Clause 19 - Disclosure of VAT avoidance schemes
Finance Bill
4:45 pm
Mr John Healey (Economic Secretary, HM Treasury; Wentworth, Labour)
I hope that the hon. Gentleman will bear with me as I explain the way in which I envisage the provisions operating. It will be business as usual in the sense that the assurance operations of Customs will be no different from the present. Decisions made by Customs and Excise commissioners or Ministers on any legislative and operational changes will be as now. The clause and schedule are designed to alert Customs earlier and more comprehensively to the possibility of avoidance schemes and their use.
I gave two examples to the Committee to exemplify the schemes that Customs are up against. There are many others, all involving a significant element of contrivance. All deprive the Government of substantial revenue. We estimate the savings arising from the measure at around £200 million in a full year. All distort competition, and as they are often available only to large businesses, they are particularly distorting and unfair to small competitors.
Tackling such schemes is onerous, time-consuming and complex. Customs must identify the existence of such schemes, and avoidance, by its nature, is secret and covert. Many schemes will remain hidden indefinitely or for many years, and the revenue will continue to be lost to the public purse. Even when schemes are identified, Customs must analyse the risk and identify every business that uses them. It must then investigate each and every one to discover whether tax is being avoided, and only then can it take action to deal with the avoidance. When taxpayers have disclosed information under the clause and schedule and it has been evaluated, they will be treated no differently as a result of the measure. The measure will bring the use of avoidance schemes to the attention of Customs at a much earlier stage, enabling it to take the appropriate action to safeguard the revenue much earlier. For taxpayers, it will be business as usual, and they will be subject to no different inquiries or treatment than they currently are when Customs discovers an avoidance scheme.
There will be clear criteria for listing the schemes. There must be an avoidance scheme involving contrivance or artificiality, which must be abusive, in that it does not comply with the spirit of the law, and it must represent a serious potential risk to the revenue. The legislation will not provide Customs with an opportunity to go on a fishing expedition into taxpayers' affairs. In any case, before a scheme is listed, Customs will publicly announce its intention to list it, and will allow one month for representations to be made on why a listing is not appropriate. The listing will then be subject to parliamentary scrutiny under the statutory instrument process.
On top of that, there are de minimis limits, which are set high and designed to ensure that smaller businesses are not affected. They require an annual turnover of £600,000 for the listing scheme, and £10 million for the hallmark scheme.