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John Healey: It may be helpful if I make it clear to the hon. Gentleman and his right hon. Friend the
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Member for Fylde that the statement of practice is included in the public notice issued by Customs and has been available since Budget day. It is public notice 700/52 and I will leave a copy of it in the Library to help Committee members.
Mr. O'Brien: I am grateful to the Economic Secretary. It would be completely futile to pretend that I had taken that document on board, but it would have been helpful in anticipating the arguments that were adduced today to have had a copy of it on the Table in the Committee Room. It is clearly relevant to our considerations today, and we are being asked to place trust in the operation of that guidance, which was published on Budget day. As the Economic Secretary will be aware, however much this is an important argument, all of us have been under a tremendous work load in order to try and master all that we have to deal with during the coming days and weeks. I am grateful to the Economic Secretary for pointing the document out. I will certainly study it, but in the absence of knowledge of it, I shall continue to press my amendments to a vote.
Question put, That the amendment be made:
The Committee divided: Ayes 9, Noes 16.
Division No. 2]
AYES
Baron, Mr. John
Burnett, Mr. John
Djanogly, Mr. Jonathan
Flight, Mr. Howard
Jack, Mr. Michael
Laws, Mr. David
O'Brien, Mr. Stephen
Osborne, Mr. George
Wilshire, Mr. David
NOES
Cruddas, Jon
Cunningham, Mr. Jim
Farrelly, Paul
Healey, John
Hendrick, Mr. Mark
Howarth, Mr. George
Lucas, Ian
McKechin, Ann
Mallaber, Judy
Marris, Rob
Merron, Gillian
Mountford, Kali
Pond, Mr. Chris
Primarolo, Dawn
Southworth, Helen
Trickett, Jon
Question accordingly negatived.
Amendment proposed: No. 1, in
Question put, That the amendment be made:
The Committee divided: Ayes 9, Noes 16.
Division No. 3]
AYES
Baron, Mr. John
Burnett, Mr. John
Djanogly, Mr. Jonathan
Flight, Mr. Howard
Jack, Mr. Michael
Laws, Mr. David
O'Brien, Mr. Stephen
Osborne, Mr. George
Wilshire, Mr. David
NOES
Cruddas, Jon
Cunningham, Mr. Jim
Farrelly, Paul
Healey, John
Hendrick, Mr. Mark
Howarth, Mr. George
Lucas, Ian
McKechin, Ann
Mallaber, Judy
Marris, Rob
Merron, Gillian
Mountford, Kali
Pond, Mr. Chris
Primarolo, Dawn
Southworth, Helen
Trickett, Jon
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Question accordingly negatived.
4.30 pm
Amendment proposed: No. 85, in
clause 17, page 16, line 6, leave out subsection (7).—[Mr. Stephen O'Brien.]
Question put, That the amendment be made:—
The Committee divided: Ayes 9, Noes 16.
Division No. 4]
AYES
Baron, Mr. John
Burnett, Mr. John
Djanogly, Mr. Jonathan
Flight, Mr. Howard
Jack, Mr. Michael
Laws, Mr. David
O'Brien, Mr. Stephen
Osborne, Mr. George
Wilshire, Mr. David
NOES
Cruddas, Jon
Cunningham, Mr. Jim
Farrelly, Paul
Healey, John
Hendrick, Mr. Mark
Howarth, Mr. George
Lucas, Ian
McKechin, Ann
Mallaber, Judy
Marris, Rob
Merron, Gillian
Mountford, Kali
Pond, Mr. Chris
Primarolo, Dawn
Southworth, Helen
Trickett, Jon
Question accordingly negatived.
Clause 17 ordered to stand part of the Bill.
Clause 18
Joint and several liability of traders in supply chain where tax unpaid
Mr. O'Brien: I beg to move amendment No. 86, in
clause 18, page 16, line 36, after 'payable', insert 'by the supplier'.
The Chairman: With this it will be convenient to discuss the following:
Amendment No. 87, in
clause 18, page 16, line 37, leave out from first 'supply' to 'would' in line 38.
Amendment No. 121, in
clause 18, page 17, line 14, after 'if' insert 'he knew'.
Amendment No. 122, in
Amendment No. 88, in
clause 18, page 17, line 24, at end insert—
'(8A) Where any VAT becomes payable and is paid by a taxable person pursuant to this section he shall be entitled—
(a) to recover that amount from the supplier, and
(b) for that purpose to require the Commissioners to give him a certificate specifying that amount,
and any such certificate shall be conclusive evidence of the facts stated in it.'.
Amendment No. 2, in
clause 18, page 17, line 31, at end insert—
'(11) A person served with a notice under this section may recover any amount that he pays to the Commissioners pursuant to the notice from the person who, apart from this section, would be liable for the VAT specified in the notice.'.
Mr. O'Brien: Clause 18 has been rightly observed to be strongly linked to clause 17, so some of the issues pertaining to clause 18 have already been debated.
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There remain some issues in my opinion and that of my right hon. and hon. Friends, which is why we have tabled the amendments. Recognising your earlier guidance about the way in which the amendments will be taken, Mr. McWilliam, I flag up at this point that amendment No. 2 will not be pressed. It has been replaced by the improvements in amendments Nos. 86, 87 and 88, which we tabled later than amendment No. 2, our original amendment.
It will be helpful to examine the amendments together and I suspect that that will necessarily involve something of a stand part debate, with your guidance Mr. McWilliam.
The Chairman: Order. The hon. Gentleman is right. Again, the amendments eat the clause and in such circumstances we shall have the stand part debate along with the amendments.
Mr. O'Brien: I am grateful for that confirmation. It will make it more efficient for us to be able to go through the clause.
The clause makes certain businesses in a supply chain jointly and severally liable for tax that has not been paid by a missing trader. That was effective from 10 April this year. The measure is restricted to telephones, telephone parts and accessories and computer equipment, including parts, accessories and software.
There is an increased risk of doing business that involves trading in specified goods, so any business unwittingly caught in a supply chain involving a missing trader fraud will need specialist advice.
It may help the Committee if I read from a letter dated 15 April this year, which was helpfully sent, as a constituency matter, by Sir Nicholas Winterton to me and my colleagues in the shadow Treasury team. The letter is from a Dr. Dwek, who is a constituent of my hon. Friend the Member for Tatton (Mr. Osborne). Fortunately, I spotted that as my hon. Friend came into the Room, so I have been able to give the proper courtesies, but I thought initially that I was raising the case on behalf of Sir Nicholas. In his letter to the Chancellor of the Exchequer Dr. Dwek says:
In your recent Budget Statement you referred to the changes in the VAT regulations for the mobile phone and computer industry, in order to avoid VAT fraud, and this is much welcomed by the trade.''
That is why the letter is important: it sets the clause in context. He goes on:
''I know this has been a serious problem and this is now being addressed through consultation documents, some of which appear to be entirely reasonable, and other suggestions could seriously undermine the trade, which is a valuable export earner.''
That is the nub of the issue.
''Surely the simplest solution would be that, instead of paying the VAT over to the supplier, it is paid directly to the Treasury by TT—
telephonic transfer—
''or BACS, and on receipt of the funds by the Treasury a receipt could be issued which could then be passed on to the supplier. In this way there could be no VAT fraud and the Treasury would collect its share of VAT at the point of sale. Simple, but quite effective.
Since my business is involved in the trade of mobile phones, we shall of course be making a full submission . . .
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However, there is one item of the draft new legislation, which does not make sense, that is: Customs will presume that a taxable person—
Dr. Dwek emphasises the following—
''had reasonable grounds to suspect'' that VAT had not, or would not be paid, on goods supplied to it in two circumstances;
1. The purchase price of the mobile telephones was lower than the price, ''the lowest price that might reasonably be expected to be payable for them on the open market''. (Section 77A(6)(a) of the draft legislation)
2. The purchase price of the mobile telephones was, ''less than the price payable on any previous supply of those goods.'' (Section 77A(6)(a) of the draft legislation).
The purchase price of mobile telephones fluctuates''—
that is a fairly obvious point—
''according to market conditions and because of the uncertainty created now by the new measures, there are so many mobile phones on the market that the price has dropped considerably, thus any trader now operating could fall foul of these two items, and this cannot be right.
Finally, the measures introduced contain so much lack of definitions, and have created so much uncertainty that the trade has come to a virtual standstill.''
Mr. Joe C. Dwek CBE, who has made many public-spirited contributions as well as obviously being a successful businessman, has put his personal reputation on the line in suggesting that these measures have already
''created so much uncertainty that the trade has come to a virtual standstill.''
Mr. Jack: Is my hon. Friend also aware that Joe Dwek was a former chairman of the Confederation of British Industry in the north-west?
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