AGGREGATES LEVY: RECOVERY AND INTEREST. (Hansard, 23 April 2001)

§ Mr. Ottaway

Paragraph 10 of schedule 5 would impose a swingeing level of penalty interest at some 10 percentage points above the rate applicable under the Finance Act 1996 which, I imagine, is the base rate or something similar to it.

The situation is exacerbated by paragraph 10(5), which cuts out a number of the mitigating factors that might have been taken into account in terms of a failure to pay the levy. The swingeing rate is imposed when there seem to be perfectly good reasons for not paying the levy, such 96 as insufficiency of funds. Paragraph 10(5)(b) deals with the question of losses, while (c) concerns whether or not the person has been acting in good faith. If someone acting in good faith fails to pay the aggregates levy and finds himself hit by the base rate plus 10 percentage points, that will be draconian. I would be grateful if the Minister could throw some light on the thinking on this point.

§ Mr. Timms

The schedule contains provisions for the recovery of debts, assessments and interest as a necessary part of the arrangements. It provides that the commissioners may, in certain circumstances, make an assessment of the amount of levy due and, having so notified the person concerned, recover the amount as a debt due to the Crown.

The schedule details the circumstances in which an assessment may be made and specifies other conditions concerning the operation of assessments, including time limits within which an assessment may be made. The power to make an assessment of levy due within the boundaries established by law is an important element of an effective control regime for any tax. It is entirely sensible that, where necessary—for example, because a registered person has failed to make any returns as required by law and thus has not paid the levy due—there should be a means by which Customs can act to recover the levy. The schedule provides an effective and reasonable means for Customs to use its best judgment to collect levy which is due but has not been declared, and it is an essential control measure to deter abuse.

Clause 27 and schedule 5 provide for penalty interest to be imposed in certain circumstances; for example, some failures to pay the levy by the due date. Again, this is a conventional arrangement. Penalty interest is compound interest, calculated— as the hon. Member for Croydon, South (Mr. Ottaway) says—at the penalty rate of 10 percentage points above the ordinary rate. Generally, penalty interest is imposed on outstanding debts and is at a higher rate because it represents ordinary interest plus a penalty.

Again, I underline the fact that all these provisions are already in force in other regimes and, to my knowledge, are not causing any difficulties within them. I do not think that there are any exceptional circumstances here which mean that different arrangements should apply.

In all these matters, taxpayers have the right of appeal to an independent tribunal following a review by the commissioners. That is set out in clause 40. The interest is calculated daily but is added to the principal once a month. The rate of 10 percentage points to which I have referred is calculated on the rate for ordinary interest that is applicable under section 197 of the Finance Act 1996. This is a conventional arrangement and I hope that the Committee will find no difficulty with it.