Schedule 28 - Amendments to machinery of self-assessment
Finance Bill
11:30 am
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.