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Finance Bill

The proposals are far-reaching in their implications and were introduced without meaningful notice or consultation. I have received representations from groups such as the Chartered Institute of Taxation and the Institute of Chartered Accountants in England and Wales, and from companies such as PricewaterhouseCoopers. They have raised a series of concerns with me, as they no doubt have with MPs from all parties, about the potential implications of what we are considering, including what they regard as potentially unforeseen implications. Indeed, the hon. Member for Fareham (Mr. Hoban) read out a quotation from the Institute of Chartered Accountants that summed up those concerns precisely. I propose to highlight three concerns that my party and I have about the Government's proposals, and then to suggest how we might deal with them. The first concern is about the aspect of personal liability. All parties in the House would wish to see companies that failed to comply with the law dealt with accordingly, but the Government's proposal makes a distinction between the organisation and the individual. The hon. Member for Poole (Mr. Syms) asked what implications that might have, and whether they might go further than the Government envisaged. It is therefore important to explore the aspect of personal liability in greater depth in Committee. Our second concern is about the lack of clear definition. Paragraph 8 of schedule 46 says that only the most recent senior accounting officer will be liable, but there will still be issues if errors have been made in the past. If the most recent senior accounting officer has been in post only for a short period, the provision may not be so satisfactory, whereas if he or she has been in post for a long time, we would be able to go back much further. There is therefore some doubt about how the provision will apply in practice. No one knows what HMRC thinks will constitute adequate or accurate reporting systems. One person's idea of adequacy may be markedly different from another person's. Indeed, in accountancy, one person's idea of accuracy may occasionally be different from another person's idea of accuracy. As far as I am aware, no guidelines have been published so far to clarify those points. My final point about the lack of definition is about the implications for UK multinationals based primarily in this country—a point that was made earlier. However, I do not think that the following point has been made: what if the senior accounting officer is not based in the United Kingdom, even if most of the company is? How will the law work in practice then? The third area of concern that I have identified in gathering together the themes that others have expressed to me relates to the regulatory burden and the costs involved. The rules will be up and running from October, and there is genuine anxiety that this does not provide a fair period for companies to respond and incorporate the new rules into their practices. My understanding is that the Government say that the new arrangements merely formalise the procedure that is often observed by companies, but all the representations that have been made to me by the industry bodies that I have just named suggest that the legislation goes further than that. There are also questions about the cost to business and the anticipated extra yield to the Exchequer, and about whether the additional money raised will be sufficient to justify the potential additional cost to business. Those are my concerns, based on my discussions with others. Thinking through these issues as carefully as I can has led me to come up with four brief guiding principles for seeking to address the situation. First, my party believes that we should support measures to improve accountancy procedures in the interest of transparency. Everyone would accept that we want to see companies complying with the law in a transparent way, and not unreasonably trying to avoid their obligations. I completely understand the Government's desire to maximise the tax yield within the laws of this country, particularly when we have such an enormous public deficit. The need for the Government to raise money is obvious for all to see. We also recognise, however, that there are many concerns over the wording, the short notice period, the regulatory burden and the personal penalties in schedule 46. It is therefore reasonable to allow this measure to go to Committee, because although the overall objective of greater transparency is reasonable, there will need to be further consideration of those specific points. The second point relates directly to the amendment tabled by the hon. Member for Fareham, with which I have a lot of sympathy. It is logical to provide for some breathing space in which the rules can be reviewed, so that companies do not fall foul of them unwittingly. Some concerns have been raised with me, however. First, there could be a tendency for some companies—not those that observe best practice, which are unlikely to fall foul of the rules anyway—to see a year's delay as another year in which they can ignore the problem, and they might not be any better prepared when the legislation comes into force than they would have been if it had taken effect sooner. To be more cynical, one could suggest that other companies could use the year to give themselves more time to think about how to evade the spirit of the law.