§ 'Any mentally handicapped adult required by the Inland Revenue to have his tax return signed by a Receiver appointed by the Court of Protection shall have the Court of Protection's commencement fee and annual management fees taken fully into account in calculating any tax payment or tax refund due.'.—[Mr. Higgins.]
§ Brought up and read the First time.
§ Mr. Higgins
I beg to move, That the clause be read a second time.
The clause is supported by my hon. Friend the Member for Tiverton (Mr. Maxwell-Hyslop). We started our debates with a major matter involving a radical change in Government borrowing. I do not suggest that the new clause has anything like the same significance. However, it involves an issue that should be brought to the attention of the House even at this late hour of five minutes to two o'clock in the morning. It came to my notice only a couple of months ago and it involves a wrong that we should put right.
It came to my attention that a mentally handicapped person was under age and was the beneficiary of two very small trusts. Being in that position he was required to claim for a refund of tax because the distributions were made gross. That had been the situation for some time and his father signed the tax forms on his son's behalf and the refunds were duly made. It was discovered that once the son became over age the Revenue would be prepared no longer to accept that arrangement. The father was told that a claim could be made only through a receiver appointed by the Court of Protection. He considered that to be an unnecessary requirement. He discovered that for providing the service of completing the tax form, or merely signing it, the Court of Protection required a commencement fee of £50 and annual management fees that started at nil for £0-£500 and increased to £25 for £500-£1,000, £75 for £1,000- £2,000 and £150 for £2,000-£3,000 and so on. Although the son was the beneficiary of only two small trusts, the costs that he incurred in securing the tax refund and paying the receiver as a result of the Inland Revenue's requirement was no less than half of the refund to which he was entitled. This is a disgraceful situation and one that should be brought to the attention of the House.
I took the matter up with my right hon. and learned Friend the Chancellor of the Exchequer, who sent me a reply. He explained that there were reasons why it was felt necessary for the arrangement to be made. He observed that the Revenue is repaying tax from public funds and that it has a duty to ensure that payments are made only to those who in law are entitled to receive them, and that it could be called upon to make the repayment a second time with little or no chance of recovering the first repayment.
My right hon. and learned Friend stated that while it is possible for an arrangement to be made with the parent, 790 for example, when the mentally handicapped person is under age, it is necessary for the form to be signed by a person who has the responsibility of ensuring that the funds are properly disbursed when he becomes of age. I understand all that well. However, the situation that I have described is still one that the House should not accept. We should make a change. Therefore, the question arises of what possible changes we can make.
The new clause that I have tabled suggests that, effectively, the costs of making the claim should be allowable as an expense for tax purposes. My constituent may still be left out of pocket, so no doubt there are alternative ways of proceding. One would be for the Department of Health and Social Security to make some allowance to the mentally handicapped to cover that situation, although it would be strange for the Government to have to make a grant to meet a situation that has been generated by an unsatisfactory set of rules. Another alternative would be to waive the fees in the case of mentally handicapped people who are claiming for tax allowances. That might create problems if the receiver were necessary for other purposes.
This situation should be put right in one way or another. Therefore, I hope that my hon. Friend the Financial Secretary can give us an assurance that he will look into the matter deeply and by one means or another make sure that the mentally handicapped, in order to obtain a tax refund to which they are entitled, do not have to incur the sort of expense involved in the case that I have brought to the attention of the House.
§ Mr. Ridley
My right hon. Friend the Member for Worthing (Mr. Higgins) was right to raise this matter because it is obvious to every hon. Member that the situation is not exactly how we would like it to be. I do not know whether my right hon. Friend was right to raise the matter on the Finance Bill. We must start from the proposition that the Inland Revenue has a duty to make sure that any tax paid by any citizen or any refund made to any citizen is correct and, in the latter case, is made to the right person. It would be wrong to work on the basis that the Inland Revenue will pay any citizen the cost of compliance with the law out of tax revenue. The law for all sorts of citizens is that they must bear their own compliance costs, particularly in relation to taxation.
I am not lacking in sympathy for what my right hon. Friend seeks to do. I wonder whether the remedy will lie with the Inland Revenue. The Lord Chancellor's Department set up the Court of Protection. It insists on the appointment of a receiver to protect mentally handicapped people. It sets out the scale of fees. The scale of fees could be reasonable where the receiver does the work of an accountant for the mentally handicapped person, who may have no one to do it for him. On the other hand, the fees seem unreasonable where the receiver, as in the case of my right hon. Friend's constituent, is the person's father, and he does the work.
§ Mr. Higgins
The receiver is not my constituent's father, unfortunately. That was the arrangement before my constituent came of age. It was a sensible arrangement and no charge was made. The receiver is charging the fee in this case purely for signing the form to ensure that the money goes to the right person. That is all that he is doing. The accounts are being prepared by a firm of accountants. 791 Therefore, perhaps my hon. Friend has a solution. If all the receiver is doing is preparing a form, perhaps the right answer is to ensure that the fees are appropriate and not on the massive scale that I have described. The danger then is that we may fall between several different Ministries. I want my hon. Friend to assure me that he will contact the Lord Chancellor's Department to see whether a sensible arrangement can be made if the new clause is not accepted.
§ Mr. Ridley
I think that the Court of Protection can appoint anybody to be a receiver, including the mentally handicapped person's father. I believe it to be right that we should study the question to ensure that the fees charged are commensurate with the work done and not excessive for work of very small calibre. In that regard I undertake with great pleasure to discuss the matter with my right hon. and noble Friend the Lord Chancellor. I heard of the matter only a short time ago, and I should like him to allow me to look into the whole question to see whether we can find a way of improving the arrangements.
§ Mr. Higgins
I am very grateful to my hon. Friend for that reply. I think that the House will agree that it does not particularly matter in what way it is done, and one understands some of the difficulties that he has mentioned. What is absolutely clear is that we ought not to allow the present arrangement to continue. I hope that we can find a solution. If not, I shall continue to pursue the matter. On that basis, I beg to ask leave to withdraw the motion.
§ Motion and clause, by leave, withdrawn.