I rise to speak to clause 105 but it could be clause 106 because my question relates to their interaction. A penalty is chargeable for both failure to make a return, under clause 105, and failure to pay tax, under clause 106. Concern has been put to us that there is an issue of double charging in a failure to make a return and failure to pay tax due on the same return. This point was considered during consultation, with HMRC concluding that two distinct penalties are required in order to encourage both payment and filing on time. It appears, however, that there is scope for taxpayers to be charged penalties of more than 100 per cent. of the tax due, in the event that a return is not filed within 12 months and payment is delayed by the same period.
The concern is that this will impact most significantly on the unrepresented taxpayer who is not aware of his obligations. I know that HMRC has indicated in consultation that work is ongoing to ensure education and support for those taxpayers but there are no safeguards in the Bill. I would be grateful if the Economic Secretary reassured the Committee about how these two separate penaltiesfor late filing and late paymentwill interact. I also ask him, with regard to clauses 105 and 106, to say a word or two about implementation of the regime. I understand that HMRC has indicated in consultation that the regime will be introduced by statutory instrument on a staged basis, with the first area to be addressed being late returns and late payment of PAYE through the year. The intention is that it will be applied to the worst offenders first, on a risk-assessment basis. There is no provision in the legislation to enable such an approach to be taken. Clearly, HMRC has not laid out its approach in primary legislation, but perhaps the Minister might say a word or two about how the provisions made under clauses 105 and 106 are to be implemented.
The clause introduces schedule 55, which provides for penalties for late filing of tax returns. I appreciate the point raised by the hon. Member for South-West Hertfordshire and the fact that he might have raised it under clause 105 or 106, or perhaps at other opportunities. It enables the Treasury to make an order to bring into force the whole schedule or parts of the schedule for specified circumstances. It also allows the Treasury to make incidental, supplemental, consequential, transitional, transitory or saving provisions by order, as appropriate, to give proper effect to the schedule. The hon. Gentleman asked about the interaction of penalties in the Bill. Any tax-geared penalty is reduced by any other tax-geared penalty charged by reference to the same amount of tax.
Safeguards outlined in the legislation include a right of appeal to an internal review and an independent tribunal against all penalties; a common legislative formulation of reasonable excuse, aligned across taxes, which is similar to that devised for penalties in the Finance Act 2008; provision in law for reduction of penalties in special circumstances not otherwise covered; and improved accessibility to appeals by specifically ensuring that penalties do not need to be paid in advance of any hearing.
The hon. Gentleman also raised the question about implementation and why it is not in the Bill. As he is aware, these are major changes which we believe are most appropriately introduced sequentially. He referred to the fact that we will take a risk-based approach. Implementation does need to consider HMRCs capacity and resource issues. Also, introducing change too quickly for taxpayers and their advisers could be problematic. We want to make progress, and the hon. Gentleman will be aware of the broader package of reforms that are being introduced. We think that we are getting the balance right in this area. If he has any further points that he wants to make on the schedule or on clause 106, I will happily address them.