HC Deb 24 February 1999 vol 326 cc438-40 6.30 pm
Mr. Quentin Davies

I beg to move amendment No. 7, in page 40, line 46, at end insert 'provided that, where such proceedings are brought without either distinguishing the amounts the employer is liable to pay or specifying the employees in question, the employer, if he be found guilty of any material default in his obligation to pay National Insurance, shall be entitled to be indemnified by the Inland Revenue for any costs and expenses incurred in defending himself in any such proceedings.'. This is an important amendment, which would ensure that the Inland Revenue in its new guise—having taken over the Contributions Agency—would not be allowed to conduct fishing expeditions. That is not desirable. It wastes public money if agencies go through companies' books hoping to find something amiss somewhere and it creates tremendous costs for businesses—most of which are entirely honest and should not be burdened with excessive costs of that kind. Such activities can easily destroy the trust that should exist in a free society between the state revenue-raising agencies—in this case, the Inland Revenue—and the public.

We were concerned about the existing text of the Bill, which states that the Revenue will be allowed to proceed in these inquiries and investigations and to launch proceedings without distinguishing the amounts which the employer is liable to pay in respect of each employee and without specifying the employees in question". That is ludicrous. We have provided alternative wording, and I hope that the Government will accept it.

Ms Hewitt

I think perhaps the hon. Gentleman has invented a new way of speeding up proceedings in the House: he puts on record his concerns about an amendment that has not been selected and I give him the assurances that he seeks on the amendment that has been selected. It is a case of two for the price of one.

As to amendment No. 7, I understand the hon. Gentleman's concerns about fishing expeditions, but I am extremely puzzled about the amendment's wording. It appears to introduce indemnities funded by the national insurance fund—which will remain in existence and is specifically preserved by the Bill—but makes those indemnities available only to those found guilty of a crime. That is curious, and I think that there is a technical fault in the wording of the amendment.

I stress—I hope that I can reassure the hon. Gentleman—that employers will have every opportunity to discuss with the Inland Revenue what amount of contribution is due before recovery proceedings are contemplated. Neither employers nor any other contributor should be compelled to defend recovery proceedings brought by the Inland Revenue just to say that they have been overcharged. However, that situation will not arise.

Under clause 11 of the Bill, the employer will have the right to take disputes about liability to the tax appeal commissioners and, beyond that, to the courts if some point of law is involved. Recovery proceedings in the magistrates court or the county court will be taken only after disputes about the amount of contributions due in law have been resolved or the time limit for an appeal has passed.

I turn to the part of paragraph 5 that provides that it is unnecessary for a recovery action to distinguish the amounts due in respect of each employee. Hon. Members may find it helpful if I give an example illustrating why that is a sensible provision—apart from the practical difficulty involved in listing possibly thousands of employees in a court document.

Suppose an employer allows private use of company cars. Class 1A contributions will be due from the employer, and he must make a return identifying the employees and the cars provided and pay the contributions due. If the employer does not account to the collector of taxes for those class 1A contributions, but chooses instead the alternative payment method, the rules in schedule 4 apply.

Let us suppose that such an employer simply puts down on the form something like "20 cars of such and such a make" without specifying each employee who uses those cars and then fails to pay some or all of the contributions that are due on those 20 cars. In the first instance, the employer will receive an informal request to pay what appears to be due. However, if the employer repeatedly fails to respond, what can the Inland Revenue sensibly do? The important point is that the Inland Revenue will depend on the employer for information. So the only practical option is for the Revenue to take proceedings for the sum that appears due and to put down what details it has in the legal paperwork, even though it cannot list each employee affected because it does not know who they are. That is what paragraph 5 allows.

If, on the other hand, the employer responds to informal requests to pay contributions by explaining why, in his view, the amount requested is not due, matters will follow a different course. If agreement cannot be reached, an officer of the Inland Revenue will make a formal decision under the provisions of clause 8 against which the employer can appeal to the tax appeal commissioners.

Paragraph 5 of schedule 4 in no sense breaks new ground. There is an equivalent provision on the statute book in respect of unpaid income tax due from employers under PAYE procedures. There is also a similar provision for contributions that are payable directly to the collector of taxes—already some 94 per cent. of national insurance contributions. For those reasons, I hope that the hon. Gentleman will withdraw his amendment.

Mr. Quentin Davies

It is clear from the Minister's response that some explanation was necessary regarding the way in which the powers will be used. We have received that explanation and, on that basis, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

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