Finance Bill – in a Public Bill Committee at 6:30 pm on 23 June 2009.
David Gauke
Shadow Minister (Treasury)
I have a question about subsection (9), which states:
“For the purposes of this section any reference to the payment of an amount to HMRC includes a reference to its being set off against an amount payable by HMRC (and, accordingly, the reference to the date on which an amount is paid includes a reference to the date from which the set-off takes effect).”
How will interest be assessed when setting off? If the amount is to be treated as paid when the offset takes effect, it appears that if HMRC delays making the set-off, the taxpayer may incur an additional interest charge because of the differential in the interest rates that apply. When the taxpayer owes money, a higher interest rate applies than when HMRC owes money to the taxpayer. Consequently, if there is a delay in the date of setting off, it is to the financial advantage of HMRC and, correspondingly, to the financial disadvantage of the taxpayer. The concern has been put to us that subsection (9) gives HMRC more flexibility than it should have in determining the date on which the set-off takes effect. I should be grateful for the Minister’s assurance that the clause will not be used to leave taxpayers out of pocket.
Sarah McCarthy-Fry
Parliamentary Secretary, HM Treasury
In the Finance Act 2008, the Government introduced legislation covering the set-off of sums that HMRC must repay against debts it is owed. Setting off reduces the administrative cost to both parties by cutting down the number of unnecessary transactions. A creditor’s right to set off mutual debts is founded in common law and enshrined for HMRC taxes in section 130 of the Finance Act 2008. Under common law, such liabilities are not discharged until payment is made, whether by circulation of actual cash or cheques, or by an appropriate adjustment in the creditor’s books. Clause 100 sets out clearly that both late payment and repayment interest runs until the amount is repaid and the date of payment is the date on which any set-off takes effect. I assure the hon. Member for South-West Hertfordshire that HMRC always seeks to make repayments promptly.
