Clause 50 - Power to charge interest

Childcare Payments Bill – in a Public Bill Committee at 9:45 am on 28th October 2014.

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Question proposed, That the clause stand part of the Bill.

Photo of Anne Main Anne Main Conservative, St Albans

With this it will be convenient to discuss clauses 51 to 54 stand part.

Photo of Catherine McKinnell Catherine McKinnell Shadow Minister (Treasury) 10:00 am, 28th October 2014

Clauses 51 to 54 also provide for enforcement actions, but deal specifically with debt recovery. The Government’s original consultation considered the best way to reclaim overpayments, penalties or interest owed. In their response to the consultation in March, they took the advice of respondents who suggested that, in the first instance, the Government should be able to recover debts directly from child care accounts. That is provided for in clause 52.

Respondents also felt that HMRC should be able to adjust parents’ PAYE or self-assessment tax code, as they perceived such adjustments to be an effective and less intrusive means of debt collection. The Government response indicated that HMRC would have that power, stating:

“Recovery will initially be attempted via unspent top-up amounts in parents’ scheme accounts, with additional facilities to make adjustments to the parent’s tax code.”

However, the Bill does not seem to provide for those specific measures. The response to the consultation also suggested that when neither approach was successful, direct debt recovery action would be pursued—but again, that does not appear to be provided for in the Bill.

On clause 52, will the Minister set out whether the Bill gives HMRC the powers I have outlined? Will HMRC be able to adjust parents’ tax codes to recover debts? Will it be able to take direct recovery action, as the consultation response seemed to indicate? If so, will the Minister outline how the process will work?

I have raised those issues because, in her evidence to the Committee, Samantha Mann from the Chartered Institute of Payroll Professionals highlighted a potential problem with recovering top-up payments through tax code adjustments from a payroll point of view. She was concerned that, although such payments could be recovered through the tax code, it would affect employers, particularly from an administrative perspective.

Will the Minister clarify whether the Bill will provide for HMRC to pursue debt recovery in the manner I have outlined? If so, what is the Government’s response to Samantha Mann’s concerns? Do they recognise that it could be complex for employers? Will the Minister clarify exactly how debt recovery under the Bill will work in practice? It would be helpful for members of the Committee, as well as other interested parties who I am sure are either following proceedings now or will go over them in due course, if she could iron out some of those complexities and queries.

Photo of David Heath David Heath Liberal Democrat, Somerton and Frome

It is a pleasure to serve under your chairmanship this morning, Mrs Main.

I have just one question for the Minister on a point of clarification. Clause 50(3)(a) says that

“in the case of an amount assessed under section 40, the day on which the person became liable to pay it” is the

“late payment interest start date”.

What is the day on which the person became liable to pay? Is it the day on which they are assessed as being liable, or is it 30 days later, when the review period has ended? If it is the first of those options, the person will never catch up: every time he or she pays, a bit more interest will be added, which will be rather a pain. If it is the end of the review period, the Bill should say that, rather than

“the day on which the person became liable to pay”.

Photo of Priti Patel Priti Patel The Exchequer Secretary

Clauses 50 to 54 cover matters relating to debts that arise under the new scheme. Clause 50 allows HMRC to charge interest on overdue scheme debts at normal HMRC rates.

Clause 51 allows HMRC to offset the associated amount repayable under the scheme against the backdated tax credit award when parents win a tax credit review or appeal. That gives parents the right level of support from the start and avoids making them go into debt when there is no need for them to.

Clause 52 allows HMRC to recover undue scheme debts from funds in the parents’ child care accounts. Clause 53 sets out that, when a parent who has a scheme debt withdraws funds from their child care account, the top-up element of the withdrawal will reduce the parent’s scheme debt.

Coding out by means of PAYE has been mentioned. The first attempt to recover due amounts will be made from the funds in a child care account. If that is not possible, the debt will be passed over to the standard HMRC debt collection process. That could include coding out, with the individual’s approval.

To put the issue into context, I should say that there is no one-size-fits-all solution, because everything is down to personal circumstances. The measure provides a simple, easily understood way for any moneys due in connection with the child care account to be recovered with minimum fuss. That is central to the scheme’s design—to its simplicity and clarity—and very much part of the way in which families and households are engaged with should they find themselves in this scenario with HMRC.

It is fair to say that parents will have plenty of opportunity to agree how their debts will be paid before HMRC can, or does, use any power to recover those debts from a child care account. That is part of the ongoing dialogue about the development of the scheme and about making sure we listen to parents and stakeholders so that we get this right and accommodate their concerns.

Photo of David Heath David Heath Liberal Democrat, Somerton and Frome

I do not think I heard an answer to my question about the interrelationship between clauses 40 and 50, as mediated by clause 56, which we have not yet come to. Clause 56 specifies the point at which a payment must be made, saying that it must be made before the end of the relevant period. I am questioning when the liability applies. Is it from the point of assessment or at  the point beyond which the debt must have been paid? If it is the former, the interest clock is running, and that really is not an acceptable position.

Photo of Priti Patel Priti Patel The Exchequer Secretary

I thank the hon. Gentleman for reiterating his point. Interest starts when the debt is overdue. That will be when review and appeal avenues are closed—that comes back to the dialogue that takes place between the individual and HMRC. If there is no review, it will be 30 days, but it will be later if the case is reviewed and if an appeal is necessary.

Photo of David Heath David Heath Liberal Democrat, Somerton and Frome

I am grateful to the Minister, but, with respect, I do not think that is what the clause says. It does not say when the debt is overdue, but when it is liable. Will the Minister speak to her officials before Report to see whether the drafting is correct?

Photo of Priti Patel Priti Patel The Exchequer Secretary

For the benefit of the Committee, I will get full clarity on this point. Before Report, we will circulate the details to all Committee members so that they are clear about this.

Question put and agreed to.

Clause 50 accordingly ordered to stand part of the Bill.

Clauses 51 to 54 ordered to stand part of the Bill.