Proceeds of Crime Bill

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Mr. Grieve: I am grateful to the Minister for going into so much detail about the matter. He has acknowledged that it is most likely that the director of the Assets Recovery Agency will intervene or use such powers only when there is no other power that he can use. In those circumstances, is there not an argument that the only potential offence that has been disclosed is tax evasion? If so, is that not contrary to what the Minister has been saying and would it not become the board's responsibility, given that that would be the only failure that could be pinned against the individual or company concerned?

Is there not a conflict in that, because the Minister has also explained that the director will be receiving information, and that he will begin to operate, not because the Inland Revenue has passed him something in relation to that person but because the criminal enforcement agencies, including his own, have?

Mr. Ainsworth: The hon. Gentleman is right. The director will levy tax in the same way as the Inland Revenue would. The only power that the director will have that is different from those of the Inland Revenue is that he will be able to designate a sourceless tax liability, so that he will not have to prove, beyond doubt, the origin of the taxable item, and the particular act of criminality that led to its acquisition.

How else can we do what we are trying to do? We are trying to introduce effective powers to use against people who have clearly gained by their criminality—they might own a property or an asset—but we also wish to isolate those powers, because it is important to provide the maximum bulwark against their seeping into the rest of the taxation system.

If we were to oblige the Inland Revenue to exercise those powers, we would wind up having to establish an organisation within the Inland Revenue to provide focus, and the gateways would be more difficult to control. The alternative is to remove those powers from the Inland Revenue in the limited circumstances to which I have referred, to provide absolute clarity about when they can be operated by the director, and to insist that he use them in the same manner as the Inland Revenue would.

That alternative way would keep the director and the Inland Revenue separate. It also has the potential to provide greater focus, because the director knows exactly what he is after—he knows the kinds of people with whom he is dealing, he has used his other powers against them, and he is now seeking to levy tax from them. That also keeps such matters completely divorced from the tasks that the Inland Revenue performs. For all those reasons, it provides a better structure than any other way of allocating the powers would provide.

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Mr. Tredinnick: Again, I am grateful to the Minister for that explanation, as is my hon. Friend the Member for Beaconsfield.

When we discussed the situation with regard to Scotland, the hon. Member for Glasgow, Pollok eloquently highlighted the differences between English and Scottish law. The Minister has explained that the Inland Revenue's powers cover the entire country—at least, I think that that is the case. Can he confirm that in this case there would be no special difference north of the border? Does his explanation of the matter apply north and south of Hadrian's Wall?

Mr. Ainsworth: The differences north and south of the border are addressed in other parts of the Bill. Scottish Ministers will decide whether to pursue civil recovery, so north of the border such cases will effectively be passed between individuals, as the director will have no civil powers. If criminal confiscation has been deemed to be inappropriate, they will be passed to Scottish Ministers who will decide whether to pursue civil recovery. If they decide that civil recovery is not possible or feasible—because time has run out, or because one of the other reasons apply—they will pass the case to the director, who will decide whether to seek to levy tax.

The taxation powers will operate in exactly the same way north and south of the border. The other powers will be operated in a similar way, but they will be organised in accordance with the Scottish legal system, and they will be exercised by different people, because of the different way in which Scottish administration is structured.

Mr. Tredinnick: Is the Minister saying that those powers will be exercised in the same way, but that they will be operated by different agencies?

Mr. Ainsworth: Yes.

Mr. Davidson: Let me reassure the hon. Gentleman that things are similar in Scotland. We have income tax, electricity and running water. There are all sorts of similarities.

Mr. Wilshire: You do not have drawing rooms.

Mr. Davidson: Not in Pollok. In fact, there are few Conservatives—I am sorry, conservatories—left, as most of them have been eaten.

I thank the Minister for responding to the points made by the hon. Member for Bosworth, who invited him, as I heard it, to explain—I look forward to the first appearance of that word in Hansard. However, the Minister said at length that it was intended that there would be no leakage of cases. Will he clarify whether there will be leakage of information? It seems essential that information should go backwards and forwards between all the agencies in such circumstances, in order to ensure that one branch of Government is aware of information discovered by other branches. Artificial divisions might scupper cases against people who deserve to be penalised.

Mr. Ainsworth: Those are important issues. Appropriate gateways for information are needed, to ensure, on the one hand, that there is not abuse, and on the other, that there is effective action. When the director takes over a particular person's tax file for a

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set period, he will have the whole file. He will therefore have all the information that was available to the Revenue. As I said, we intend to establish a memorandum of understanding to allow for the circumstances in which information is passed between the Revenue and the director. I said earlier that I did not know the point at which it would be possible for that to be shared.

We have not yet set a memorandum of understanding, and we do not yet have a director of the agency. It was felt that we should allow the director to have input into the memorandum of understanding, rather than tying him hand and foot, before he even exists, as to how he will operate. We therefore intend to draw up the memorandum of understanding after the director is in place.

We do not intend that information gained by the director through his powers should then be passed back to the Revenue so that it can be used against the individual by the Revenue in other ways. When the person's tax files cease to be under the control of the director, it is intended that they should be filleted to make certain that the Revenue's powers are not accidentally extended because the director has had other abilities, and has been able to gain other information that the Revenue would not have been able to gain.

Mr. Tredinnick: The Minister focused on the memorandum, which was the subject of an earlier exchange. As I understand it, he is saying that he wants to leave the director some discretion or latitude in terms of the way in which memorandums are assembled. Nevertheless, would it not be sensible to offer guidelines, which are different from direction? That would provide clarity.

Mr. Ainsworth: I intended to allow input rather than discretion. We should at least listen to the individual who is expected to do the job thereafter before drawing up the memorandum of understanding that will tie him as to how he does that job.

I want to continue to fill people in on the Government's intentions. I am certain that there are drawing rooms in Scotland. There are posh people in Scotland, but there are no drawing rooms in the council houses of Pollok—

The Chairman: Order. We should return to the subject under discussion.

Mr. Ainsworth: If the qualifying condition is satisfied, the director will assume the responsibility for the taxes or the contributions for the periods in question. He will do that by serving a notice on the Board of Inland Revenue to state that, for certain taxes and contributions and for certain periods, he intends to carry out the general revenue functions as specified in the notice. Effectively, he will choose the most appropriate option for specific case from a menu of taxes or contributions for certain periods. While the notice is in effect, the Board of Inland Revenue will have no role in the tax affairs of the specified person or company to the extent set out in the notice. That is to ensure that a double taxation does not occur with regard to a particular liability.

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However, the clause makes it clear that the director may withdraw the notice at any time, and that he must do that if the qualifying condition ceases to be satisfied. In the event of the withdrawal of the notice, the Revenue will consider the tax obligations of the person or company concerned.

12.15 pm

The amendment would limit the director's taxation functions to those cases and periods into which the Inland Revenue had not carried out a previous inquiry. There are a number of cases in which, if the Revenue discovers new information following an inquiry, it may carry out a further inquiry. Under section 29 of the Taxes Management Act 1970, it is entitled to raise an assessment notwithstanding the closure of a previous inquiry. Section 29 of that Act sets out the conditions under which such an assessment may be raised.

An important feature of this Bill's development has been the maintenance of a single, national and consistent taxation system. The amendment would cause a variation from that because the director would be unable to make further inquiries or raise the discovery assessments that the Revenue may do. Additionally, if new information came to light that demonstrated that a tax assessment or further assessment was appropriate although the Revenue had carried out a previous inquiry into the same period of the same entity's tax affairs, barring the director from raising an assessment would place the subject of his inquiries at an advantage compared with other taxpayers.

The amendment implies that the director and the Revenue should not both assess the same tax. I assure the Committee that we do not intend to double-tax in that way, but that only the director will collect the tax, interest and penalties due. If the subject of the inquiry demonstrates that tax on the investigated income and gain was paid to the Inland Revenue, the director will not raise an assessment and he will serve notice of withdrawal. However, it would be a step further to accept the amendment and bar the director from making inquiries into cases that the Inland Revenue may investigate under the Taxes Acts.

I urge the hon. Member for Beaconsfield to withdraw the amendment. I hope that I have given a helpful explanation of how the powers will be used.

 
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