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Session 2001- 02
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Standing Committee Debates
Finance Bill

Finance Bill

Standing Committee F

Tuesday 25 June 2002


[Mr. Roger Gale in the Chair]

Finance Bill

(Except clauses 4, 19, 23, 26 to 29, 87 to 92, 131 and 134 and schedules 1, 5 and 38)

Clause 132

Mandatory e-filing

Amendment proposed [this day]: No. 227, in page 104, line 7, leave out 'requiring' and insert 'permitting'.—[Mr. Bercow.]

4.30 pm

Question again proposed, That the amendment be made.

The Chairman: I remind the Committee that with this we are taking the following amendments: No. 228, in page 104, line 38, leave out 'or requirement'.

No. 229, in page 104, line 41, leave out 'or requirement'.

No. 254, in page 105, line 9, leave out 'required' and insert 'permitted'.

No. 231, in page 105, line 20, leave out subsection (7).

The Paymaster General (Dawn Primarolo): I was speaking to the group of amendments and I had started to make a detailed response to amendment No. 231. To recap, amendment No. 231 would mean that the regulations made under the clause could not provide for a penalty to be charged where an employer did not comply with the requirement to send their return electronically. The regulations made under these powers will require employers to send certain returns electronically and require those returns to meet the quality thresholds. Earlier, we discussed quality thresholds that are providing for the information that legislation, and the Inland Revenue, require to comply with the pay-as-you-earn regulations.

Regulations cannot be effective without some form of sanction for those who fail to comply. That is the experience of this Government and Treasury Ministers; the Conservative Government reached the same conclusion. Employers have the choice of sending their returns electronically themselves or using an intermediary, such as a payroll bureau, so no-one should have to pay a penalty. As I said this morning, we are paying a fee to encourage employers to make that transition.

Where a non-electronic or substandard return is submitted, the clause will allow the Inland Revenue to provide in the regulations either to treat the return as not made or to charge a fixed penalty. The amount of any fixed penalty will be linked to the employer's size, which is normal procedure. The clause sets an upper limit of £3,000 for penalties and, in line with normal practice, only the most serious failures would attract

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the maximum penalty. The actual amounts of the penalty for each category of employer size will be specified in the regulations; the practice is well known.

Mr. John Bercow (Buckingham): The Paymaster General is seeking to justify the regulations, but to many of us it seems that the regulations in their proposed form, if they are to reflect the terms of the clause, will represent a triumph of Sir Humphrey at his most zealous. Perhaps I am being a trifle cynical, but can the hon. Lady tell me, as an earnest of good intentions and of her understanding of what is likely to follow, how we are to interpret in subsection (3) the words

    ''provision for the application of conclusive or other presumptions''?

What does it all mean?

Dawn Primarolo: It means the same as is already operational in the tax system and the same requirements that are applied now with regard to the obligations of employers to make PAYE returns. I understand that the hon. Gentleman may be a little cynical, but I cannot understand why it is something that the Committee should consider in a cynical vein when the Government provide for a direct payment to encourage employers in a matter that employers have identified as having high compliance costs, and are prepared to invest in payment to assist the employer to make those returns electronically.

The clause provides for the same provisions to apply for electronic transmission as for the current paper submissions that can be made by employers. That goes to the heart of the hon. Gentleman's points. He wants employers to be able to choose whether to file electronically for PAYE, whereas the Government wish all employers to do so, after a period of time and investment. To remove the penalties would render the clause useless—which is the hon. Gentleman's intention in moving the amendment. The Government reject it and ask the Committee to do so. Our objective is to move to electronic filing by 2010. It is staggering that in this day and age, with the speed of developments in e-commerce, members of a Committee of the House would declare that they do not wish to assist employers to move to electronic filing or provide the investment necessary to achieve that.

Mr. Peter Luff (Mid-Worcestershire): That is ridiculous!

The Chairman: Order.

Dawn Primarolo: In this day and age, when faster and better methods of communication exist, the Opposition wish to stick to paper—and presumably, if they could, to the pony express.

Mr. Luff: Will the Minister give way?

Dawn Primarolo: In a moment.

I ask members of the Committee to reject the amendment.

Mr. Luff: The hon. Lady does not understand that although legislation that assists employers to achieve honourable objectives that the Government wish them to embrace is welcome, legislation that compels them to do so is not. There is a world of difference between

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those two concepts. Cannot the Minister understand that simple point?

Dawn Primarolo: The hon. Gentleman fails to understand that the Opposition parties wish us to maintain a system—simply because they do not want modern technology—that will not deliver the objectives that business says it wants: clean data, speedy service, accurate information from the Revenue, and the eradication of confusion and delay.

Mr. Michael Jack (Fylde): Will the hon. Lady tell us which member of the Opposition has opposed in principle the use of electronic filing?

Dawn Primarolo: The Opposition wish to prevent the crucial part of the equation that would enable the efficient working and delivery of electronic filing, and the reduction of compliant costs: the requirement to file electronically. They want the ends but do not want to provide for the means—that is typical of many Opposition speeches.

Mr. John Burnett (Torridge and West Devon): Is it the hon. Lady's view that everyone, without exception, should have to file electronically?

Dawn Primarolo: The vast majority of people should be required to file electronically for their PAYE returns. [Interruption.] The hon. Gentleman tempts me into discussing an amendment that has yet to be moved; I accept that it may be possible to vary that requirement in special circumstances for a very limited number of people. However, electronic filing of PAYE for the overwhelming majority of people by 2010 is not an unrealistic target. It would be unacceptable not to use the best technology in this modern age to improve delivery of service.

Mr. Howard Flight (Arundel and South Downs): I thank the Paymaster General for giving way. I hope that exchanges will not become acrimonious where she does not agree with me. My hon. Friend the Member for Buckingham (Mr. Bercow) and I referred to her letter, which clearly stated that the Government did not intend to force, require or oblige people to file electronically. What happened to that? There has been a sudden change. As most of us made clear, some 95 per cent. of businesses are likely to want to use electronic methods to file their returns. It is therefore balderdash that not making it compulsory will wreck the project. Will the Paymaster General say how she has reconciled stated Government policy some 18 months ago with today's volte-face?

Dawn Primarolo: If there is no problem with everyone filing electronically, the hon. Gentleman has already answered his own question. Nor will he be worried about the requirement for it all to be completed by 2010 because, according to him, it will happen.

With regard to the letter to my right hon. Friend the Member for Leicester, West (Ms Hewitt) in 2000, I am comfortable with the proposition. People have two options. They can file their returns personally using the software on the Inland Revenue website that has been available for some time. If they do that, they will still

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receive a payment from the Inland Revenue over the five-year period, which they will be able to use to invest further in their software to improve their business. If people do not want to do that, we now provide an intermediary for them to use, which many people already do. Again, there will be a direct payment to assist in the transfer to using the intermediary. The software can be very simple, and will speed up, not slow down, the processes that businesses must undertake on PAYE.

Mr. Bercow: Will the Paymaster General give way?

Dawn Primarolo: I will be happy to give way to the hon. Gentleman in a moment.

I cannot see why our target of 2010 is unrealistic, given the vast growth in the use of computers and the internet, and the clear business improvements that can be gained from them.

Roger Casale (Wimbledon): I am sure that the Paymaster General is as surprised as I am that so many Opposition Members seem to be ready to go to the stake over what they regard as the inviolable right of business people not to file their tax returns by e-mail. Will the Paymaster General confirm that just as the Inland Revenue has the right to require proper tax returns from business people, so it must have the right to say how it wants those returns presented? After all, people are compelled to use a paper form, and in future they will be required to use e-mail. What is wrong with that?

Dawn Primarolo: I gave way to my hon. Friend, so perhaps I should give way to the hon. Member for Buckingham.

Mr. Bercow: I do not agree with the hon. Member for Wimbledon (Roger Casale), although in view of the stoical service that he gives on the Committee from the Back Bench, I say to him in a genuine spirit that it is time that he got his reward and was put on the Front Bench.

The way in which the Paymaster General dangles the carrot of the entitlement to use an intermediary is ultimately unpersuasive. The point has been made to me repeatedly that if someone opts to use an intermediary rather than to file personally, he or she will still be required to have an e-mail address. Does she not recognise that? Some of the people who object most strenuously to the clause do so to the idea that they should have to use e-mail, even if only indirectly, when they do not wish to do so.


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Prepared 25 June 2002