(Except clauses 11, 18, 40, 43, 44 and 69 and schedule 8) - Clause 24 - Deduction cases
Finance Bill
2:00 pm
Dawn Primarolo (Paymaster General, HM Treasury; Bristol South, Labour)
At the end of the morning sitting, I was explaining the effect of the amendments and why they are therefore not acceptable to the Government. An important aspect of the arbitrage legislation is that it does not set out an all-or-nothing approach. If a company receives a notice under the legislation, it must consider first whether the legislation applies to it and, if it does, how great an effect the legislation has on its self-assessment. The company takes its own view of both matters in its self-assessment. If there is a disagreement between Her Majesty's Revenue and Customs and the company, and it cannot be resolved, the matter can proceed to the special commissioners, who will be able to consider not only whether the legislation applies at all, but the extent of its effect.
The amendments would bypass the self-assessment stage. Instead, the matter would proceed directly to a hearing at the special commissioners to determine whether a notice should be issued. That unprecedented approach would require the special commissioners, who are established as a body to hear appeals, to apply legislation directly in the first instance. It is not clear how an appeal against the special commissioners' view would proceed. As I said this morning, there is no advantage in the huge increase in bureaucracy and costs that the amendments would impose.
There is already a right of appeal when the parties disagree, and there is nothing to be gained by requiring a hearing irrespective of whether disagreement exists. I hope that my explanation has dealt with the worries of the hon. Member for Runnymede and Weybridge (Mr. Hammond), but I shall be happy to give him further reassurance. HMRC has said in published guidance that companies may make what are referred to as a point of principle referral to special commissioners on aspects of the arbitrage legislation. A point of principle referral allows a point to be considered separately from other self-assessment matters and can be heard as soon as the relevant facts have been established.
Unlike the special commissioners' referral in the amendments, the point of principle referral would include the extent of the effect of the legislation as well as whether it applied at all. I hope that the hon. Gentleman is reassured that the issuing of the notice supported in the guidance notes with the point of principle referral gives sufficient opportunities, without the additional bureaucracy and possible cost, for the matter to be considered. It would also leave in place the special commissioners' role to hear any subsequent appeals.