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Finance Bill

I regret giving way and I am grateful for your guidance, Sir Nicholas. Clause 117 is about creating a single penalty regime for incorrect tax returns to apply across taxes and duties administered by HMRC. It does that by extending the scope of schedule 24 of the Finance Act 2007 and replacing the current separate and different regimes. The new penalties will be related to the amount of tax understated, the behaviour—as the hon. Member for South-East Cornwall (Mr. Breed) described—giving rise to the understatement and the extent of disclosure by the taxpayer. Much more of the penalty framework will be set out in primary legislation than in the past and, together with appeal rights, which I would have thought would have been singled out for approval, to an independent tribunal against all penalties, that will ensure greater consistency. These provisions will repeal the large number of different penalty regimes that are specific to particular taxes and can be confusing for the taxpayer. Amendment No. 1A seeks to postpone applying the new penalties for the additional taxes for 12 months and until the new regime's effectiveness for the main taxes has been evaluated. Such a delay would be a huge missed opportunity to simplify, modernise and align penalties across HMRC, to enable clear deterrent messages to be sent and to move to a more effective and fair response to taxpayer errors. Before the new penalties were even put forward for consideration in last year's Finance Bill, HMRC undertook a review of settled cases, to assess the likely impact and effectiveness of the new penalties, and this, combined with international comparisons and the support of analysts and academic research, all helped in developing the overall structure. These penalties are a good example of evidence-based policy making. In practice, holding introduction back by 12 months would actually mean three to four years' delay, because meaningful evaluation could not be started until sufficient cases had been worked and completed. As with all proposals in the review of powers, deterrents and safeguards, the penalties reforms have been the subject of extensive consultation since 2006. The Institute of Chartered Accountants in England and Wales wrote:"““We think it would be sensible to have a single system of penalties for incorrect returns across the tax system””." The Chartered Institute of Taxation concurred:"““We are pleased to note the proposals by HMRC to extend the Finance Act 2007 approach for the main taxes to other taxes, which is in line with our comments in earlier consultations.””" The Association of British Insurers, which is not always in favour of Government proposals, wrote:"““The benefits of aligning penalties for incorrect returns across taxes outweigh any difficulties.””" The Society of Trust and Estate Practitioners said, in relation to inheritance tax:"““The principle of alignment of penalty regimes is logically sound and appropriate to the taxes that affect trusts, estates and their administration. It is appreciated that alignment of penalties will simplify the structure.””" I could continue with other such positive quotes, but I detect a degree of twitchiness in the Committee about the length of time that I am taking. However, this is an important debate and I wish to respond seriously to the measured points that have been made on occasion by Opposition Members. Amendment No. 2A calls for the Treasury order commencing the penalties for the additional taxes to be made under the affirmative procedure. That would be contrary to the normal practice for commencement orders in tax matters, which are usually made under the negative procedure. I can recall that between 1992 and 1997 I made similar points to those made by the hon. Member for South-West Hertfordshire and his colleagues. In those days, a popular way for the Opposition to extend the length of a debate was to make a routine and well worked complaint about the conduct of the Government. We learned the lesson of where the previous Government had got it right in terms of administering legislation, and we implemented that lesson.