§ Brought up, and read the First time.
§
`In section 22 of the Value Added Taxes Act 1983 (which allows refunds of tax in cases of bad debts) there shall be added after subsection (1) a new subsection (1A) as follows:
(1A) In subsection 1 above and regulations under that subsection, references to a "person" shall include any person who has funded the payment of value added tax (the "Payer") on behalf of any person liable (the "Trader") to pay tax on a supply of goods or services; the Payer shall, subject only to subsection (5) below and to regulations under subsection (1), be entitled on making a claim for any bad debt relief to the Commissioners to a refund of tax chargeable by reference to the outstanding amount as if he has been the Trader and to the exclusion of the Trader".'.—[Sir William Clark.]
§ Sir William ClarkI beg to move, That the clause be read a Second time.
Someone importing goods into this country has a forwarding agent. In turn, the forwarding agent must pay the VAT on the value of the goods being imported. That is perfectly all right, provided that the goods come in, VAT is paid, and the importer eventually repays the forwarding agent the amount of VAT paid. However, if a forwarding agent pays the VAT and the importer goes into liquidation, the forwarding agent cannot reclaim the VAT.
As my hon. Friend will no doubt tell the House, where a forwarding agent has paid the VAT and the importer or his company goes into liquidation within 30 days, there is a concession whereby the Customs will repay the VAT paid to the forwarding agent.
For the Government to believe that an importer who goes into liquidation will get a bankruptcy or liquidation order against him within 30 days is pie in the sky. It is bound to take a forwarding agent three, four or five months before he can get an order of liquidation or receivership. Consequently, the Inland Revenue's concession of 30 days means nothing.
Where a forwarding agent has paid the VAT on behalf of an importer and the importer goes into liquidation, the Inland Revenue should repay to the forwarding agent the amount of VAT that he has paid on behalf of the importer. Perhaps my clause is not all that well worded, but the spirit of it is that in no circumstances should a forwarding agent be put in the position of paying VAT on behalf of the importer and then, if the importer goes into liquidation of losing that sum paid in VAT. It has nothing to do with the forwarding agent.
According to the VAT regulations it could be that the VAT paid by the forwarding agent could be paid under the registration of the forwarding agent. As I understand it, Customs and Excise do not accept this. There is an anomaly in our VAT regulations, and I hope that my hon. Friend will ensure that the forwarding agent is protected for the amount of money that he has paid on behalf of the importer who goes into liquidation.
§ Mr. LilleyMy hon. Friend has explained with admirable lucidity the circumstances in which forwarding agents operate, and how the law bears on them, so I will not repeat that explanation to the House and delay its proceedings. He rightly mentioned that, at the beginning of the month, we introduced an extra-statutory concession that goes some way to meet the problem that he has 464 highlighted. He takes issue with two aspects of that concession—the condition that Customs have imposed for returning VAT to the agent rather than to the importer, and the provision that the delay should be at most one month after the importer goes into liquidation or some similar state of insolvency.
The one-month condition is to ensure that the agent makes best effort to recover the debt, for which he is commercially responsible. It is not our intention that the agent should necessarily force the importer into liquidation. To avoid the position where the agent foresees liquidation and does not press his case, leaving Customs to pick up the bill, the agent generally bills the importer for import VAT for payment immediately or within a short time, such as seven days. He picks up his own and other charges over a longer time. Given the short time within which VAT is normally reimbursed, it is not unreasonable to set a one-month deadline, but I accept that, as my hon. Friend said, liquidation takes longer than a month to achieve. I undertake to look at the working of the time limit in the light of the experience that we have gained with the extra-statutory concession.
I have today announced a general review of bad debt provisions within the VAT system as a whole, not just as it affects importers. Within the context of that general review, we shall look closely at the aspects that my hon. Friend has raised. He has made a powerful case, and that will reinforce the intensity with which we examine the experience of this extra-statutory concession, and we may come round to his view in due course. I am grateful for the way that he has highlighted the issues at stake. We could not accept the new clause as it stands, but we would work within the context of extra-statutory concessions in the first instance.
§ Sir William ClarkI am grateful for my hon. Friend's assurance. However, I am worried about what happens if, while the Customs and Excise review is going on, a forwarding agent pays VAT for an importer who goes into liquidation. Could my hon. Friend give an assurance that, having accepted the spirit of the new clause—I shall not push it to a Division—from now on, if a forwarding agent has paid VAT on behalf of an importer, and that importer goes into liquidation while the review is going on, Customs and Excise will make repayment of the VAT retrospective from today?
§ Mr. LilleyI shall certainly consider the point and write to my hon. Friend about it. I take the point he is making. We have spelt out the specific terms of the extra-statutory concession. Obviously I would not want to change them on the Floor of the House without considering further the point that he has made.
§ Sir William ClarkIn view of that assurance, I beg to ask leave to withdraw the motion.
§ Motion and clause, by leave, withdrawn.