HC Deb 14 July 1976 vol 915 cc842-65

Amendments made: No. 55, in page 124, line 7, at beginning insert Subject to this section'.

No. 56, in line 10, at beginning insert 'reasonable'.—[Mr. Joel Barnett.]

Amendment proposed: No. 57, in page 124, line 13, leave out from beginning to 'an' and insert: '(1A) Subject to this section, the Board may by notice in writing require a person to deliver, to a named officer of theirs, such documents as are in the person's possession or power and as (in the Board's reasonable opinion) contain, or may contain, information relevant to any tax liability to which he is or may be subject, or to the amount of any such liability. (2) Subject to this section'.—[Mr. Joel Barnett.]

Mr. David Howell

On a point of order, Mr. Deputy Speaker. You are now going at some speed through Government amendments which arise at least in part from points raised in Committee. We are coming to very important issues—not that previous issues have not been important—and we are dealing with highly sensitive matters leading to fundamental proposals about constitutional powers. We expect a little more explanation from the Government, certainly on this amendment.

Mr. Peter Rees

And Amendment No. 56.

Mr. Deputy Speaker

We have disposed of Amendments Nos. 55 and 56.

Mr. Peter Rees

On a point of order, Mr. Deputy Speaker. These are matters of great importance. We are rushing through far too fast and are not doing justice to a very important schedule. I am sure that the Chief Secretary will agree that it is only courteous to the House that he should explain the import of these provisions. It would be a grave affront to the public, who are concerned with these matters, if we did not have a proper explanation.

The Chief Secretary to the Treasury (Mr. Joel Barnett)

While I am dealing with Amendment No. 57, perhaps I might en passant refer to Amendments Nos. 55 and 56.

Mr. Deputy Speaker

The amendment was clearly moved formally. If the hon. and learned Member for Dover and Deal (Mr. Rees) had anything to say about it, he should have said it at the time. Nevertheless, the Minister is doing the correct thing. He will refer to Amendments Nos. 55 and 56, although we have already agreed to them.

Mr. David Howell

My hon. and learned Friend the Member for Dover and Deal (Mr. Rees) has a point. We are dealing with very important matters. I think that we can get round the difficulty in the way which the Chief Secretary suggests. In case we suddenly get on the skids again and go rushing on, I give notice that we shall want an explanation of Amendment No. 58, which is on a similar point to Amendment No. 56.

Mr. Deputy Speaker

If an hon. Member rises, even though the Minister moves an amendment formally, he will be called. I am not responsible for hon. Members failing to rise.

Mr. Barnett

I am very sorry if by some mishap the hon. and learned Member for Dover and Deal (Mr. Rees) did not know that you were moving rather speedily—though not too speedily—Mr. Deputy Speaker.

Amendment No. 57 gives the Board of Inland Revenue power to call for documents from a taxpayer relevant to his tax liability, and to do so without having to obtain the consent of a general or special commissioner beforehand. This preserves the Board's existing freedom, which is contained in the existing section 20, to issue a notice without reference to anyone else.

Amendment No. 56 provides that an inspector's opinion that the documents he is seeking from the taxpayer contain, or may contain, information relevant to any tax liability is to be a "reasonable opinion". The word "reasonable" was suggested to me in Committee upstairs, and, being the reasonable chap that I am, I agreed to table a Government amendment to that effect. I moved it formally because I assumed that the hon. and learned Gentleman had noted it and recognised that there was no need for me to speak at length on it.

Mr. Peter Rees

This is a matter of some importance, and I am grateful to the Chief Secretary for having met some of the points that we made in Committee

As I read Schedule 6(20), it appeared that the word of the inspector was sufficient and that it would be impossible to challenge the reasonableness or otherwise of his request for documents. He may ask for documents which, in the opinion of most right-thinking people, are irrelevant. Therefore, we tabled amendments on this matter in Committee and I appreciate that the Chief Secretary has sought to meet our objections.

Is the amendment now in such form that if a taxpayer feels that the inspector has gone a little further than is necessary for the purpose of the provision, the taxpayer may go before a body of commissioners and say "No, this is unreasonable"? In that case the commissioners would be entitled to go behind the certificate or statement of the inspector and consider whether the inspector had been reasonable in asking for the document or documents in question. If the commissioners are bound by the inspector's statement, "I behaved reasonably", it would appear that this protection is illusory.

This is a point of some refinement and the Chief Secretary may need the assistance of the Solicitor-General, We were privileged upstairs in Committee to have the attendance of the Solicitor-General, but tonight the Chief Secretary is battling on alone. If he cannot answer the point now, no doubt we can return to it tomorrow.

Mr. Joel Barnett

I am happy to respond to the hon. and learned Gentleman. I assure him that appeal commissioners can go behind documents to ensure that demands for information are reasonable.

Amendment agreed to.

Amendment made: Amendment No. 58, in page 124, line 21, after 'inspector's' insert 'reasonable'.—[Mr. Joel Barnett.]

Mr. David Howell

I beg to move Amendment No. 59, in page 124, line 27, at end add 'over the age of 16 years'.

Mr. Deputy Speaker

With this amendment, it may also be convenient to take the following amendments:

No. 61, in page 124, line 47, leave out paragraph (5).

Government Amendment No. 62.

Mr. Howell

This amendment relates to the provision in Schedule 20 (3) (a) under which the inspector of taxes may seek information and papers from any son or daughter of the taxpayer. We debated this matter in Committee and some distaste was expressed at the possibility of a situation arising in which an inspector of taxes, for justifiable reasons, could be put in a position of harassing young children of a taxpayer in whose affairs the inspector was interested. My hon. Friends in Committee sought to make some decent modification of that situation by limiting the power only to a son and daughter over 16 years of age. This is a reasonable provision, and I am sure that the Chief Secretary will be able to accept it.

1.0 a.m.

Amendment No. 61 seeks to leave out paragraph (5) of Schedule 6. It would take out of the Bill a number of other circumstances which we find potentially distasteful and rather complicated and curious. They are, in a sense, the "beyond the grave" provisions of the schedule, those by which the inspector of taxes is empowered, with the safeguards which have been put in, to search into the affairs of someone who has died and, indeed, to seek from the widow or the widower the necessary papers and information.

There is also the curious circumstance—I think graphically described by my right hon. Friend the Member for Crosby (Mr. Page)—in which we are asked to legislate to give powers to the inspector of taxes to inquire into the affairs of a company which has ceased to exist. That, too, is included in paragraph (5) and that, too, raises the curious prospect of demands being made for papers belonging to organisations which may long since have been wound up and liquidated, the papers being bound away in safes or destroyed altogether.

These provisions caused us considerable worry, particularly the item dealing with the demands placed upon a widow after the death of the taxpayer. In Committee we sought reassurance and, more than that, we asked that these measures should be modified. These amendments would go further still and remove all our worries simply by removing the paragraph altogether.

Mr. Lawson

It would be helpful if we could have some explanation from the Chief Secretary of the significance of Government Amendment No. 62, which seems to be a very mysterious amendment. I wholly concur with the strictures of my hon. Friend the Member for Guildford (Mr. Howell) on the harrying of young children and of widows by the tax authorities, because there is a possibility that some taxpayer may not have filed a correct return. This is going too far.

What is extremely mysterious and baffling is the full significance of Government Amendment No. 62, the main word in which seems to be "immaterial"—in which case it seems to be immaterial whether the word is there.

Mr. Peter Rees

I wonder whose fevered imagination was responsible for the proposed Section 20. It cannot have been the Chief Secretary's, because we know him to be a sunlit, genial figure. As one looks about the Treasury Bench—although perhaps one does not do so at this hour of the night—one is pleased to see the figure of the learned Solicitor-General. He was obviously called in to give moral support to his right hon. Friend. It could not have been his imagination which was responsible for the proposed section either, because we know him to be a man with broad and humane sympathies.

I can only conclude that it is the Chancellor of the Exchequer who seeks to bring into the rapacious net of the Inland Revenue the widows and orphans of taxpayers who might by some conceivable stroke have defaulted on their obligations. Can it be right that children under the age of 16 are to be subjected to the intolerable pressures of the Inland Revenue? Can it be right that a widow, recently remarried, should be snatched from her marirage bed to be subjected to the loathsome attentions of the Inland Revenue? These are serious matters and I am sorry that they have attracted a certain levity from the Labour Benches.

The hon. Member for Keighley (Mr. Cryer), who has not graced our debates up to now, might be about to intervene and mention the case of Mr. Deevy. Whether he would be in order in doing so is a different matter.

I wish to confine myself to the exorbitant powers with which the Chief Secretary apparently wishes to clothe the Inland Revenue. A modest restriction on those powers would be at least to exempt from the attentions of Somerset House children under the age of 16, children barely above the age of criminal responsibility. I should like a full and sympathetic explanation from the Chief Secretary before I could go along with Amendment No. 62. Why should a widow, on remarriage, still be subject to this odious attention, these hideous pressures from the inspectors of taxes, or the Board of Inland Revenue?

In a humane society these provisions would be regarded with utter detestation. I find them so uncharacteristic of the Chief Secretary that I can only conclude that it is the unwholesome pressure of the Chancellor that has compelled him to ask us to sanction them. I await with a little trepidation, and a certain amount of distaste, the Chief Secretary's explanation.

Mr. Graham Page

Schedule 6(5) is so shockingly badly drawn that it is almost unintelligible. It sets up mysterious things. For example, it talks about "a company". It says that: a company which has ceased to exist is to be a taxpayer under the previous subsections. Then the taxpayer's spouse and son and daughter are brought into it. How can there be a spouse or a son and daughter of a company which has ceased to exist?

A few words later there is reference to an individual who has died". Are we really to suppose that a young daughter, of any age down to a few months, can be questioned about the deceased taxpayer's affairs? It was on this schedule, or a related clause, that I raised in Committee the point that the spouse of a widow or widower remains such only until remarriage. This is the reason why the Government have suddenly realised that they have to put in a little bit to say that such people remain a widow or widower, quite contrary to the English language, if they remarry. This little bit in parenthesis is sought to be added in Amendment No. 62. It makes the whole paragraph even more ridiculous. I hope that the Government will accept Amendment No. 61 and get rid of this mysterious little provision which will cause immense trouble. It is stupid.

The important amendment in this group is that which endeavours to fix an age below which the children of the taxpayer shall not be questioned and asked to produce their father's papers to the tax inspector, who breaks into the house. There must be some age inserted. The Government have not come forward with an age. I believe that the age might have been set at 14.

The Chief Secretary cannot envisage that an inspector entering a house—and he can force his way into it—should question young children. Let us have this figure in the Bill to make it certain that that is not allowed. The whole situation is so revolting to imagine, with children being cross-examined, that it makes the whole of the proposed Section 20 repugnant to anyone who tries to understand what the Government are seeking to do.

Mr. Joel Barnett

I do not think that hon. Gentlemen who have spoken are quite as naïve as they would have me believe. We are dealing here with potential tax evasion, possibly on a quite large scale. It is not unknown for persons seeking to evade tax to put money in the names of their children under the age of 16 or in a wife's name. In some cases, after a company has gone into liquidation it may be necessary to go beyond it to the former directors and shareholders. It is hard to believe that hon. Gentlemen are not aware of that kind of situation.

When I am told that what we are doing is distasteful and that we are harrying young children, going behind companies which have ceased to exist and snatching widows from their beds, I really wonder what we are talking about. What is evident, however, is that hon. Gentlemen are seeking to ensure that it will be possible for tax evasion to go unfound. If the amendment were carried, a person evading the payment of tax on a substantial scale could put money in the names of his children below the age of 16 and no tax inspector would be able to—

Mr. Peter Rees

Is the Chief Secretary seriously suggesting that, if equipped with these powers, the Inland Revenue could make demands on children under the age of 16 for their savings books? This is ludicrous. Is he seriously suggesting that in practice the Inland Revenue will wish to use these powers on children under 16?

Mr. Barnett

Is the hon. and learned Gentleman seriously suggesting that there will not be cases where a taxpayer who has been avoiding tax, sometimes on a very substantial scale, will not have put money into a bank account in the name of his children below the age of 16? There is, in fact, a very substantial safeguard to avoid a situation where tax inspectors could harry young children, snatch widows out of their beds and get hold of widows and widowers who used to belong to a company which has ceased to exist. I really wonder where hon. Gentlemen think they are.

There is a very considerable safeguard. Before an inspector of taxes can obtain the notice required under this provision, he has to go before a general or special commissioner and the general or special commissioner has to give his consent, having heard the inspector state his case. The general or special commissioner has to be satisfied of the case that is being presented. In those circumstances, to remove that from the statute book would leave a situation which I hope, on reflection, hon. Gentlemen will be prepared to recognise would be quite wrong.

It was put to me that Amendment No. 62 is very mysterious. It is nothing of the sort, as the right hon. Member for Crosby (Mr. Page) would have told his hon. Friends if they had asked him. I am surprised at the lack of consultation on the Opposition Benches. In Standing Committee it was suggested to me very helpfully by the right hon. Gentleman that the term "widow" and "widower" were not apt where the surviving spouse had remarried. The amendment makes the position clear. I said in Committee that I was obliged to the right hon. Gentleman and I am. I have now put down an amendment which rectifies the situation.

1.15 a.m.

Mr. David Howell

With the leave of the House, I should perhaps point out that, although we feel strongly, this is very much the less controversial section of our debates on these matters.

It is a little unfortunate that the Chief Secretary, at the start of the runway, has already put on all engines and seems to be waxing very indignant about our questioning of his amendments and about the proposals behind our own amendments. I am sorry if the right hon. Gentleman objects, but we find it uncivilised that there should be this prospect of harrying children under 16 years of age.

We hear how potential tax evaders will transfer hundreds of thousands of pounds into their children's bank accounts. I do not know quite how they will do that without incurring capital gains tax, but no doubt the right hon. Gentleman will explain to us—

Mr. Nicholas Winterton (Macclesfield)

He will advise us.

Mr. Howell

—how these things are done as he goes along. As to the amendment—

Mr. Joel Barnett

On a point of order, Mr. Deputy Speaker. I thought I heard the hon. Member for Macclesfield (Mr. Winterton) suggest that I would advise someone how to evade tax. I shall be glad if he will withdraw that statement.

Mr. Nicholas Winterton

The Chief Secretary has given plenty of advice to the House, and no doubt he will continue to do so.

Mr. Joel Barnett

The hon. Gentleman accused me of profferring advice on an illegal matter. I shall be obliged if he will withdraw his remark.

Mr. Peter Rees

Further to that point of order—

Mr. Deputy Speaker (Mr. Oscar Murton)

Order. Did the hon. Member for Macclesfield (Mr. Winterton) make a remark about tax evasion? If he did, he should withdraw it, because it is not an appropriate parliamentary expression. It is an aspersion on the Chief Secretary.

Mr. Nicholas Winterton

I should expect the Chief Secretary to give professional advice from the Dispatch Box, and I merely repeat what I said a moment or two ago.

Mr. Deputy Speaker

Did I understand the hon. Gentleman to say that the Chief Secretary would give that advice from the Dispatch Box—to evade tax?

Mr. Wintertonrose

Hon. Members


Mr. Deputy Speaker

I repeat, did the hon. Member for Macclesfield make the suggestion that the Chief Secretary at the Dispatch Box would use his powers to advise anyone how to evade tax?

Mr. Winterton

I suggest that we look at Hansard tomorrow.

Mr. Deputy Speaker

No. The hon. Gentleman must inform me what in fact he said.

Mr. Winterton

I said that I was sure the Chief Secretary would give whatever advice he thought appropriate, or words to that effect. As far as I know, there is nothing illegal in evading tax. It is tax avoidance which is illegal. Tax evasion certainly is not.

Mr. Joel Barnett

The hon. Gentleman should take advice from his hon. and learned Friend the Member for Dover and Deal (Mr. Rees). He accused me of giving advice on evasion, which is illegal, and I shall be obliged if he will withdraw what he said.

Mr. Deputy Speaker

I think that the hon. Member for Macclesfield misunderstood the implication of his remark. He should withdraw it. The Chief Secretary has made it clear that advice on evasion is illegal.

Mr. Winterton

Then, if I put it the other way, I am sure the House will have it straight.

Mr. Deputy Speaker

No. The hon. Member for Macclesfield should now understand the implication of his remark, and withdraw it.

Mr. Winterton

I have the highest respect for the Chief Secretary. If he has taken in any unfortunate sense a remark which I made from a sedentary position, most certainly I will say to him quite happily that I withdraw the remark if he took it incorrectly.

Mr. Deputy Speaker

Very well. I take it that the remark is now withdrawn.

Mr. David Howell

I think that the Chief Secretary had something to be indignant about there, and I am glad that my hon. Friend has withdrawn his improper accusation about tax evasion.

Before that little diversion, I was saying that the Chief Secretary did not have very much to get indignant and excited about at this stage. We are putting forward amendments on what is a highly controversial part of the schedule, and we are arguing an eminently civilised and reasonable case.

If we are to give these Draconian powers to inspectors of taxes, with appropriate safeguards, it is reasonable to suggest that children under 16 should be protected from harassment. I do not see anything extreme in that. I do not think the Chief Secretary has any reason to think that we are "trying it on" or that we are being naive.

I note the Chief Secretary's comments about Amendment No. 62 and the explanations which were prompted by the observations of my hon. Friend concerning the definition of "widow" and "widower". As the Bill stands a woman ceases to be a widow when she remarries, and the inspectors would not be able to harass her. The amendment means that harassment will follow her through her subsequent marriage. When she has settled down to a new family life, and forgotten her bereavement, she is then asked for information and documents concerning her previous marriage to a man who is dead and concerning a past life. This is verging on the uncivilised. What is more, it is nothing compared with what is coming. It is a little odd that hon. Members below the Gangway should be asked to pass legislation to harass young children. Yet this is peanuts compared with what comes later in the schedule. The powers will be given to allow Government officials to break into homes at all times of the day and night, to search for docu-

Question accordingly negatived.

Amendments made: No. 60, on page 124, line 44, after "inspector's", insert "reasonable".

ments and information and to seize anything they like.

I hope that the Chief Secretary will answer our points, but not in an excitable way. I hope he will realise that we have put forward reasonable points which require a reasonable response if we are to make progress on the Bill.

Question put, That the amendment be made:—

The House divided. Ayes 17, Noes 119.

Division No. 251.] AYES [1.23 a.m.
Bain, Mrs Margaret Montgomery, Fergus Wigley, Dafydd
Brotherton, Michael Morrison, Charles (Devizes) Wilson, Gordon (Dundee E)
Dykes, Hugh Page, Rt Hon R. Graham (Crosby) Winterton, Nicholas
Fairgrieve, Russell Penhaligon, David
Gilmour, Sir John (East File) Reid, George TELLERS FOR THE AYES:
MacGregor, John Tebbit, Norman Mr. Nigel Lawson and
Maxwell-Hyslop, Robin Warren, Kenneth Mr. Peter Rees.
Allaun, Frank Fowler, Gerald (The Wrekin) Miller, Dr M. S. (E Kilbride)
Anderson, Donald Garrett, John (Norwich S) Morris, Alfred (Wythenshawe)
Archer, Peter Golding, John Morris, Charles R. (Openshaw)
Armstrong, Ernest Graham, Ted Murray, Rt Hon Ronald King
Barnett, Guy (Greenwich) Grocott, Bruce Ovenden, John
Barnett Rt Hon Joel (Heywood) Hamilton, James (Bothwell) Owen, Dr David
Bates, Alf Hardy, Peter Palmer, Arthur
Bean, R. E. Harper, Joseph Park, George
Bennett, Andrew (Stockport N) Harrison, Walter (Wakefield) Parry, Robert
Blenkinsop, Arthur Hart, Rt Hon Judith Prescott, John
Boothroyd, Miss Betty Hatton, Frank Robinson, Geoffrey
Brown, Hugh D. (Provan) Heller, Eric S. Roderick, Caerwyn
Buchan, Norman Horam, John Rowlands, Ted
Buchanan, Richard Hunter, Adam Skinner Dennis
Callaghan, Jim (Middleton & P) Irving, Rt Hon S. (Dartlord) Small, William
Canavan, Dennis Jackson, Miss Margaret (Lincoln) Snape, Peter
Carmichael, Neil Jeger, Mrs Lena Stewart, Rt Hon M. (Fulham)
Clemitson, Ivor John, Brynmor Stoddart, David
Cocks, Michael (Bristol S) Johnson, James (Hull West) Stott, Roger
Cohen, Stanley Jones, Barry (East Flint) Strang, Gavin
Coleman, Donald Jones, Dan (Burnley) Thomas, Mike (Newcastle E)
Cook, Robin F. (Edin C) Kilroy-Sllk, Robert Tierney, Sydney
Cox, Thomas (Tooting) Lamborn, Harry Tinn, James
Craigen, J. M. (Maryhill) Lamond, James Urwin, T. W.
Crawshaw, Richard Latham, Arthur (Paddington) Walden, Brian (B'ham, L'dyw'd)
Crowther, Stan (Rotherham) Leadbitter, Ted Walker, Terry (Kingswood)
Cryer, Bob Litterick, Tom Ward, Michael
Cunningham, G. (Islington S) Loyden, Eddie Watkinson, John
Cunningham, Dr J. (Whiteh) McCartney, Hugh White, Frank R. (Bury)
Davies, Bryan (Enfield N) McElhone, Frank Whitehead, Phillip
Deakins, Eric MacFarquhar, Roderick Wilson, Alexander (Hamilton)
Dempsey, James McGuire, Michael (Ince) Wilson, William (Coventry SE)
Dormand, J. D. Maclennan, Robert Wise, Mrs Audrey
Douglas-Mann, Bruce McNamara, Kevin Woodall, Alec
Dunwoody, Mrs Gwyneth Magee, Bryan Woof, Robert
English, Michael Mahon, Simon Wrigglesworth, Ian
Evans, Ioan (Aberdare) Marks, Kenneth Young, David (Bolton E)
Ewing, Harry (Stirling) Marquand, David
Fernyhough, Rt Hon E. Marshall, Dr. Edmund (Goole) TELLERS FOR THE NOES:
Flannery, Martin Maynard, Miss Joan Mr. A. W. Stallard and
Ford, Ben Millan, Bruce Mr. John Ellis.

No. 62, in page 125, line 3, at end insert '(the circumstance that she or he may have re-married being immaterial for the purposes of those subsections)'.

No. 63, in page 125, line 4, leave out from beginning to "with" in line 5 and insert— '(6) Notices under this section are not to be given by an inspector unless he is authorised by the Board for its purposes; and— (a) a notice is not to be given by him except'.

No. 64, in page 125, line 6, after "and", insert "(b)".

No. 65, in page 125 leave out line 9 and insert "this section".

No. 66, in page 125, line 10, after "(1)", insert "(1A)". "(1A)".

No. 67, in page 125, line 12, leave out "inspector's notice" and insert "notice in question".

No. 68, in page 125, line 20, after "inspector" insert '(or, as the case may be, the Board)'.

No. 69, in page 125, leave out lines 21 to 40 and insert— '(8) To the extent specified in section 20B below, the above provisions are subject to the restrictions of that section.'—[Mr. Joel Barnett.]

Mr. Joel Barnett

I beg to move Amendment No. 70, in page 126, line 2, leave out from beginning of line to end of line 14 and insert— 'an inspector authorised by the Board for the purpose of this section may by notice in writing require the person to deliver to him such documents as are in his possession or power and as (in the inspector's reasonable opinion) contain information relevant to any tax liability to which any client of his is or has been, or may be or have been, subject, or to the amount of any such liability. For this purpose section 20(7) above applies, substituting "the client" for "the taxpayer.".'. This amendment is concerned with the provision under which an inspector may issue a notice to a tax accountant who has been convicted of a criminal offence. It provides that a notice may be issued only by an inspector authorised by the board for the purposes of the schedule. Previously, any inspector could issue a notice. I hope that the amendment will be acceptable to the House.

Amendment agreed to.

Mr. Joel Barnett

I beg to move Amendment No. 71, in page 126, line 30, leave out from "of" to "is" in line 31 and insert 'the appropriate judicial authority; and that authority'. As the Bill stands, a notice cannot be issued to a tax accountant without the consent of a general or special commissioner. The effect of the amendment is that, instead of the consent needed being that of a general or special commissioner, it will be the consent of a circuit judge in England and Wales, a sheriff in Scotland or a county court judge in Northern Ireland.

Amendment agreed to.

Mr. Joel Barnett

I beg to move Amendment No. 72, in page 126, line 39, at end insert— '(6) To the extent specified in section 20B below, the above provisions are subject to the restrictions of that section. 20B.—(1) Before a notice is given to a person by an inspector under section 20(1) or (2), or under section 20A, the person must have been given a reasonable opportunity to deliver (or, in the case of section 20(2), to deliver or make available) the documents in question; and the inspector must not apply for consent under section 20(6) or, as the case may be, section 20A(4), until the person has been given that opportunity. (2) A notice under section 20(1) does not oblige a person to deliver documents relating to the conduct of any pending appeal by him; a notice under section 20(2) does not oblige a person to deliver or make available documents relating to the conduct of a pending appeal by the taxpayer; and a notice under section 20A does not oblige a person to deliver documents relating to the conduct of a pending appeal to the client. "Appeal" means appeal relating to tax. (3) An inspector cannot under section 20(1) or (2), or under section 20A(1), give notice to a barrister, advocate or solicitor, but the notice must in any such case be given (if at all) by the Board; and accordingly in relation to a barrister, advocate or solicitor for references in section 20(2) and (3) and section 20A to the inspector there are substituted references to the Board. (4) To comply with a notice under section 20(1) or section 20A(1), and as an alternative to delivering documents to comply with a notice under section 20(2), copies of documents may be delivered instead of the originals; but—

  1. (a) the copies must be photographic or otherwise by way of facsimile; and
  2. (b) if so required by the inspector (or, as the case may be, the Board) in the case of any documents specified in the requirement, the original must be made available for inspection by a named officer of the Board (failure to comply with this requirement counting as failure to comply with the notice).
(5) A notice under section 20(2), if given to a person who is carrying on a business or was doing so at any time material to the subject matter of the inspector's (or the Board's) enquiries, or (whether carrying on not oblige the person or make available any which originates more date of the notice. (6) But subsection (5) does not apply where the notice is so expressed as to exclude the restrictions of that subsection; and it can only be so expressed where—
  1. (a) the notice being given by an inspector with consent under section 20(6), the Commissioner giving consent has also given approval to the exclusion;
  2. (b) the notice being given by the Board, they have applied to a General or Special Commissioner for, and obtained, that approval.
For this purpose the Commissioner gives approval only if satisfied, on the inspector's or the Board's application, that there is reasonable ground for believing that tax has, or may have been, lost to the Crown owing to the fraud of the taxpayer. (7) A notice under section 20(2) in relation to a taxpayer who has died cannot be given to a person by virtue of her or his being the taxpayer's widow, widower, son or daughter if more than 6 years have elapsed since the death. (8) A notice under section 20(2) or section 20A(l) does not oblige a barrister, advocate or a solicitor to deliver or make available, without his client's consent, any document with respect to which a claim to professional privilege could be maintained. (9) A notice under section 20(2) does not, in the case of a person who (in the course of a business carried on by him) has stood in relation to another as tax accountant, oblige that person to deliver or make available documents which are his (the accountant's) property and originate as working papers of that relationship.'.

Mr. Deputy Speaker

With this, we may take the following amendments to it:

Amendment (a), in subsection (3) leave out from first 'solicitor' to end of line 18.

Amendment (b), in subsection (7), leave out '6' and insert '3'.

Amendment (c), leave out subsection (8) and insert— '(8) No notice under sections 20 or 20A shall oblige any person to deliver or make available any documents with respect to which he or any other person could or could if legal proceedings were pending maintain a claim to professional privilege (unless in the case of a claim which could be maintained by some other person that other person consents) (9) Any claim that documents are or would if legal proceedings were pending be the subject of professional privilege for the purposes of sections 20 or 20A shall be dealt with subject to rules of Court by such judge of the High Court as the Lord Chancellor may select for the purpose'.

Mr. Barnett

Amendment No. 72 is slightly longer than the previous amendments. It introduces a new sections, 20B, which sets out restrictions on the powers to issue notices under Clause 20(1) and Clause 20A. Most of the restrictions are new and follow from undertakings I gave in Committee to reconsider certain points. I shall he happy to deal with any points that may arise on Amendments (a), (b) and (c) or any other points that the Opposition wish to raise.

Mr. Peter Rees

I am delighted that this group of amendments holds—indeed rivets—the attention of the House, even at this late hour. It is reassuring to note the presence of so many Government supporters who were not privileged to take part in the debates in Committee upstairs. We are glad to see those hon. Gentlemen here, even at this late hour. We hope that they, like me, will make their modest contribution. Government supporters were notable by their absence from the Standing Committee. They are now untrammelled by the Whips. With the whole of the night before us, I have no doubt that we shall hear constructive, illuminating and agreeable speeches from the. [Interruption.] Government supporters who are now making interventions from a seated position were not present in the Standing Committee. They will not have followed with close attention the thread of our debates, which are of great importance to the country.

I thought that the Solicitor-General had vanished. I was wrong. However, I notice that with his customary modesty he is sitting low down on the Government Front Bench. I say that since the amendment to which I wish to speak is related to what he said. In Committee we discovered a range of points which we thought it necessary to raise. We shall be obliged to explore those in the later hours of the morning. We cannot leave Schedule 6 without a great deal of close exploration.

We notice that there has been a softening in the attitude of the Chief Secretary. I stress "in his attitude". In no other of his faculties have we detected any softening. If anything, they have grown more acute and sharper as the night has gone on. But the right hon. Gentleman is still the robust and genial character that we knew upstairs.

The point to which I wish to direct attention concerns professional privilege. I am sure that I shall carry the whole House with me—even perhaps the hon. Member for Bolsover (Mr. Skinner)—when I say that the foundation of a civilised society is the right of a person who tangles with the Administration or the law to have access to professional advice and, when he does, to have that advice immune from the prying eyes of those with whom he may be litigating, whether private litigants or a Government Department.

I am sure that the personal intervention of the Solicitor-General caused a considerable relaxation in this area. However, I must tell him and the Chief Secretary that the amendment, far though it goes, does not go far enough. I should like to consider at a later stage why the Government have resiled so far. I should like to feel that a modest measure of credit for this position can be taken by the Opposition. Perhaps we can explore that aspect later. For the moment, I am concerned with the main issue of professional privilege.

Dripped through these new provisions is a measure, but only a measure, of protection for those who may be involved professionally in these matters. The Government do not appear to have understood that it is important that not only those who may be called upon to advise taxpayers professionally but the persons to whom they tender advice should be protected by privilege. It would be idle to say that there is a measure of professional protection of privilege here if the Revenue can bypass the barrister, solicitor or accountant and go straight to the taxpayer and say "we want you to disclose all the professional advice you have received on your tax affairs over the past three, four or five years".

I am sure that the House, now that it appreciates what is at stake, will accept that our amendments are not trivial or frivolous. I hope that the Chief Secretary and the Solicitor-General will approach them with deep seriousness.

I should like to draw attention particularly to Amendment (c). It attempts to extend professional privilege to docu- ments not only in the hands of the professional people who may have advised the taxpayer but in the hands of the taxpayer himself.

A point of some technicality is involved here. It may be that the Solicitor-General will feel it appropriate to advise the House on this matter. It is difficult to know how questions of professional privilege can be determined if there is no litigation pending. Privilege is essentially envisaged in the context of litigation when one can go to the court and say "This document is privileged. I do not propose to hand it over". Therefore, the second part of Amendment (c) reproduces a provision which is to be found in the Patents Act, because it designates the court which can determine the question of privilege.

The questions of privilege that the Government have sought to introduce arise only where an appeal is pending. I believe that it is equally important that a taxpayer should enjoy the benefit of privilege in advance of an assessment being raised against him. These exceptional and unprecedentedly wide powers can be exercised in advance of an assessment having been raised and in advance of any appeal having been lodged. In that kind of situation, it is important that the taxpayer should be able to say "No, I am not going to disclose to you the advice I have received from this or that professional person or firm." I suggest that privilege should extend to that kind of situation. The defect in the Government's amendment is that the privilege is restricted only to the professional person concerned and to documents which are called into being or are connected with a pending appeal.

Now that I have pointed out these considerable defects, I feel sure that Ministers will look benevolently on Amendment (c).

1.45 a.m.

Amendment (b) is of a different character. It relates to the new Section 20B(7), which enables the Revenue, in relation to a taxpayer who has died, to give notice to his or her widow, widower, son or daughter—I shall not reopen the debate we have just had—if more than six years have elapsed since the death. I am sure that unprejudiced hon. Members will agree that to have this kind of thing hanging over the family of a deceased taxpayer for six years after his death is too long.

I have put down an amendment to limit the period to three years. In some circumstances, the Revenue can raise an assessment on a deceased taxpayer by reference to his income within three years after his death. That is why I chose three years. If the Chief Secretary prefers three and a half or two years, I shall not quibble, but six years is far too long. These matters must be cleared up within a measurable time of a taxpayer's death. That is a smaller but no less important amendment, and I commend it to the House.

Mr. Joel Barnett

I hope that the hon. and learned Member for Dover and Deal (Mr. Rees) will accept that it would not be reasonable to allow a legal adviser to assert his client's privilege when the inquiry is into his own tax affairs. Such a claim would not prevail against the Law Society's own statutory powers. A legal adviser cannot assert his client's privilege if, under the existing Section 20, the board served the legal adviser with a notice for documents relating to his professional practice. He is, therefore, in just the same position under the new Section 20(1) as under the existing Section 20.

The effect of Amendment (a) would be that no one—neither the inspector nor the board—could serve a notice on a barrister, advocate or solicitor requiring him to produce documents relating to the tax liability of a third party. It would prevent any notice from being served on a barrister, advocate or solicitor requiring him to produce documents relating to someone else's tax affairs.

The new Section 20B(3) contained in Amendment No. 72 prevents an inspector from issuing a notice to a lawyer for documents relating to his own or anyone else's tax affairs. That leaves the board as the issuing authority in respect of the lawyer's own affairs under the board's power in the new Section 20A(1) to issue notices to taxpayers relating to their own affairs, but it has to go on and specifically substitute the board for the inspectors in relation to notices to a lawyer for documents relating to someone else's affairs. Amendment (a) would delete the substitution, leaving no issuing authority at all for notices to lawyers relating to other people's affairs.

I hope that the hon. and learned Gentleman will accept that that would not be justifiable. Where a lawyer is served with a notice requiring him to produce documents relating to someone else's tax affairs, the Bill as amended provides full protection for documents in respect of which a claim to professional privilege could be maintained. If that is not the case and the hon. and learned Gentleman can show me that it is not the case, I shall be happy to look at it, but I understand that that is the case as it now stands.

A lawyer may also be a tax accountant as defined in the Bill, and there should be the same right to call on him for documents relating to his tax clients in the, I hope, very rare case in which the lawyer has been convicted of a tax offence himself as there is to call on any non-lawyer tax accountant—subject, of course, to any plea of privilege that the Bill as amended will protect. I therefore hope that the hon. and learned Gentleman will accept that Amendment (a) is not justifiable.

Amendment (c) relates to subsection (8) of the proposed Section 20B in Amendment No. 72. It excuses a lawyer who is served with a notice requiring him to produce documents relating to someone else's tax liability from having to produce, without the client's consent, any document with respect to which a claim of professional privilege could be maintained. The hon. and learned Gentleman's amendment proposes that any person, whether a lawyer or not, when served with a notice to produce documents should be excused from having to produce, first, any document in respect of which a claim to professional privilege could be maintained and, second, certain documents in respect of which there would be no privilege—namely, any document in respect of which a claim to professional privilege could be maintained if legal proceedings were pending but to which no privilege attaches in the absence of such proceedings being contemplated or pending.

I hope that the hon. and learned Gentleman will be more aware than I am of the question of privilege, but I believe, on the advice I have received, that what has been put into the Bill more than adequately protects lawyers. However, I am happy to assure the hon. and learned Gentleman that if there is any doubt about the matter we shall have continuing discussions with his profession—

Mr. Peter Rees

I think that the right hon. Gentleman has missed the purpose of the amendments. Maybe he has done so because of the lateness of the hour or because I was not very clear. I am not introducing these provisions to protect lawyers, as they can look after themselves. I say that as a lawyer myself. It is to the lawyer's clients that the amendments are directed. They are the people who can claim professional privilege in respect of advice tendered to them and in respect of all sorts of documents that are called into existence not necessarily for the purpose of litigation. Perhaps the right hon. Gentleman will take that on board. Perhaps he will beat that in mind in what I hope will be the fruitful conversations that he will have with the various professional bodies that are still extremely interested in this problem in spite of the amendments that the Government have brought forward.

Mr. Barnett

I am always happy to have a chat with lawyers at any reasonable hour. I believe that Amendment (c) goes rather further than the hon. and learned Gentleman claims. I believe that he is claiming rather more privilege for the lay client than should be written into the Bill, but I am happy to give the matter consideration.

Amendment (b) seeks to reduce the rime limit in a case where inquiries are made to a third party in relation to a taxpayer who has died. A notice cannot be given to the widow, widower, son or daughter of a deceased taxpayer if more than six years have elapsed since the death. The hon. and learned Gentleman seeks to reduce that to three years. As he said, there are other precedents in legislation for three years.

In straightforward cases, no doubt a three-year time limit would work very well, but in this schedule we are dealing with anything but straightforward cases. Matters could be so delayed as to make it rather difficult for the Revenue to obtain the necessary information. I am not saying that six years is absolutely right, but I believe that three years is too short. I think that we should keep the six years and see how it goes. In due course I shall consider how the provi- sions are working and consider whether it is necessary to reduce the period.

Mr. Peter Rees

I take it from the right hon. Gentleman's remarks that he will consult the interested professional bodies, not only lawyers. I understand that his own profession as well as others is interested in professional privilege. I recognise that at this late hour it is not possible to explore these matters in any constructive manner, and I am not concerned to hold up the business of the House. If the right hon. Gentleman will give an undertaking that he will consult the interested professional bodies, I shall be quite happy.

Mr. Barnett

I am perfectly happy to give that undertaking. I have had many discussions with the professions with my hon. and learned Friend the Solicitor-General. I can give an undertaking that I shall have further discussions with them.

Mr. Graham Page

I am not sure what can result from those discussions at this late stage of the Bill. We cannot amend the Bill further after we have dealt with proposed amendments to the schedule. I rise more to press the Chief Secretary about the change from six years to three years. We must balance the arguments. In some cases it may not be easy for the inspector within the period of three years to discover what he wants to search out. Set against that is the case where the taxpayer has died and the inspector is endeavouring to get information from the taxpayer's family. That searching out should not continue for six years. In many serious legal cases action is precluded after three years. There is no restriction on the age of the members of the family who can be questioned. Three years is sufficient.

The Chief Secretary in talking about privilege in reference to proceedings contemplated. I stress what my hon. and learned Friend the Member for Dover and Deal (Mr. Rees) said in an intervention. We are talking not about professional privilege—the privilege of the solicitor, barrister or accountant—but about the client's privilege. Perhaps it is wrong to refer to that as professional privilege. It is the privilege of the client who seeks advice and is entitled to have that advice kept confidential. As I understand that privilege, it does not apply in general to advice obtained by a client. It applies to any advice and any documents prepared when proceedings are contemplated as well as when they are pending or in process. Therefore, Amendment (c) may be necessary.

Even though an assessment may not have been made, even though proceedings may not have been started, if proceedings are in contemplation and the client has gone to his solicitor or accountant for advice the point would be covered. To that extent I am grateful to the Chief Secretary for the very extensive Amendment No. 72. It covers many of the points we raised earlier. I hope that it covers my definition of professional privilege.

Amendment agreed to.

Further consideration of the Bill, as amended, adjourned.—[Mr. Joel Barnett.]

Bill, not amended (in the Committee) and as amended (in the Standing Committee), to be further considered this day,