VAT REGULATIONS (AMENDMENT) (Hansard, 22 March 1978)

§ Mr. John Wakeham (Maldon)

I beg to move, That leave be given to bring in a Bill to amend the regulations with respect to the 1534 powers of the Commissioners and appeals to a value added tax tribunal; to amend Sections 31 and 40 of the Finance Act 1972; and for connected purposes. The Bill would introduce a procedure for appeal against VAT assessments. No doubt the House will be familiar with the case of Mrs. Holvey which was heard in the High Court last November. It attracted a lot of publicity, much of it wide of the mark. One substantial point emerged, however. It was that it is possible for a taxpayer to have to pay over a substantial sum of tax even when a refund is due.

The appeals procedure for VAT is a relic of the days of purchase tax. I believe that it should be brought into line with the appeals machinery for income tax assessment.

The procedure under the present law is set out in Section 40 of the Finance Act 1972, which provides that the tax in dispute must be paid over in full before a VAT tribunal can entertain an appeal. The commissioners have power to vary that provision in the case of hardship. The fact that they do so from time to time is evidence that the law is unsatisfactory in that fairness depends upon an appeal to the commissioners rather than upon a statutory right. The present procedure can and does produce real difficulties, particularly for small business men in that they have to find substantial sums of tax which are not due.

My proposal is to bring the appeals procedure into line with income tax, so that when an appeal is made that part of the tax which is agreed and due should be paid. The disputed tax should be held in abeyance until the appeal has been heard, but the taxpayer runs the risk of substantial interest payments if he with-holds payment of tax for which he is liable.

My proposal was raised in Committee on the Finance Bill of 1972, which set up the VAT regulations. The main argument used against it then was not that it was unfair but that it would unreasonably delay the collection of tax that was due. In particular, it was argued that, VAT being a new and unknown tax, a considerable number of appeals would arise, particularly in the initial stages. If that argument was valid at the time, I do not believe that it can be used now, as we have had the VAT regulations for 1535 six years and the position is obviously much clearer.

Secondly, since that date we have brought in swingeing rates of interest on overdue tax. It is now 9 per cent., which is not tax-deductible. That was not part of the law in 1972. It would add a strong incentive to pay the tax properly due on an appeal.

My proposal is not, therefore, revolutionary. It is simple—to give the VAT payer the same rights as the income tax payer.

It is also not a new proposal. Indeed, I draw the attention of the House to Amendment No. 201 to the Finance Bill of 1972, the intention of which was to do very similar things. That amendment was tabled by three distinguished members of the Treasury Bench—the Chancellor of the Exchequer, the Chief Secretary to the Treasury and the Financial Secretary.

The fact that they tabled that amendment in 1972 would not necessarily commend it to my hon. Friends, but I believe that it prevents Labour Members being against it. [HON. MEMBERS: "Oh."] It appears that even that is in dispute.

I make no apology for seeking leave to bring in a separate Bill to improve the methods of collection of tax rather than leaving it until the Finance Bill. One of the main reasons why our tax system is so archaic and complicated is 1536 that we tinker with it each year in the Finance Bill, when there is never enough time to do an adequate job. We would do better to put the collection of tax, tax rates, allowances and matters of that sort into one Bill and deal with tax management in another.

My proposal will be most help to small business men who get themselves into a mess with VAT, for all sorts of reasons, often not their own fault, such as illness. This will give them a better chance of clearing up their problems without the necessity of having to pay on occasions vast sums of VAT which will not be due.