Finance (No.2) Bill (Fourth sitting) Debate

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Department: HM Treasury

Finance (No.2) Bill (Fourth sitting)

Kemi Badenoch Excerpts
Tuesday 27th April 2021

(2 years, 11 months ago)

Public Bill Committees
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James Murray Portrait James Murray
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Clause 126 enables HMRC and Border Force officers to use a civil penalty to combat the unauthorised removal of things that have been seized in situ. When HMRC seizes goods, they are normally kept, as we heard, in Border Force-controlled warehouses. When goods that have been seized are kept on the trader’s premises, the seizure is known as seizure in situ. Currently, the law does not refer to seizure in situ; therefore, if seized goods are removed without prior authorisation, no penalty can be issued. We recognise that the clause will amend that.

We want HMRC to take robust action to deal with those who import illicit items into the UK or seek to bring in things on which duty has not been paid. We want the detention and seizure of things to be a valuable tool in the fight against duty evasion. We therefore do not oppose the clause.

Question put and agreed to.

Clause 126 accordingly ordered to stand part of the Bill.

Clause 127

Temporary approvals etc pending review or appeal

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

Kemi Badenoch Portrait The Exchequer Secretary to the Treasury (Kemi Badenoch)
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Clause 127 makes changes to customs and excise review and appeals legislation, to safeguard the right to appeal. To do this, HMRC will be given the power to temporarily approve a business, on application and subject to meeting certain criteria, in order that the business may continue to conduct controlled activities until the conclusion of its appeal into an earlier decision.

As Committee members may be aware, businesses in a number of regimes operated by HMRC require approval before they may conduct certain controlled activities. These include the alcohol wholesaler registration scheme, which regulates the sale of alcoholic drinks, and the raw tobacco approval scheme, which requires the approval of anyone conducting activities involving raw tobacco.

Approval is dependent on a business continuing to satisfy certain fit and proper criteria, which are defined in law. Where evidence shows that the business is no longer fulfilling those criteria, HMRC may, as a last resort, revoke its approval. As with all HMRC decisions, the recipient may request an internal review by an independent officer and, ultimately, has the right to appeal to a tribunal and higher courts.

On receipt of HMRC’s decision to revoke, a business must cease the controlled activity, even where it contests the decision. HMRC currently has no power to pause or suspend its decision, or to allow the business to continue with the controlled activities while it pursues its right of appeal.

Previously, it was believed that where a business sought relief from the courts, such a suspension could be granted. However, comments made by the Supreme Court in 2019 in OWD Ltd v. HMRC highlighted that that may not be the case. If neither HMRC nor the courts have the power to suspend revocation, it could, in theory, cause a business to fail before its appeal has been concluded, fundamentally undermining the right of appeal. It is in order to protect this right that changes are being made. To be clear, the process of temporary approval would apply only in appeals involving civil cases. Those cases where revocation of an approval is linked to criminal prosecution would not be considered.

The changes made by the clause create a new power for HMRC to issue temporary approvals in respect of the control schemes covered by this clause, as they all contain similar fit and proper criteria. Temporary approval would be conditional on the business providing sufficient evidence to support its case that, without that temporary approval, its appeal right is ineffective.

The clause also creates a new appeal right in relation to HMRC’s decision on whether to grant temporary approval. That will ensure that a business has every opportunity to seek protection following a decision by HMRC. The business must demonstrate that it would suffer irreparable harm—rather than just inconvenience—by not being able to conduct the controlled activity in the period between revocation and the outcome of its appeal. That does not alter HMRC’s position that it has judged the business to no longer satisfy the requirements to hold approval; the object of the change is to safeguard appeal rights and not to allow unfit businesses to gain extended periods to trade before an appeal is heard.

The evidential requirements for gaining a temporary approval are intentionally high, to protect revenue and ensure compliance. Any temporary approval would be issued with strict conditions, allowing HMRC to monitor activity closely; any new evidence of unacceptable trading would result in removal of this temporary approval, to protect revenue. HMRC will specify through its public notices the evidence that must be submitted with a temporary approval application, along with details of timings and other relevant matters. The legislation will come into force at a future date to be determined by HMRC and will be brought in by regulations made by statutory instrument.

In conclusion, the clause gives HMRC the power to grant businesses a temporary approval to conduct controlled activities in appropriate circumstances. This power does not currently exist, and it is right that we remedy that situation to provide fairness to taxpayers appealing a decision to revoke their right to trade.