A moment ago the Minister referred to representations received from the Low Incomes Tax Reform Group during the passage of the Bill. I rise to raise points from that group on managed payment plans.
Clause 110 is welcome, but I have a few questions about its details. The clause gives HMRC the ability to set out further requirements for managed payment plans in regulations. However, it appears that much of the detail will be set out in non-statutory guidance, a draft of which has been published and is on the HMRC website.
In the original consultation document, HMRC proposed to limit MPPs to payment by direct debit and to online filers. Following representations from the Low Incomes Tax Reform Group, HMRC offered the following points of reassurance in its consultation response, both of which are vital for low income taxpayers to take advantage of MPPs. First, HMRC said that it was:
exploring other methods of payment for MPPs (ie not limiting them to direct debit) and have agreed to accept standing orders.
Secondly, HMRC said:
Paper tax return filers will be allowed to set up MPPs.
The draft guidance appears to cover both these points. It confirms that HMRC will accept both standing orders and direct debit, but suggests that direct debit is preferred, one of the requirements being to:
Make payment by Direct Debit or Standing Order. HMRC will need some assurance that payments will be made at a precise time and be posted to the correct record, and this is best achieved through Direct Debit.
Can the Minister give some indication of what information will be sought from those people who use standing orders? The LITRGs concern is that such people will be pressured into agreeing to a direct debit. It would be helpful if the Minister outlined what HMRCs policy will be in those circumstances.
Another concern that the LITRG has mentioned to us is that paper filers will also fare worse than those filing online. Again, the LITRG quotes from the draft guidance, which says:
Those who cannot file online, or do not wish to do so, will still be able to set up a payment plan by filing a paper return but will have to calculate their self-assessment themselves.
As paper filers tend to be older people, some of whom may be lacking the technological sophistication to file online, or those on low incomes who cannot readily afford access to the internet, there is a concern that that guidance may be somewhat unfair. The regulations or perhaps even the guidance itself, should require HMRC to provide those people with help in making their calculations, on request. I would be grateful if the Minister responded on that point.
There is also the question of penalties in the event of failure to maintain a payment plan. In the event of a taxpayer failing to keep up agreed payments, subsections (6) and (7) of clause 110 allow HMRC to give notice to the taxpayer that he is relieved from penalties that would otherwise arise. However, that safeguard appears to operate at HMRCs discretion, so that it would be reliant on the guidance and individual officers applying that guidance in practice. The LITRG argues that there should be a statutory right of appeal if HMRC refuses to give such a notice. If there is no such right, the taxpayer would have no recourse against HMRC if it exercised its discretion wrongfully, except by way of judicial review, which is no real remedy, as the Minister will know, because it is well beyond the means of the majority of individual taxpayers and certainly beyond the means of most of the taxpayers that we are talking about. Again, I would be grateful for the Ministers comments.
Finally the LITRG has highlighted to us that Budget note 88 tells us that MPPs will not be introduced before April 2011, because changes are needed to HMRCs systems. I seek some reassurance from the Minister that HMRCs systems will be able to cope, given the increased pressures on its finances. Also, has any consideration been given to trialling the new scheme prior to widespread and national implementation in 2011?
I welcome the Oppositions overall support for MPPs. As the Committee will be aware, entry to a plan will be wholly voluntary. First, the taxpayer must agree to pay the tax in instalments and HMRC must agree to accept payments in that way. Secondly, instalments paid before the normal date must be balanced by those paid afterwards. I believe that MPPs are an important way in which we can help taxpayers to manage their money.
The hon. Gentleman asked a number of detailed questions. First it is right, as he will appreciate, that the guidance that we published in draft sets out a framework for MPPs and how the HMRC will operate them. Clearly, most of the detail is contained in the guidance, on which we have been consulting, rather than in the Bill. The detail of any particular payment plan will be in the terms and conditions under which HMRC makes it available and the taxpayer chooses to accept. We do not believe that it is necessary for such a level of detail to be in regulations. If a default occursobviously, we hope that such cases will be few and far betweenthe taxpayer would be in breach of the terms of their own plan and would therefore be liable for the consequences of their late payment.
Subsection (7) allows HMRC to relieve the taxpayer from penalties following a failure to make agreed payments, where that is appropriate. It is not an entitlement, but may be offered to taxpayers where they continue to pay by agreed instalments. That will happen where the taxpayer has approached HMRC before the payment date and has either made good the deficient payment within a few days, or arranged time to pay the balance
Independent research commissioned by HMRC and by others shows that direct debit is favoured by many, including most businesses. Although it is HMRCs preferred method of payment, its officers will not put pressure on taxpayers to pay in that way. Following representations made in the consultation, HMRC will offer MPPs for some of the electronic payment methods, such as standing orders. Assorted information that HMRC would require would include fully completed pay slips showing the correct taxpayer reference, year, and amount of payment.
On statutory rights of appeal, it is not the case that there is a statutory right of appeal. We certainly want to encourage anyone in difficulties to approach HMRC. As I have indicated, where the taxpayer has approached HMRC before the payment date and has either made good the deficient payment within a few days, or set up an arrangement for time to pay the balance, HMRC would want to respond favourably. Of course, all late payment penalties can be appealed in the usual way.
We are confident that HMRCs systems will be able to cope with implementation. Strong governance will be provided by a dedicated implementation team, overseen by an implementation forum of leading officials and industry figures. HMRC will continue to look at whether it will be appropriate to trial the changes in the course of development, but we believe that MPPs are an important initiative and that is why they have been included in this years Finance Bill.