Clause 25 - Liability of officers for sums paid to employers
Tax Credits Bill
4:30 pm
Mr Paul Boateng (Financial Secretary, HM Treasury; Brent South, Labour)
I join the hon. Member for Arundel and South Downs in welcoming you, Mr. Beard, to the Chair this afternoon. It is a pleasure to serve under your chairmanship for the first time.
Clause 25 allows regulations to be made to hold an officer of a company—in practice, that is usually a director—personally liable for the company's tax credits debts, when it is believed that the debt has arisen through fraud or neglect by that person. The amendment would limit the scope of the measure to cases of fraud and remove from it cases of neglect.
In practice, the Revenue would use the regulations when there appears to have been deliberate exploitation of companies' limited liability and the tax credit system, for a director or other officer's personal benefit. Sadly, there are occasions when unscrupulous directors attempt to use the status of limited liability to enrich themselves. It is necessary always to provide for that possibility.
It may seem, as the hon. Gentleman put it, that only the fraud test is needed, but there are two reasons why it is right to maintain the fraud or negligence test. First, there is an important argument of principle. Neglect simply means a failure to take reasonable care. It is right that, when companies have received significant sums of public money to fund the payment of working tax credit to their employees, the officers of the company should be expected to take reasonable care to ensure that the money is used for that purpose. That is not unreasonable.
Secondly, there are practical difficulties with a fraud only test. There will be cases when it is clear that there has been either fraud or neglect, but it may be difficult
to demonstrate categorically that there has been fraud rather than neglect.