Proceeds of Crime Bill

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Mr. Tredinnick: I am listening to the Minister with great interest, and I am grateful for that detailed and helpful explanation. Am I to understand that the director and the tax officer from the Revenue will sit in conclave and discuss a particular course of action? Will they themselves make a decision about which of them will proceed? Is discretion provided? Will those two people make up their own minds?

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Mr. Ainsworth: Once the file has been passed to the director, it will be for him to make the decision. He will obviously be able to consult the Revenue about other action and other investigations that have taken place, but we do not want him to become involved in pursuing tax evasion cases and other issues that are regularly handled by the Revenue and to start to invade and double-guess that area of responsibility. We are ensuring that that is not possible. The Revenue will not pass a person's case to the director and suggest that he deal with it on the basis that he might be more effective.

That is not to say that the Revenue does not have a responsibility to report criminality. If in the course of its normal functions it becomes aware of criminality, it will report that to the police or the Serious Fraud Office, for example. Such information might subsequently find its way into the director's hands, but not straight from the Revenue, because it is not the intention that he should deal with tax fraud and evasion. He will receive his cases from the criminal system and will be obliged to consider all his powers in the hierarchy that we have established. He can be given only cases in which prosecution has been ruled out as ineffective. He must then consider part 2 criminal confiscation or civil action against the individual involved. Only after he has decided that no such action is appropriate or possible in the circumstances should he consider levying a tax on the property.

Mr. Tredinnick: To pursue this further, what is to stop the representative of the Revenue and the director having a quiet word and saying, ''I can't say this, but I can tell you that if you were to think this, it wouldn't be remiss.''? Two Parliaments ago, there was much debate about the register of the poll tax or community charge and council tax and the impact that it would have on the electoral roll—whether the number of people registering on the electoral roll would be reduced because of the fear of being subject to that tax. All sorts of safeguards were supposed to be in place. That may be an abstruse comparison, but I wonder whether a nod and a wink might be inevitable between the two people.

Mr. Ainsworth: I understand the hon. Gentleman's point. In some circumstances, that will happen and will be appropriate. What will prevent that from happening is simple: the law. The rules of confidentiality that apply to the Revenue are strongly enforced on all Revenue staff and will apply as much to any discussions that Revenue staff have with the director as to anything else. However, that is not to say that discussions will not take place. When a file is in the director's hands, we would expect him to co-operate and discuss the case as appropriate with the Revenue. We want it to work in that direction, and we shall need a memorandum of understanding on how they conduct their business together. Having received a tax file, the director may need the Revenue to clarify issues about which it knows. We do not want the Revenue to use the director inappropriately to pursue taxpayers.

Mr. Tredinnick: Will such a memorandum effectively be a heads of agreement about how to

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proceed? Will it have force in law? Will it be based on what the remit of either party allows?

Mr. Ainsworth: I do not know when we will be able to draft a memorandum and let people examine our proposals. I reassure the hon. Gentleman that we do not intend to allow the Revenue—either directly and openly or by a nod and a wink—to say to the director, ''Here is a case that you ought to be interested in.'' The director should receive his cases from the criminal system and the prosecution agencies, rather than from the Revenue because the Revenue may have pursued the matter unsuccessfully.

If a case is referred to the director by the prosecution agencies and he decides that his other powers are inappropriate or inoperable and considers whether to raise a tax levy against an individual, he may need to discuss that with the Revenue. We must ensure that that is permitted when it is appropriate. We do not want a free flow of cases from the Revenue to the director. The director will receive his cases only from the prosecuting authorities and the criminal justice system.

Mr. Tredinnick: The Minister says that there will not be fishing expeditions by the director to the Revenue through which he could try to elicit more information than he is entitled to. Did I understand him correctly? He says that the director will approach the Revenue with a specific brief and that safeguards are present to prevent the Revenue from opening other issues with him such as separate cases or previous convictions. How would the safeguards apply in those instances?

It may help the Minister if I expand on that while he considers the briefing that he has received. I know that it can be difficult for a Minister to reply if he has not read the briefing.

Mr. Ainsworth: The director will have powers of investigation and powers that are appropriate to certain parts of the Bill. He will use such powers as are appropriate. The Revenue has its own powers. It investigates tax fraud and taxpayers, and may levy tax on criminal gain.

We have made it absolutely clear in the Bill that the Revenue cannot pass on a case to the director. The Revenue will not be able to say, ''You have powers under part 4 or part 2 of the Bill. We are certain that this has been going on and if only you use those powers, that will come to light.'' If the Revenue became aware of criminality during its investigations, it would pass on a case not to the director but to the Serious Fraud Office and the police, and there would then be an investigation that would lead to a decision on whether to prosecute. If the police decided that clear criminal gain was involved but that a prosecution was not possible, they would pass on the case to the director to allow him to consider whether the proceeds of crime could be pursued.

Mr. Field: A concern that I have comes from a constituency matter with which I have recently dealt. There is an assumption that the police will deal with any case of fraudulence in which a criminal element is involved. In a matter of insolvency, that is not always the case. For example, I am acting on behalf of a

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constituent whose business relied on another business that has become insolvent. There have, apparently, been shenanigans. My constituent's worry—and he has given me a list of the various agencies that he has contacted—is that the moment the business became insolvent, the police said that it was nothing to do with them and that there was now an administrator on board.

My hon. Friend the Member for Bosworth gave an example of a situation in which the police might not be involved, and if there were a tax-graded issue in an insolvency case, it would be returned—perhaps via the administrator—to the director. That is a worry and it struck me, when dealing with my constituent's situation, as an odd state of affairs.

I can understand where the police and the Department of Trade and Industry are coming from. Their view is that it is now a legal process and they should stay out of it. I wonder what comments the Minister has about how that potential problem can be avoided.

Mr. Ainsworth: Parts of the Bill dictate how insolvency interacts with the powers of the director. Neither the Revenue nor a person who is put in charge of a company that is in receivership and insolvency will pass on cases to the director.

With regard to fishing expeditions, the Revenue will not, other than by accident, become aware of criminality. The function of the Revenue is to examine tax fraud and tax evasion. It is not the director's function to investigate such matters. In a case of tax fraud and evasion, the Revenue will keep that file. Under the powers, it will take action against the individual concerned in exactly the same way as it does now. Only if it becomes aware of some other criminality during its investigations will it be obliged—as it is now, we are not changing anything in that regard—to report the matter to the Serious Fraud Office, the police, the National Crime Squad or whoever is appropriate. It will continue to carry out its business in the same way as it does now.

Mr. Tredinnick: I understand what the Minister is saying. If some other matter comes to light while the director is investigating a case, the Revenue will not pass that information to the director, but to the appropriate authority—which, in this case, is the police—for further investigation. The purpose of our exchange has been to tease out a little more information about that interface. He has helpfully done that, and has explained how it works.

However, the concern must remain that there might a conduit or a possibility of inappropriate behaviour. I qualify that point by saying that we are dealing with villains—the whole point is to try to stop the Revenue being defrauded and to bring to justice the wrongdoers. Nevertheless, to ensure that justice is properly served, we have to consider such aspects.

Mr. Ainsworth: And ensure that there is no leakage of inappropriate cases into the hands of the director. The Revenue has its powers and it exercises them. In some circumstances, as the hon. Member for Beaconsfield said, they are fairly wide-ranging. It is appropriate that the Revenue should keep those

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powers and continue to carry out its business in exactly the same way as it does now. We do not want the director to have the ability to do the Revenue's job for it.

When a case is referred for the confiscation of criminal assets, we want the director to have the same powers as the Revenue. Such referrals will occur only as a result of criminal investigation, not as a result of tax investigation. The tax authorities will have been examining the issues that it is appropriate for them to examine, and if they find certain matters they will not hand on the case to the police or the director but deal with it themselves, as they do now. We have tried to structure the Bill so that it will have no impact on the way in which the Revenue undertakes its job. When the director has control of a person's tax affairs, he will conduct himself in the same way as the Revenue.

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We are not setting up two different taxation systems. The person will be adjudged for taxation in the same way, whether by the director or by the Revenue. He will be adjudged only by the director in those narrow circumstances in which there is a suspicion of criminal gain and that the origin of the property concerned was criminal. The director will rightly have such cases in his portfolio that have been passed to him by the appropriate authorities. As I have said, he will consider his revenue-raising powers only within the context of the hierarchy, having first gone through the prospects of criminal confiscation and civil recovery.

The director will have taxation functions for cases throughout the whole of the United Kingdom, including Scotland. During the Committee's consideration of part 1, I circulated a note setting out the intended relationship between confiscation, civil recovery and Revenue functions. It covered how cases may be referred to the director from Scottish Ministers when they decide not to pursue civil recovery. In such cases, the director may consider using his taxation powers.

For each case in which the director wishes to use taxation functions, he must first satisfy a qualifying condition. That is an important condition, because there is no intention under the Bill that there would be any change whatever to the taxation treatment of ordinary taxpayers. Such individuals and businesses will continue to have their taxation affairs dealt with by the Inland Revenue, whose powers will remain unaffected by this part of the Bill. It is important to emphasise that point, because we intend that the director use his taxation functions against only a small number of people in relation to the total taxpaying population. Such individuals or businesses will be able to be the subject of the director's taxation functions only when the qualifying condition has been satisfied.

The condition is that the director has reasonable grounds to suspect that income, gain, profits or a transfer of value is chargeable to the relevant tax, and resulted from criminal conduct. It is immaterial whether the conduct was carried out by the person to whom the income, gain, profits or transfer has accrued. In that context, the criminal conduct does not

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include tax evasion, responsibility for which will still remain with the Inland Revenue. The Revenue's special compliance office will continue to be the body that investigates cases of tax fraud, and the Board of Inland Revenue will continue to be the prosecuting body for cases of tax fraud in England and Wales.

 
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