I wanted to make only a few opening remarks, because it is important that the Minister has the opportunity to speak on this clause. Clause 11 specifies that the management of top-up fees is going to be administered by HMRC and provides a power for HMRC to make various regulations to administer those payments under the scheme and for the purpose of administering and implementing the Act, to which the Minister alluded in the discussion of the previous clause. Subsections (3) to (6) set out the scope of the powers and it is intended—the Minister mentioned this in previous discussions—that the provisions made under this power will mirror as closely as possible provisions that apply to the administration of gift aid exemption claims under the taxes Acts.
The Bill provides for regulations to include an appeals process—something that we welcome. The power to make regulations under clause 11 includes the power to make provision in connection with clause 12, “the Change of charity’s legal form”. I know that the Minister has tabled fairly substantial changes to that, which we will discuss in due course. I do not particularly want to focus on that.
Subsection (9) provides for any amount of money calculated under the scheme to be rounded up to the nearest whole penny, which is a helpful bit of attention to detail. The example given states that 0.5p will be rounded up to the next penny, which I am sure will help people to understand the situation.
However, will the Minister discuss some of the enactments mentioned in subsection (4)(a) to (g) and in subsections (5) and (6)? If the Minister wants to think about how he will respond to that with practical examples, I am probing the wording to ensure that we all understand the powers in this primary legislation. The paragraphs of subsection (4) state:
“(a) providing for the payment of interest;
(b) requiring the provision of information;
(c) conferring a power of entry onto land;
(d) providing for the imposition of a civil penalty;
(e) creating a criminal offence (including, in particular, offences relating to the provision of false or misleading information or failure to provide information);
(f) providing for enforcement of sums owed (whether by action on a debt, by distraint against goods or in any other way);
(g) providing for appeals.”
Will the Minister give us some information about the thinking behind those provisions? My worry, as with clause 10, is that any ordinary person who becomes a member of a local charity’s board or indeed the leader of the Bromsgove Scout group—
The second Bromsgrove Scout group, which is becoming famous and immortalised in our discussions. Any ordinary person will look at these provisions and wonder what on earth is going to happen and what powers are being given to HMRC, particularly regarding civil penalties, criminal offences and the powers of entry on to land. It is important that the Minister can explain what that means in practice.
I also want to probe subsections (5) and (6). Subsection (5) states:
“A power conferred by subsection (3) to apply or incorporate a provision creating an offence does not include power to increase the level of any punishment for which a person may be liable on conviction for the offence.”
That seems fairly straightforward in drafting terms to ensure that the Bill does not cut across anything relating to other legislation where criminal offences are specified, but I would like the Minister to clarify that. Subsection (6) reads:
“A power conferred by subsection (3) to apply or incorporate a provision imposing a civil penalty does not include power to increase the maximum amount of the penalty.”
Is that also standard drafting to ensure that nothing done in this Bill or by regulations will change the regime of civil penalties elsewhere?
I apologise for having to go through the provisions in some detail, but, once again, a provision that—for good reason—exists to give HMRC the opportunity to make regulations about the administration of top-up payments and administering the Act, which, on the face of it, no one would necessarily argue about, creates a range of complexities and issues that are not fully explained. The need for further guidance or rules could cause some considerable concern for the charities and organisations that we would want to benefit from the scheme. I look forward to what the Minister has to say.
I thank the hon. Lady for her comments. She asked several good questions that I shall try to answer. I agree that the clause is important and that we need to go through it in some detail. It gives HMRC powers to make regulations to implement and administer the small donations scheme. On our first day of detailed scrutiny, we debated exhaustively whether HMRC should administer the scheme, so I do not intend to run through that issue now.
Clause 11 is one of the most important clauses in the Bill. As the hon. Lady recognises, it gives HMRC wide powers to administer the scheme, so I shall take some time to set out what it will do and how it will work. It provides powers for HMRC to make regulations for the administration of top-up payments for the purposes of fully implementing the Bill. Regulations made under those powers may include applying the primary legislation that is already in place for gift aid, which incorporates rules on gift aid exemption claims, income tax repayments, and income tax or corporation tax that is due and payable. They also include primary legislation relating to the collection or management of income tax or corporation tax.
In a sense, clause 11 is the engine room of the whole scheme. All the day-to-day rights and responsibilities of charities and HMRC will be delivered through regulations made under its provisions. HMRC has already published draft regulations for consultation, and we will return to the House to debate them in more detail following Royal Assent.
We discussed the policy objective of the scheme earlier, but it is worth repeating that the new scheme is an extension of gift aid. Its purpose is to allow charities to collect a gift aid-style payment on small cash donations for which it is impractical to collect a gift aid declaration. If the scheme were a tax relief, like gift aid, it would have to be legislated for under the Finance Bill process, and claims under the new scheme would have been automatically covered by the administrative provisions under taxes Acts, including the Taxes Management Act 1970, and various Finance Acts. Of course, we have to legislate for the scheme through a separate Bill, but it complements gift aid and has been designed to work closely with it.
The Minister will remember the evidence given to the Committee by Mr Clark, one of the experts who the Treasury consults regularly on charity taxes. Indeed, he was consulted about the preparation of the Bill. Mr Clark said that the original gift aid legislation was about 50% of the length of the Bill. The Bill’s provisions are therefore vastly more complex, yet the hon. Gentleman is introducing draft regulations and defending the amount of guidance he will have to publish. Will he tell us the length of the published guidance that he expects small charities such as the Second Bromsgrove and the First Isleworth Scouts to wade through to understand how they are to register for gift aid, and how they can eventually gain access to the scheme?
It is fair to say that the length of the guidance—whether that is 20 or 30 pages—is less important than its usefulness, because that is what charities will be looking for. As we have discussed, it is important that the first draft of the guidance is shared with the trusted working group with which HMRC has been working to ensure that that guidance covers all the bits and pieces that charities would expect, and that it is written in an understandable way. The draft guidance will be published at the start of the new year so that, before the whole scheme becomes operative, we can make sure that the charity community and other interested parties have the opportunity to respond to it and to try to improve it. I am sure that many will come up with some good ideas.
We want the provisions relating to the administration of gift aid claims to apply to the small donations scheme, although some will be modified slightly, when necessary. We do not want charities and CASCs to have to learn a new administrative framework for claiming under the scheme. Provided that charities know their responsibilities and entitlements under gift aid, they will broadly know their responsibilities and entitlements under the new scheme. The draft regulations that we have already published align the two schemes closely.
The provisions in the Bill specify the unique features of the scheme, including the amount of the top-up payment, the eligibility criteria and the community building rules. However, the general administrative framework for making claims under the scheme will be introduced through regulations, and that approach is intended to ensure flexibility in future. If the main tax administration framework changes, we will want the same rules to apply to the scheme, and we will not want to rely on the introduction of new primary legislation to ensure that the scheme follows the gift aid rules set out in taxes Acts. The effect of such regulations will be that amendments to relevant tax provisions will automatically apply to the scheme.
I thank the Minister for his explanation so far. I understand that he does not want to introduce new primary legislation whenever changes are made to tax laws, but will he explain the link between top-up payments and the regulations in paragraphs (a) to (c) of clause 11(3), which mention income tax and corporation tax? Will he give an example of how such taxes are linked to top-up payments?
If the hon. Lady will allow me to continue, I may come on to answer her question.
On the face of it, the powers under clause 11 are very wide, but they relate mainly to applying the rules on gift aid in existing legislation. HMRC will have the power to make regulations if there is nothing similar in place for gift aid—for example, when HMRC makes an overpayment of money to a charity. The administrative framework for overpayments of tax under gift aid does not fit the new scheme properly, so wholly new drafting has to be adopted.
The most significant and serious powers, such as the ability to apply a criminal offence, to which the hon. Lady has referred, will be done by keying into existing law. The power to apply such a criminal offence does not include the power to increase the level of any punishment, so HMRC cannot do whatever it wants. When it has to apply primary legislation to the scheme, relevant provisions will already have been debated and passed by the House, usually through a Finance Bill. A further safeguard is that clause 16 requires regulations to be made under the affirmative procedure, so there will be a further opportunity for the House to debate them before they come into law.
The draft regulations are technical—they mainly adopt the administrative provisions in the taxes Acts, albeit modified to apply to top-up payments—so HMRC has published a technical note to explain what they will do. They include provisions to apply criminal offences for certain non-compliant activities, which are necessary to deter—and, if necessary, to deal with—serious non-compliance and fraud. Those provisions already apply to gift aid claims. Fraudsters are likely to be attracted to the new scheme, as we have discussed several times, and without such provisions, they could attempt to abuse the scheme in the knowledge that there would be no real comeback if they were caught.
The non-compliance provisions will not affect the vast majority of compliant charities and CASCs claiming under the scheme, just as they will not affect those organisations already claiming under gift aid. The same rules and checks that HMRC follows when applying the provisions for gift aid claimants apply to the small donations scheme. The draft regulations also include the rules for charities that change their legal form under the provisions of clause 12, which we shall address in some detail when we debate that clause.
The hon. Member for Harrow West referred to the evidence session and talked about the length of the gift aid legislation. For his information, that legislation was 11 pages long; this Bill is 13 pages long.
The hon. Member for Kilmarnock and Loudoun asked about income tax and corporation tax. The gift aid rules are set out in the Income Tax Act 2007 and the Corporation Tax Act 2010, so the new scheme must be able to follow provisions in those Acts.
I thank the Minister for that explanation, but will he say more about why it is important that that is in the Bill? I understand how income tax comes into play in the context of gift aid, but I cannot understand why corporation tax comes into play for small charitable donations top-up payments. I might have misunderstood the taxation rules, so if he can explain the situation, I will be eternally grateful.
The hon. Lady asks a good question. If she will allow me, I will find out more and then let her know.
As I said, clause 11 gives HMRC the powers that it will need to make regulations to administer the scheme on a day-to-day basis. Charities will already be familiar with the rules because they mostly mirror gift aid, and there are in-built safeguards to ensure that HMRC applies its powers proportionately. I therefore commend the clause to the Committee.
I thank the Minister for his response to a number of questions and for offering to make further information available on several of them. I understand the points regarding subsections (4) and (5), which I wish to probe further. It is good to have that on the record. However, if someone involved with a charity reading that information was unfamiliar with how legislation is made about criminal offences and civil penalties, they might be rather frightened, concerned or worried, and they might wonder what on earth the powers were that could be used against them. Again, those are just some of the concerns about the drafting of the Bill.
The Minister is right to say that clause 11 is one of the most important clauses in the Bill. Partly because it is technical, gives powers to make regulations and is drafted in fairly technical language, charities and other organisations have not come forward with suggested amendments or changes. They have been more concerned about dealing with issues such as the matching provisions, the eligibility of charities, connected charities and community buildings, so it was important to debate and examine the clause in further detail.
As the Minister says, it seems that the clauses relating to gift aid have been transposed: the language and the drafting have been taken from other Acts and put into the Bill. There might be good reasons for putting all that in the Bill in the same way as in the legislation on gift aid, although I am still struggling to understand why some of the powers have been given here. I would genuinely like to hear from the Minister about the issues around income tax, corporation tax and so on, and how that fits with what was supposed to be a straightforward Bill to give top-up payments of £1,250 to small charitable organisations.
I will not prolong the discussion on this clause, but we may wish to return to it at a later stage if we are concerned about the powers that have been taken. I hear what the Minister has said about people being able to comment on the draft regulations and I agree that it is right that they should return under the affirmative procedure. On that basis, I do not suggest that the clause should not stand part of the Bill, but we may wish to return to it at a later stage.