Clause 29 - Reduction of penalty under section 25 or 26
Mr John Healey (Economic Secretary, HM Treasury; Wentworth, Labour)
The clause permits mitigating circumstances to be taken into account so that a civil penalty can be reduced. At the same time, it sets out the circumstances in which a reduction cannot be considered. Mitigation of a penalty amount will be appropriate in many cases. For example, where a business or an individual actively assists Customs and Excise to establish the extent of the arrears, thereby saving officials time, that assistance will be recognised
by a reduction in the amount of penalty assessed. As we draw comparisons to the VAT civil evasion regime that is already in place, it may be of interest to the Committee that the average penalty applied in cases of VAT civil evasion is currently just over 40 per cent. of the tax evaded. That figure shows the reduction in penalty that many taxpayers earn through co-operation with Customs and Excise investigations.
The hon. Member for Eddisbury asked why a person who acts in good faith might be precluded from being taken into account by Customs or a tribunal in considering whether a penalty can be reduced under clause 29. I will try to clarify the situation in the following way. When a person is liable to a penalty under clause 25 for evasion through dishonesty, there can be no question that he acted in good faith. In contrast, there is a general recognition that taxpayers have acted in good faith where dishonesty is not an issue. That has been recognised in setting the maximum penalty in clause 26 at a figure well below the maximum provided in clause 25, and in the decision to step the non-evasion penalty. Allowing further mitigation for good faith would in effect give the taxpayer dual relief. Decisions about whether to reduce a penalty, and if so, by how much, will initially lie with Customs, but its decisions are appealable to the independent VAT duties tribunal. On that basis, I hope that the Committee will support the clause.
Question put and agreed to.
Clause 29 ordered to stand part of the Bill.