, line 28, at end insert—

`21A.—(1) Section 20B of the Taxes Management Act 1970 (restrictions on powers under sections 20 and 20A) is amended as follows.

(2) In subsection (2)—

(a) after ``any pending appeal by him'', insert ``or any pending referral to the Special Commissioners under section 28ZA of this Act or paragraph 31A of Schedule 18 to the Finance Act 1998 to which that person is a party'', and

(b) after ``a pending appeal by the taxpayer'', insert ``or a pending referral to the Special Commissioners under section 28ZA of this Act or paragraph 31A of Schedule 18 to the Finance Act 1998 to which the taxpayer is a party'', and

(c) after ``a pending appeal by the client'', insert ``or a pending referral to the Special Commissioners under section 28ZA of this Act or paragraph 31A of Schedule 18 to the Finance Act 1998 to which the client is a party''.'.

This is a technical point that has been raised with me by KPMG. The introduction of the new provisions relating to referrals to the special commissioners extends the protection to taxpayers so that a notice under any of the relevant sections cannot oblige a taxpayer to provide documents or information relating to the conduct of any pending appeal by the taxpayer. However, there is apparently no extension of the protection that currently exists in section 20B of the Taxes Management Act 1970 to take account of the proposed referral procedure.

Ms Dawn Primarolo (Paymaster General, HM Treasury; Bristol South, Labour)

I am extremely grateful for the opportunity to speak on this amendment again, Dr. Clark, as I have already inadvertently covered the point, in my rush to be helpful to the hon. Gentleman—

Mr Peter Luff (Mid Worcestershire, Conservative)

Characteristically helpful.

Ms Dawn Primarolo (Paymaster General, HM Treasury; Bristol South, Labour)

I am grateful to the hon. Gentleman for saying that.

I inadvertently covered this point in my comments on amendment No. 47. The hon. Member for Arundel and South Downs was characteristically gallant, and did not point that out to me. I therefore refer him to the comments that I made then, and specifically to the assurances about not using section 20 or 20A to obtain the documents or information relating to the conduct of a pending referral. As he was so gracious to accept that as a good explanation in response to amendment No. 47, I hope that he will accept it as an equally good explanation concerning the relevant amendment, and will withdraw that amendment.

Mr Howard Flight (Arundel & South Downs, Conservative)

I thank the Paymaster General, both for her kind words and for putting on the record the underlying point, which others have also raised. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Schedule 28 agreed to.

Clauses 87 to 90 ordered to stand part of the Bill.

Schedule 29 agreed to.

Clauses 91 and 92 ordered to stand part of the Bill.