Finance Bill

I take on board the hon. Gentleman’s point, but it would be up to HMRC to decide where to deploy its CID officers. Also, there are usually police officers available at most ports. In a more recent note produced after the publication of the Bill, the Chartered Institute of Taxation argued:"““We have had assurances that the use of the powers will be restricted to a small cadre of people, properly controlled and trained. There does not seem to be anything to give effect to that promise in the legislation—why not? It would be preferable to have such powers included in the legislation, rather introduced by ‘administrative procedures’.””" The Institute of Chartered Accountants in England and Wales, in its parliamentary briefing of 24 April, said:"““It is vital that HMRC make publicly clear the circumstances in which the powers of arrest will be used…In order for Parliament to properly debate these clauses, the promised statement of practice should be made available to coincide with the debate.””" It added:"““Fundamentally, we question whether HMRC ought to have criminal investigation powers at all. We think that serious organised tax crime ought to be dealt with by the Serious Organised Crime Agency (SOCA) in the same way as any other organised crime.””" The Law Society reflected those concerns in its parliamentary briefing of 20 April when it said:"““HMRC have made significant efforts to separate out functions so that criminal investigation activity is not confused with civil investigation activity and separate personnel are involved…There is no statutory basis, however, for this separation of functions: it may be appropriate to consider whether there should be a separation.””" It was also concerned that"““In the adoption of PACE under the statutory instrument no particular grade of officer is specified to exercise the powers…There is no statutory basis for the separation of criminal from civil powers within HMRC…HMRC have taken these issues seriously but it may be appropriate for a legislative framework to exist as well.””" The Professional Contractors Group, which represents many small businesses including in the IT sector, stated:"““The culture of tax inspectors is becoming increasingly aggressive and destructive, and less concerned with the law.””" With regard to the proposed criminal powers, the PCG states:"““PCG calls for clarification over when new powers will apply, a guarantee that they will never be used as part of routine compliance work and for this guarantee to be enshrined in statute. This separation must be as solid as possible and not liable to be eroded either by the misapplication of powers by inspectors or by any future administrative reorganisation within HMRC.””" PricewaterhouseCoopers has argued—in a response to HMRC’s consultation of 14 February 2007, given by its partners John Whiting and Tom Cawdron—that"““the use of powers must be separate from procedures for civil investigations…Criminal gangs allegedly committing MTIC fraud and tax credit fraud on a vast scale need to be tackled with an appropriate degree of tax specialist support. We believe that it ""is a mistake for tax officials (using the word ‘tax’ in the widest sense) who may return to a normal tax environment at the end of their spell of duty in RCPO to investigate such organised crime.””" Given all those serious concerns, can the Minister now provide Parliament with some specific on-the-record assurances about how these powers will be exercised in practice? First, who can exercise the powers and how limited will their exercise be within HMRC? Our amendment No. 20 argues that the ability to exercise them should be confined to HMRC’s criminal investigations directorate, which specialises in fighting fraud and criminal activity but does not ordinarily deal with day-to-day tax affairs. That might help reassure taxpayers, including businesses, that HMRC will not use the threat of powers of arrest as leverage in ordinary tax disputes. The regulatory impact assessment that accompanied these proposals, under the heading ““Training given to HMRC officers””, states:"““The structure of HMRC with a separate Criminal Investigations Directorate, ensures the same officers do not deal with both criminal and non-criminal investigations. Officers responsible for criminal investigations will receive all the relevant training and will not have any other duties such as carrying out routine compliance work””." However, the RIA is not part of the Bill, which in clause 81(9)(2)(a) states:"““A certificate of the Commissioners that an officer of Revenue and Customs had authority under subsection 2(e) to exercise a power or function conferred by a provision of this Act shall be conclusive evidence of that fact.””" Given that apparent dichotomy, can the Minister assure the Committee this evening that the powers in part 6 of the Bill will be exercised only by officers of HMRC’s criminal investigations directorate, and not by other, wider elements of the organisation, as well? Secondly, in what circumstances will the powers be used? It is important to establish that such powers should be used only to fight suspected fraud or other related crime, and not as leverage in ordinary day-to-day tax disputes. What is important is not just the power of arrest but the threat of its use. It would be quite wrong for HMRC officers—a number of whom are now incentivised regarding the annual revenue that they are targeted to bring in—to use the threat of arrest by HMRC as leverage in a tax negotiation in which there is no real suspicion of fraud or other criminality. What assurances can the Minister give the Committee that that will not be allowed to happen, and that potentially overzealous tax inspectors will be kept in check if these powers are granted? Let us consider some simple instances. Can the Minister assure us that an individual who makes a genuine mistake on their annual tax return, even if it is in their favour, will not be threatened with arrest? Similarly, can he assure us that a small business that is experiencing genuine cash flow problems, and which is therefore having difficulty meeting its tax payments, will not have its partners or directors threatened with arrest as a result? We also presume that someone who is in dispute with HMRC over an attempt to recover an alleged tax credits overpayment—there were a third of a million such people last year—will not be threatened with arrest in any circumstances, save where there are reasonable grounds to suspect that they have been involved in an organised attempt to defraud the system? Conversely and for the record, we do expect such powers to be used in fighting organised fraud such as MTIC fraud, which is costing the UK taxpayer billions of pounds a year. Thirdly, when will the specific guidance that relates to the operation of the powers be issued. The RIA, under the heading ““Communication of the changes””, states:"““HMRC has undertaken to publish material setting out information on which officers are entitled to use criminal investigation powers, how that work is organised in HMRC and how the powers are organised.””" As I have already stated, the draft order to implement part 6 of the Bill has been published, but when I checked with both the Library and HMRC this afternoon, the specific guidance about the implementation of the powers in practice, as opposed to just the powers themselves, had still not been published. It would, obviously, have been very helpful to have that information before the House before today’s debate. In addition, it should be borne in mind that even when we do have such information, it will still only be in the form of guidance, or some form of code of practice as—in fairness—has been suggested by the Liberal Democrats in amendment No. 18, and so will not be on the face of the Bill. Similarly, the RIA, under the heading ““Implementation and delivery plan””, also states:"““The changes being made come into force according to an order to be made by the Treasury. The order will not be made until the training has been rolled out appropriately.””" The Treasury has already published the draft order as part of the consultation, but without a potential implementation date. So assuming for a moment that the Bill receives Royal Assent before the summer recess, when is the order intended to be made and is the Treasury confident that all of the relevant training will have been completed by that time? In summary, we can understand why the Government might want to do this, following on from the HMRC merger. We accept that they have carried out a consultation exercise in advance of seeking to codify these combined powers in part 6 of the Bill. Nevertheless, we remain concerned by the extent of these powers and, specifically, how they might be exercised in practice. The concern spreads wider than just the Opposition. It includes the Chartered Institute of Taxation, the Institute of Chartered Accountants in England and Wales, the Law Society, the Professional Contractors Group and respected members of the accounting profession, including those from PricewaterhouseCoopers. Parliament must be reassured that the powers will not be used arbitrarily and that HMRC officials will not use them or threaten to use them simply as leverage in tax negotiations. We have already seen a significant hardening of HMRC’s attitude in respect of the adjudication of tax credit overpayments and we are concerned that such a hardening in other areas could take place once the new powers have been granted to the combined organisation. To this extent, we have proposed two amendments to limit the exercise of such powers to a finite number of specially trained officers—amendment No. 2—or to those working specifically in the criminal investigator’s directorate at HMRC, which is amendment No. 20. I shall listen carefully to the Minister’s reply before deciding which, if either, of the amendments to press to the vote.