The clause specifies the time limits for issuing civil penalty demand notices. Although the principle of having such a clause is not disputed in relation to the technical process of the Bill, there is a
problem. The determination of the start date for calculating time limits for the raising of assessments or, as in the instant case, demand notices gives rise to considerable litigation and expense. It is our duty to seek to avoid that consequence flowing from statutory provisions as best we can. The method of calculating the start date for the time limits should be defined more closely to create some certainty for taxpayers. That is a principle that we seek to push forward throughout the consideration of the Bill.
The problem arises in a number of existing areas of tax legislation, and it is disappointing that in introducing a new civil penalty regime, no attempt has been made by the Treasury or Customs and Excise to address the issue. Continued reliance on case law is unattractive as it discriminates against small businesses that may not have ready access to the case law in question. I am well aware that many Committee members are concerned that small businesses do not find themselves with an added cost burden or discriminated against. There are a number of potential solutions to the problem that could be based on the principles surrounding case law, or perhaps by linking the start dates to the start of the financial year, thus requiring Customs to show only that the relevant conduct had been conducted at some stage during the financial year.
The aim of any principles adopted should be to reduce the need to argue about the specific dates on which conduct ceased, although consultation would be required to ensure a fair balance on the time given to Customs to pursue such matters. I have deliberately not proposed an amendment on the basis that the matter would benefit enormously from the Economic Secretary and the Government giving it further consideration, and taking consultation with business and advisors further. We look forward to what he has to say, but if it does not satisfy us the matter may resurface on Report.
When the Minister responds to my hon. Friend's observations, I should be grateful if he would expand on the reason for choosing a time limit of 20 years in clause 31(1)(a). It states that a demand notice may not be given
''in the case of a penalty under section 25, more than 20 years after the conduct giving rise to the liability to the penalty ceased.''
That is a long time, and I should like to know why that period was selected and on what basis it was determined to be the right period. I am aware that, over time, application of the Statute of Limitations to Customs and Excise matters has changed, particularly concerning repayments. Instead of going back six years, Customs and Excise has an arrangement to go back three years for repayment of certain moneys. That is reflected, oddly, in subsection (1)(b). I am always interested to know why certain periods are chosen and the thinking behind them. I should be grateful for a full explanation from the Minister.
The clause sets out time limits for the issue of demand notices. The provisions are designed to protect the interests of those incurring penalties by ensuring that the threat of the penalty cannot hang over them indefinitely.
In response to the right hon. Member for Fylde, the time limits in the clause simply mirror those applying to the VAT civil penalties regime, which already exists and operates effectively.
In response to the hon. Member for Eddisbury, if there are problems with the time limits, I would expect them to be exposed during the operation of the new regime and to be identified in the review which we intend to undertake after about 18 months of its operation.
May I ask the Minister how that would operate in the case of a company that might, for example, be fraudulently avoiding its obligations under VAT legislation which then, perhaps after three or four years, goes into liquidation? It would automatically go out of business and cease to be a legal entity. The 20-year timescale could give rise to the possibility that people might contrive to avoid their obligations through such artificial constructs. If so, what will happen?
I am conscious of the time and, if the right hon. Gentleman will allow me to, I will consider the matter further and write to him.
Question put and agreed to.
Clause 31 ordered to stand part of the Bill.
Clause 32 ordered to stand part of the Bill.