The Exchequer Secretary to the Treasury (Helen Whately)
I congratulate my hon. Friend on securing today’s debate and setting out his argument so clearly. I listened carefully to his constituent’s experience, and I take on board the issues he has raised. As I am sure my hon. Friend knows, I am unable to go into an individual case at the Dispatch Box, but I will set out the Government’s overall position on the accelerated payment notices that are the subject of this afternoon’s debate,.
The top line—as, in essence, my hon. Friend said himself—is that tax is paid for our public services. Without that revenue, schools could not open, roads would go unrepaired, and the NHS would be unable to treat the sick. Therefore, we all agree it is only right that the Government do all we can to make sure the correct tax is paid at the correct time, and that we clamp down on those who shirk their fair share. That is why the Government continue to take tough action to tackle tax avoidance, and Parliament has granted HMRC a range of powers to do so. Accelerated payment notices are one of those tools. As my hon. Friend mentioned, they were introduced through the Finance Act 2014 with the goal of changing the economics of tax avoidance, because tax disputes can often take years to resolve. Before APNs were introduced, users of tax avoidance schemes could purposely string out disputes and unfairly benefit from the cash generated by their liabilities until the matter was resolved. That situation was clearly wrong, especially when contrasted with the behaviour of the majority of taxpayers, who pay what they owe on time and swiftly resolve any queries with HMRC.
There is not, and has never been, any principle that disputed tax should sit with the taxpayer rather than the Exchequer. APNs ensure that the tax in avoidance disputes sits with the Exchequer while that dispute plays out. APNs have meant that the Government could remove this unjust advantage from tax avoiders, so that instead of enjoying unfairly gained cash, avoidance scheme users would have to hand over any disputed tax to HMRC until matters were resolved. That was a significant change.
In the eight years since their introduction, APNs have brought forward over £5.6 billion in revenue to fund those vital public services.
Mr Steve Baker
Is not the fundamental problem, though, that whether a scheme is an avoidance scheme is often contested? Is not the problem that whether or not this is a just retention of funds, it is often subject to the judgment of courts to see whether something is or is not lawful?
Helen Whately
I absolutely hear my hon. Friend’s point. Let me come to some of the checks and balances, and I take his wider point about HMRC’s powers in that regard.
To take a step back, I recognise, in the specific case we are discussing, how deeply worrying such a dispute can be for the individuals involved. That is one reason why fairness is HMRC’s guiding principle when dealing with such matters and why it is right that although, on the one hand, HMRC has the capability to robustly tackle tax avoidance, that is balanced with checks to make sure that it does not over-reach its powers.
We recognise that tools such as APNs must be carefully targeted. That is why they can be used only in tax avoidance cases and in limited prescribed circumstances, and they have important safeguards. There must be an active dispute between HMRC and a taxpayer either in the form of an open tax inquiry or a live tax appeal. That dispute must be about tax being either underpaid or overclaimed as a result of avoidance. And APNs cannot be issued unless one of the following applies. First, the individual issued with an APN has used an avoidance scheme that has already been defeated in court and they have consequently been given a follower notice—a legal request from HMRC to the individual to settle their avoidance dispute. Secondly, the information on the scheme must have been provided to HMRC under the disclosure of tax avoidance schemes—the DOTAS regime. Thirdly, HMRC must have taken action to challenge the taxpayers’ use of the avoidance scheme under the general anti-abuse rule—the GAAR. In addition to those conditions, APNs can be issued only with the approval of an oversight board of senior policy, technical and legal members of HMRC.
My hon. Friend correctly highlighted that there is no right of appeal against an APN. However, under the legislation, HMRC must examine any representations against a notice, and nothing is due from the taxpayer until HMRC has finished those considerations. I should point out that an APN does not in any way inhibit a taxpayer’s right to continue their dispute with HMRC or to appeal against its conclusions, and taxpayers who believe that their dispute is not being suitably progressed can apply to the tax tribunal to resolve it. I make it clear that if a dispute against HMRC is settled, any disputed sums paid under an APN will be repaid with interest, providing the taxpayer with redress where applicable.
In short, accelerated payments are a fitting response to the problem of individuals who purposefully spin out tax disputes and unfairly benefit from the funds in question. That has been backed up by the courts, which have examined cases where taxpayers have tried to challenge HMRC’s use of accelerated payments and have found APNs to be proportionate, reasonable and fair. Mr Justice Green said in one case that
“the provisions in the Finance Act 2014 are perfectly fair and adequate. There is no need for the Court even to consider the need for supplementation through the implication of additional duties.”
HMRC continues to ensure that APNs are used appropriately. For example, the implementation of APNs was included in a review of HMRC’s powers and safeguards. Following that review, the published guidance on APNs was updated. I stress that APNs do not increase someone’s tax liability. Instead, they simply require an individual to pay the tax they would have owed had they not joined an avoidance scheme.
Mr Baker
I am extremely grateful to the Minister for giving way. As she goes through her speech, I am reminded of something that I have impressed on Ministers in the past. A problem with DOTAS is that perfectly decent, normal people who want to pay the right amount of tax can get drawn into schemes because the nature of a DOTAS registration is misrepresented. Could we have a boilerplate that firms are required to place prominently before their customers, so that customers can be told, “The reason this scheme is registered with DOTAS is because HMRC thinks it doesn’t comply with the rules. It is not how Parliament intended things to work, and you will probably have HMRC coming after you later”? If normal taxpayers who intend to pay the right amount tax could see such a boilerplate, they would not be drawn into such schemes and we would not have nightmares such as this.
Helen Whately
My hon. Friend makes an important point about how, if I understand him correctly, we can help taxpayers have the information and awareness that they may be taking a tax risk—a risk of doing something that could be seen as tax avoidance. HMRC already takes steps to communicate in that way, and I am happy to take up his specific suggestion with the Financial Secretary to the Treasury, whose area this is, to see whether more can be done.
Returning to the point I was in the middle of making, I recognise that individuals in such circumstances can face significant bills, which is why HMRC is committed to working positively and empathetically with anyone with an APN facing payment difficulties, including, where appropriate, agreeing more time to pay. HMRC teams are trained to identify customers who may need extra help managing their financial affairs. I urge anyone who is worried about being unable to make a payment to contact HMRC to work out an individual approach.
In conclusion, I emphasise that Ministers cannot intervene in HMRC’s operational decisions and individual cases, but if HMRC is directly provided with information about this case, its officers will look into it. The Government value every penny of tax revenue. That is true at any time, but particularly so now as we recover from the economic consequences of covid-19 and face new demands on public finances. That is why HMRC must continue to tackle tax avoidance and pursue the tax owed to the Exchequer.
Question put and agreed to.