Proceeds of Crime Bill

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Mr. Field: I suspect that it was one of those late-night or early-morning amendments that were tabled to try to confuse the Minister or, dare I say it, to cause his civil servants to have even more grey hairs. I am surprised that there are only three versions—I was expecting considerably more permutations on which the Minister would have to speak.

It is legitimate to ensure, at least, that if the EU arrest warrant were extended in relation to a raft of new offences, only offences that were criminal offences in the UK would be included, even if they had been committed abroad. That would be sensible. The Minister has provided a certain amount of comfort to my hon. Friend, who will no doubt have the final say on the matter.

Mr. Hawkins: I certainly welcome the contribution of my hon. Friend, who has reinforced our concerns. Although I would emphasise that the amendment relates directly to the EU arrest warrant, it was not simply an exercise in trying to cause more grey hairs for the Minister's civil servants. In the light of his reassurance, however, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Mr. Grieve: I beg to move amendment No. 485, in page 185, line 20, leave out from 'indirectly)' to end of line 22.

Subsection (4) states:

    ''Property is criminal property if it constitutes a person's benefit from criminal conduct or it represents such a benefit (in whole or part and whether directly or indirectly), and it is immaterial—

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    (a) who carried out the conduct;

    (b) who benefited from it.''

The amendment would remove the words,

    ''it is immaterial—

    (a) who carried out the conduct

    (b) who benefited from it.''

Two issues arise from that. First, the words appear to be otiose. I do not understand what they add to the clause. On the face of it, the clause is understandable, straightforward and comprehensible without their inclusion. What would be the effect of their removal?

The second issue goes a little further, and I would like enlightenment on it. Clearly, the trigger for the director's involvement is criminal conduct, which we discussed earlier. However, I infer that persons possessing property must have committed criminal conduct in relation to that property before they could be taxed on it. The mere fact of possessing property that has a criminal origin does not mean necessarily that one has committed an offence that would make one liable to taxation. That must be the case.

5.45 pm

Both the wording of the clause and the definition of criminal property are curious. The Minister may be able to explain all that to me without difficulty. Are persons in possession of criminal property liable to taxation only if it is their personal benefit, or if they have committed, or are suspected of committing, a criminal offence in relation to it? I would be grateful for clarification on that, because otherwise the basis of clause 311 seems to unravel and we are dealing with a wider matter than the suspected criminal conduct of an individual.

Mr. Ainsworth: The amendment would change the definition in the clause of when property is criminal property. The definition is relevant only to clauses 315 and 316, which make provision for the director's role in cases in which inheritance tax is payable, because the term is not used elsewhere in part 6.

Under the current definition, property is criminal property if it constitutes a person's benefit from criminal conduct or it represents such a benefit in whole or in part and whether directly or indirectly. Subsection (4) puts it beyond doubt that it is irrelevant who carried out the conduct and who benefited from it. It is, in effect, the same provision that is applied in clause 311 to the income and gains covered by that clause, but adapted to the language of inheritance tax.

The revised definition would remove the reference to its being immaterial who carried out the conduct and who benefited from it. It would not, however—the hon. Gentleman is right—remove the reference to a person's indirect benefit from criminal conduct.

It is not clear that removing the reference would necessarily prevent the director from exercising his inheritance tax functions in cases in which the person who is taxed did not commit the criminal conduct. However, an undesirable element of doubt could arise if the suggested text were deleted.

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We intend for the director to be able to exercise his taxation function in any case in which he has reasonable grounds to suspect that the criminal conduct or criminal property test is satisfied. The director will determine whether that would contribute to the reduction of crime in particular circumstances. In cases in which the person liable to be taxed is not suspected of involvement in criminal activities, it is unlikely that the director would, in most cases, exercise his taxation functions. In those circumstances, I ask the hon. Gentleman to withdraw the amendment.

Mr. Grieve: I am grateful to the Minister. He has helped to clarify the matter. I am also grateful for confirmation that deleting half of subsection (4) would not make a big difference.

The wider issues still trouble me slightly. Let me take an example. I find it difficult to think of concrete examples for part 6, although I always try to apply my mind to the Bill in that way. Let us imagine a godfather figure who has large quantities of assets that are suspected to have been acquired as a result of criminal conduct. He dies and the inheritance tax falls due on his estate. There is no difficulty in that example because the suspected criminal conduct is that of the person who is dead, and it is his estate that falls liable to taxation. However, he may have made inter vivos gifts that would fall into the hands of another person, who would be expected to declare any gift to the Revenue if it was taxable. That person may not be suspected of any criminal conduct. I hope that the Minister understands my point.

When we discussed clause 311, it was emphasised that we were talking about the director intervening when an interest had accrued

    ''as a result of the person's or another's criminal conduct''.

Those were the only circumstances in which he could intervene and take over the board's functions. Clause 320(4) introduces the concept of criminal property that may be in the possession of someone who has not committed any criminal conduct. That is why I was interested to probe the issue. It seemed a departure from the principle set out in clause 311.

The Minister has partially reassured me on the issue, but—and I emphasise that I do not know the answer to my question—I remain slightly perplexed about the example of, for instance, an inter vivos gift. Money might pass to a person who has not committed any criminal conduct, and it might be thought that the money should be taxed. Even if the money were not declared to the Board of Inland Revenue, it would still be the board's responsibility, because the director's responsibilities do not impinge on breaches of tax law, as the Minister explained. The responsibilities relate only to breaches of the wider criminal law, in which he may intervene.

I am sorry if that is muddling to the Minister. In fact, it is muddling to me. His officials seem to have cottoned on to that. I wonder whether ''criminal property'' constitutes a distinct category. People who are not suspected of any criminal conduct may be taxed. That is the best way that I can put the matter to the Minister, who seems to have received a message

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from someone who may have understood what I am trying to say.

Mr. Ainsworth: I am convinced that the hon. Gentleman never sleeps. I am fascinated by the pleasure that he gets when he is satisfied that he is right about the way in which the Bill works, and about whatever it is that he stumbled across at 2 o'clock yesterday morning, or over the weekend.

If a person has not been involved in criminality, the director will not as a matter of routine become involved. The issue will involve his taxation powers only when it has passed down the hierarchy, having been passed to him because some criminal activity had been pursued. He will be involved only if various investigations have been undertaken as to whether criminal confiscation or civil recovery can be used, and whether a tax liability has been avoided. That is self-evident.

Part of the director's function is to reduce crime. We do not want to punch a hole in the director's abilities, and there is therefore no intention of departing from the principle in clause 311, whether it involves inheritance tax, income tax or another tax liability. The person who is taxed needs to be shown to have committed the criminality. I do not know whether the hon. Gentleman is confusing himself; he is to some extent confusing me. I do not believe that I shall have satisfied him on all the issues that he raised.

Mr. Grieve: I am very grateful to the Minister, who has substantially answered my question. It was always my understanding that the wording of clause 311 governs the whole of part 6: it identifies when the director can take over Inland Revenue functions. I merely highlight that there might be an inconsistency in the wording of clause 311 in the case of an inter vivos transfer of assets within the seven-year period to a person who has not committed a criminal offence but whom the director wants to investigate for taxation purposes. In such circumstances, the wording of clause 311 might preclude his doing so. That is my late-night anxiety. I have shared it with him; it can now be his anxiety to share with his officials. I shall not trouble the Committee further.

Mr. Ainsworth: I seem to have satisfied the hon. Gentleman without realising it.

Mr. Grieve: I shall be very interested to discover whether the Minister subsequently writes to me about the matter. Whatever the outcome, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

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