It is a pleasure to serve under your chairmanship again, Mr. Gale, and I, too, congratulate the hon. Member for South-West Hertfordshire on his promotion to the Front Bench.

I am pleased that the hon. Member for Chipping Barnet supports the Government’s intention in the clause and, in a moment, I shall provide some reassurance and clarification on the point raised by the hon. Member for Birmingham, Yardley.

Our purpose here is to ensure that the limitation period in which to make a claim for the recovery of direct tax paid by reason of mistaken law is six years from the date of payment. That follows a House of Lords judgment on 25 October last year in Deutsche Morgan Grenfell Group plc v. Her Majesty’s Revenue and Customs. The Lords held that in certain circumstances the limitation period for claims does not begin until the claimant has discovered the mistake, which means that restitution is due in some cases for payments made more than three decades ago. As we have discussed, interest might be due on those payments as well.

That judgment leaves the Government facing potential repayments of very large sums in other cases,  which means that the general populous might pay a price through higher taxes or reduced public spending for a disproportionate benefit to a small number of groups and companies. In 2004, legislation was introduced to protect the Exchequer from new claims arising on or after 8 September 2003. We are acting now on claims made before that date to protect the wider public interest.

The clause ensures that a six-year limitation period applies from the date of payment. In other words, the payment groups affected will still be entitled to six year’s worth of repayments. That strikes a fair balance, familiar to other parts of the legislation, as the hon. Lady rightly said, between the general interest of the community and the protection of the rights of claimants. It goes some way, as well, to restoring the general symmetry thought to exist between the rights of claimants to recover overpaid tax and those of HMRC to recover underpaid tax.

To clarify the point raised by the hon. Member for Birmingham, Yardley, the clause will not affect the claimant in the Deutsche Morgan Grenfell case, as the hon. Lady acknowledged, or other claimants for whom that claim was a test case. The clause affects other cases and will ensure that a fair and proportionate limitation period of six years applies from the date of payment.

There have been widespread discussions about a transitional provision, which was raised by the hon. Lady. However, that misses the point of the clause. I imagine that the purpose of a transitional provision is to allow for an extra period in which claims can be made under the previous system. However, the clause affects claims made before 8 September 2003 only. In other words, all of the claims affected by the clause have been made already. I do not think, therefore, that providing for a transitional period in the clause would have any meaning.

It is my clear view that the clause is compatible with the European convention on human rights and strikes the right balance between the interests of the general taxpayer and the claimant companies. We are absolutely confident that it is proper to legislate in this way and we would defend robustly any challenge to the legislation in the courts. It is important to affirm that limitation periods are a matter for national legislation. Claimant groups affected by the measure will still be entitled to six year’s worth of repayments.

The hon. Lady raised a question about people who might have acted differently in the past. I am not sure that there is any great value in speculating about what others might have done in the past. Given the amount of revenue at stake, as she acknowledged, it is very important that the Government take action. The House of Lords judgment in the Deutsche Morgan Grenfell case was made prior to the announcement of the measure before us. We are aiming simply to put things right by ensuring that those claimants bound by that judgment under the terms of the group litigation are unaffected by the legislation, as I have explained. I hope that the clause will find favour with the Committee.