Clause 35 - Powers of Commissioners on a review

Finance Bill – in a Public Bill Committee at 2:30 pm on 20th May 2003.

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Photo of Stephen O'Brien Stephen O'Brien Shadow Paymaster General 2:30 pm, 20th May 2003

I beg to move amendment No. 131, in

clause 35, page 27, line 13, leave out 'confirmed the decision' and insert

'varied the decision as requested by the applicant'.

Photo of Nicholas Winterton Nicholas Winterton Conservative, Macclesfield

With this it will be convenient to discuss the following:

Amendment No. 132, in

clause 35, page 27, line 15, leave out from 'which' to end of line 18 and insert—

'—

(a) the notice requiring a review issued by the person or his representative in accordance with section 33 is received by the Commissioners, or

(b) the review is agreed to by the Commissioners as mentioned in section 34(4).'.

Amendment No. 120, in

clause 36, page 27, line 25, leave out

'(including any confirmation under section 35(4))'.

Photo of Stephen O'Brien Stephen O'Brien Shadow Paymaster General 2:45 pm, 20th May 2003

Given the arguments that relate to clauses 35 and 36, I am grateful, Sir Nicholas, that you have adjusted the order in which we consider the amendments. The arguments are slightly different from those that we have just considered on clause 34, the result of which was disappointing. I shall not have to repeat my arguments on clause 35 when we discuss clause 36.

Clause 35 sets out the powers of the commissioners and the time limit for giving notice of their determination on a review. I shall briefly outline the problem as I see it. Subsection (4) provides that if the commissioners do not give notice of their review decision within 45 days, it shall be taken that they have confirmed their decision. That means that any inactivity on the part of the commissioners, for whatever reason, prejudices the position of the taxpayer in that one avenue of appeal is removed. A powerful argument has been made not just by Opposition Members but by others who have been advising us that the provision is unacceptable, given the relative resources of commissioners and small businesses. That is very much in line with arguments that have been made earlier.

The solution for clause 35 can be found in amendments Nos. 131 and 132 and for clause 36 in amendment No. 120. The recommendation is to consider how the burden might be reversed so that the commissioners are required to notify the taxpayer of their decision within 45 days. If they do not, it should be assumed that the commissioners have varied the decision in the applicant's favour.

To protect against situations in which taxpayers do not ensure that the commissioners receive notification promptly, it would be appropriate for the time limit of 45 days to reply to run from the date of receipt of notification by the commissioners, which can easily be established.

Photo of Mr John Burnett Mr John Burnett Liberal Democrat, Torridge and West Devon

Is the hon. Gentleman as concerned about the clause as I am? It is as though the Executive were trying to usurp the function of the judiciary. Is not this a preposterous clause?

Photo of Stephen O'Brien Stephen O'Brien Shadow Paymaster General

The hon. Gentleman may have detected a theme in the criticisms and observations that we have consistently made. We have been trying to establish the standard that accords with natural expectations and established precedents of justice in this country, while at the same time fully recognising that the Government, whether they have a large or small majority, are entitled to levy and to receive revenue that is due to them under the law, and to ensure that that is done efficiently.

The citizens of this country—our constituents—deserve our protection. I hope that the hon. Gentleman recognises that our approach in scrutinising the legislation has consistently been to consider very carefully the rights, checks and balances that must exist, particularly for statutory enforcement. He mentioned the potential for the Executive to usurp the judiciary, which in the world out there could sound a little like part of a constitutional law course. None the less, the question is absolutely key to the principles that we rightly are expected to adopt and adhere to when we consider legislation.

I am grateful to the hon. Gentleman, who helps to pinpoint our deep anxieties and concerns about many enforcement aspects of the Bill. That said, the Economic Secretary is putting up a consistent line of defence against the argument, and is making it clear that the Government need more draconian powers than have hitherto applied. That can be discussed again on Report, when we will consider the totality of what has taken place.

As we go through the Bill clause by clause, it is important that we consider carefully the merits of the case for each clause. The points made earlier will no doubt be hotly debated on Report, unless the Government see their way to accommodating some of the concerns that have been highlighted. Amendments Nos. 131 and 132 consistently apply that set of principles and do not damage the potential for revenue.

We are considering amendment No. 120, which relates to clause 36, for the convenience of the Committee at this time, and it will no doubt be formally moved at some point. I shall pray in aid the arguments I have used for amendments Nos. 131 and 132 in debating amendment No. 120, which is a reference to a deletion. I hope that with those arguments the Economic Secretary will see fit to accommodate the genuine anxieties and concerns and recognise that the matter is part of the balance to be struck between the potential prosecuting and adjudication authorities in Customs and Excise and the rights of the taxpayer.

Photo of Nicholas Winterton Nicholas Winterton Conservative, Macclesfield

Order. Before I call the Economic Secretary, I should tell the hon. Gentleman who leads for the Opposition on these amendments that amendment No. 120 is being taken with this group and will not need to be moved. If the hon. Gentleman wants a separate Division on that amendment, the Chair will give it some consideration, but the only amendment that is usually pressed to a Division is the lead amendment, which in this case is amendment No. 131. That is what happens unless I receive a special request that the Opposition want to push a particular amendment, which is not the lead amendment, to a Division.

Photo of Stephen O'Brien Stephen O'Brien Shadow Paymaster General

For the convenience of the Committee, as the amendments all relate to the same point and argument, I shall be content to seek a vote only on the lead amendment if the Economic Secretary's reply does not satisfy us—which I hope will not be the case.

Photo of John Healey John Healey The Economic Secretary to the Treasury

I sincerely hope that I can satisfy the hon. Gentleman and his hon. Friends, and the hon. Member for Torridge and West Devon (Mr. Burnett), on that point.

On amendment No. 131, clause 35 sets out what Customs may do following a review of a decision that a taxpayer is liable to a penalty or a review of the amount of any penalty. It also provides that a review decision should be communicated to the taxpayer within 45 days of a request to review being received. If that is not done, subsection (4) ensures that the taxpayer may assume that the original decision has been confirmed.

For the benefit of the hon. Member for Torridge and West Devon and to reassure the hon. Member for Eddisbury that the powers are not draconian, I can explain the purpose of the provision. Subsection (4) ensures that, when unavoidable delays occur, taxpayers have some certainty and can, should they choose, lodge a formal appeal with the independent VAT and duties tribunal. In other words, that is not a draconian power, but a practical provision. It makes no presumption about and does not prejudice any subsequent consideration by the tribunal, and it is not, as the hon. Member for Eddisbury claimed, a case of the Executive usurping the function of the judiciary, because the confirmed decision of the commissioners is then subject to appeal before the tribunal.

Photo of Mr John Burnett Mr John Burnett Liberal Democrat, Torridge and West Devon

Does the Economic Secretary accept that subsection (4) demeans the commissioners? I am concerned that it may do so. There will be occasions when they may legitimately want more time. A sole commissioner may be sitting and he may be ill before he can write his judgment or come to an opinion on the matter. Has the Economic Secretary considered that?

Photo of John Healey John Healey The Economic Secretary to the Treasury

Yes, but the balance of judgment in this case is to provide certainty for the business that could be challenged, so that, whatever the response of Customs, and especially if, for whatever reason, there is an unavoidable delay of more than 45 days, the trader knows that it can, should it choose to do so, take the case to the tribunal without further delay.

Photo of Rob Marris Rob Marris Labour, Wolverhampton South West

Perhaps the Economic Secretary and other hon. Members are aware that a similar provision has existed in planning law for many years. When somebody lodges an application for planning permission and the local authority fails to make a decision within six weeks, that becomes a deemed refusal and provides certainty. The person who made the application can then, if they wish, appeal that deemed refusal or give the local authority more time. Is that not a parallel with this power?

Photo of John Healey John Healey The Economic Secretary to the Treasury

That was a helpful intervention from my hon. Friend. He draws an interesting parallel. The provisions that we are proposing to put in place for the new civil penalties regime are already in place for the excise regime. Therefore, there is nothing new in the ground that we are establishing in this clause.

Photo of Jonathan Djanogly Jonathan Djanogly Conservative, Huntingdon

Generally speaking, I would not rush to planning law to look for best practice.

The Economic Secretary mentioned certainty, but I do not believe that there is certainty in this provision. It is all very well to say that the commissioners can be appealed, but that does not give certainty to the taxpayer, who will have costs on the appeal and will want to make sure that the decision is taken at the time. If the amendment is not accepted, the commissioners could decide not to review the cases in hand; they could simply ignore the cases coming to them.

Photo of John Healey John Healey The Economic Secretary to the Treasury

We included this provision precisely because we wanted to ensure that any challenges to the decisions of Customs and Excise are dealt with in a timely way and, if necessary, independently of the VAT and duties tribunal. Without it, there may be an indeterminate period before a trader gets the commissioners' judgment after an application for review. I hope that that is clear. It certainly is to some of my hon. Friends who are nodding, and I am grateful to them for that.

Amendment No. 131 would punish unavoidable delays by ensuring that failure to respond to a notice requiring review would have whatever result the taxpayer sought, irrespective of the merits of the case. I urge the hon. Member for Eddisbury to pause a moment and reflect on the possible practical consequences of such a provision. At its most extreme, every taxpayer may be tempted to request a review, on the ground that there is no liability. An orchestrated campaign could easily leave Customs powerless to undertake detailed reviews within the deadlines, with the result that taxpayers who were properly assessed could escape penalty.

There may be valid reasons for the delay, including the illness of a pivotal departmental official, a significant computer breakdown or a severe postal disruption. It is clearly unreasonable to attempt to punish such delays, as proposed by the amendment.

I remind members of the Committee of my earlier remarks about the ability of Customs, through clause 34(4), to agree to entertain a request for a review outwith the normal time limits if the taxpayer has experienced unavoidable delays.

Photo of Jonathan Djanogly Jonathan Djanogly Conservative, Huntingdon 3:00 pm, 20th May 2003

Surely the purpose of the Bill is not to cater for the sicknesses of individuals in the Inland Revenue. Surely the point is that people want determination within a set period and it is up to the authorities to ensure that they have the organisation to deliver that.

Photo of John Healey John Healey The Economic Secretary to the Treasury

The hon. Gentleman's point underlines mine. Customs and Excise manages the regime, not the Inland Revenue.

The purpose of the clause, as with the excise regime, is to ensure that traders who believe that judgments are flawed can challenge them and know that that challenge can be made in a timely way. If, for any unavoidable reason, Customs and Excise is unable to meet its part of the arrangement within 45 days, that trader, irrespective of any delays or problems with Customs and Excise, may choose to take the case to a tribunal.

Photo of Michael Jack Michael Jack Conservative, Fylde

The Minister said that the procedure is paralleled by similar procedures under existing Customs and Excise legislation. Can he tell the Committee whether Customs and Excise has received representations from any representative body complaining about the existing procedures and their operation?

Photo of John Healey John Healey The Economic Secretary to the Treasury

I regret that I cannot at this stage give a certain response to that question. However, I shall examine it and, if such representations have been received, I will write to the right hon. Gentleman and send a copy to Committee members. I ask my hon. Friends to resist the amendment if the hon. Member for Eddisbury chooses to press it.

Amendment No. 132 seeks to clarify where no clarification is necessary. The clause provides for a 45-day period from the day on which the review is required by the taxpayer under clause 33. Customs and Excise must receive a notice of requirement to be aware of the need to review and the mechanism by which it is made aware is already provided in clauses 33 and 34(1). I hope that I have demonstrated that the amendment is unnecessary and that hon. Gentleman will choose not to press it.

On amendment No. 120, let me say that clause 36 sets out a number of rights and powers concerning tribunals, including the listing of decisions that may be appealed against. To provide certainty, clause 36(1) makes it clear that when Customs and Excise has failed to notify a review decision within the specified period and is consequently deemed to have upheld the original decision in accordance with clause 35(4), the taxpayer has the certainty that he can appeal to a tribunal against the upheld decision should he wish to do so. The same arrangements and powers operate under the excise regime. The amendment would remove that element of certainty for the taxpayer, and I hope that Opposition Members will reflect on that and not press the amendment.

Photo of Stephen O'Brien Stephen O'Brien Shadow Paymaster General

I have listened carefully to the Minister and recognise the encompassing approach of clauses 35 and 36.

The hon. Member for Wolverhampton, South-West (Rob Marris) made an interesting intervention, which the Minister found telling. There is a clear answer to the parallel that he drew with planning law, in addition to the incisive observation from my hon. Friend the Member for Huntingdon. The basis of planning law is that a citizen seeks to have something granted by public authorities, whereas the taxing authorities would not be in that position and a review would not be sought if the taxing authorities were not seeking to extract something from the citizen. If one examines carefully the directions that the propositions in those two examples would give, planning law has a slightly different context than the clause, under which the taxpayer needs to be given protection.

Photo of Mr John Burnett Mr John Burnett Liberal Democrat, Torridge and West Devon

A more searing and important reason for the analogy being completely inappropriate is that a local planning authority is an arm of the Executive, albeit of local government. The commissioners are part of a judicial and independent function.

Photo of Stephen O'Brien Stephen O'Brien Shadow Paymaster General

I am grateful to the hon. Gentleman, who made an important point that supports an intervention on the previous clause. On the basis that that can be distinguished, the issue is certainty. There is a balance of argument between certainty for the taxing authorities and certainty for taxpayers. One person's draconian power is another person's potential oppression. We must consider that carefully, and while those phrases may seem extreme, they represent the extremes of the argument.

The Minister sought to rely on the difficulty that the amendments might encourage an orchestrated campaign, but, as we are dealing with civil penalties, I respectfully submit that he must not overlook the interplay between the civil penalties and the remaining criminal penalties. If there was an orchestrated campaign or conspiracy, criminal jurisdictions would apply. That is a problem, and the Economic Secretary would not want civil penalties to be substituted. That is a fair distinction.

It is interesting that PricewaterhouseCoopers said of clause 35, and in support the amendment:

''This amendment seeks to remove an unwelcome development. As the relevant clause . . . stands, if the time limit for the Commissioners to reply passes, they are treated as confirming their original notice. This rewards inaction and penalises the taxpayer, who must then appeal to the Tribunal. This does not seem the right balance. In other areas (notably tax clearances) a lack of reply means a decision in the taxpayer's favour. I would not like to see this form of decision by inaction becoming the norm.''

That is the nub of the arguments that we have tried to put across. The amendments may seem at first flush to be de minimis, but they go to the heart of the balance between taxpayers and taxing authorities.

As my arguments do not appear to have gained the Minister's favour, I shall press the amendment to a vote.

Question put, That the amendment be made:—

The Committee divided: Ayes 9, Noes 15.

Division number 9 Adults Abused in Childhood — Clause 35 - Powers of Commissioners on a review

Aye: 9 MPs

No: 15 MPs

Ayes: A-Z by last name

Nos: A-Z by last name

Question accordingly negatived.

Clause 35 ordered to stand part of the Bill.

Clause 36 ordered to stand part of the Bill.