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Mr. Philip Hammond: Clause 28 deals with the procedural rules for companies that are subject to a notice under clauses 24 or 26. I do not have a tremendous amount to say about clause 28, but our new clauses have been grouped with it. We aim to resolve the uncertainty that we are told still exists by introducing a binding statutorily provided advance clearance regime that, if operated efficiently and consistently, will quickly restore taxpayers' confidence.
New clause 5 sets out a procedure for advance clearance on application to the commissioners. Subsection (1) would remove companies that have sought and received advance clearance from consideration under clauses 24 and 26; subsection (2) states that any application made under subsection (1) can be in writing, delivered by post or electronic mail, and shall contain particulars of the operations that are to be effected. There is also a provision within subsection (2) to allow the commissioners to require further details for the purpose of their decision within 30 days of the receipt of the application or of any further particulars previously required. It tries to keep the process moving fairly speedily.
There is also provision that if such requested information is not received within 30 days of the applicant being required to give it, and if any such notice is not complied with within 30 days or any longer period that the commissioners may allow, the commissioners need not proceed further. In other words, they may treat the taxpayer as having abandoned the application.
Subsection (3) requires the commissioners to notify the applicant of their decision within 30 days, or, if they have requested more information, within 30 days of the receipt of that information. Subsection (4) gives the applicant a right to refer any rejected application to the special commissioners who have the power to give clearance in the same way that the commissioners do, and subsection (5) makes any decision by the commissioners or special commissioners void if information provided by the company is not accurate or does not accurately disclose all the facts.
Since the Finance Bill was published before the election it has been changed and the guidance notes now state that there will be a clearance regime, albeit not one with any statutory force. We welcome the introduction of the clearance regime that the Government have announced, but we recommend that such clearances be within a statutory framework, provided that the clearance, if obtained based on accurate and full information, is binding on the Revenue by statute for a period of time.
Practitioners tell me that some of the existing non-statutory clearance methods work better than others from a taxpayer's point of view. I say that to be
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consensual. That is why we seek to include a statutory provision in this case. The new clause would enable taxpayers, when implementing a financing structure for their UK or overseas investments, to get advance clearance from the Revenue. That would give the taxpayer certainty rather than considerable uncertainty, which the new rules might otherwise create.
Guidance notes are no guarantee of certainty and the existence of those notes leaves a great deal of room for interpretation. The taxpayer has the additional problem that guidance notes can be withdrawn or redrafted at any time; the taxpayer always has to face the possibility of a change in the guidance that governs the effect of any part of the legislation.
The rules that we propose mirror those for pre-clearance of share reorganisations and the transactions and securities legislation. I note that most jurisdictions, including the United States, Australia, New Zealand and the Netherlands, have advance clearance systems to obtain pre-transaction binding rulings for such transactions. Such a clearance system is intended to be a practical way for taxpayers and the Inland Revenue to achieve certainty and avoid complicated arguments at a later date.
Another example has come to my attention today. Apparently, the Belgian authorities have now taken steps to implement a decision that was taken in 2003 to give Belgium what they describe as
''an efficient, proactive and flexible ruling practice''—
this is the interesting part—
''in order to remain attractive for foreign investors and to provide the necessary certainty to Belgian taxpayers.''
As I have conducted my preparatory discussions in the past few weeks, it has surprised me how often Belgium has come up.
Dawn Primarolo: The hon. Gentleman has no idea.
Mr. Hammond: The right hon. Lady, who has knowledge of Belgium, expresses some reaction to that. I remember working occasionally in Belgium a decade or so ago when, it would be fair to say, the country was not characterised as a place that was radically reforming its legislation to make itself more flexible and dynamic. However, it is interesting that some of the countries that had developed somewhat rigidly structured regimes that were not business friendly have now realised that to compete they have to change their regimes and make themselves more attractive to business.
One trap that we sometimes fall into in this place is stereotyping. We have ideas about different countries and how responsive to business their regimes are, but the world can change quickly and we can find that countries that were traditionally regarded as business friendly have allowed themselves to lag behind—I name no names; Committee members will draw their own conclusions—while others that were traditionally regarded as not particularly business friendly have galvanised themselves, not for fun or to risk losing tax revenue that would otherwise have benefited their taxpayers, but because they have worked out that having a more business-friendly environment that
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encourages investment and inward business location leads in the medium term to more revenue rather than less and thus a greater ability to provide the good quality public services that people in all countries, western, advanced or otherwise, want.
Chris Huhne: I am grateful to the hon. Gentleman for drawing international parallels. We broadly support the new clauses, so does he agree that there are also precedents within United Kingdom statutes—for example on the taxation of capital gains—that we could commend to the Minister?
Mr. Hammond: I am sure that the Minister will explain why the Government think that, in this case, a non-statutory regime is preferable. It is important to have that debate, because, as the hon. Gentleman will know, there are many people outside the Committee and many practitioners in the field who believe that the Bill, because of its complexity and potential for genuine uncertainty, if not disagreement, is a good candidate for a statutorily enforceable pre-clearance regime.
5.15 pm
Rob Marris: The new clause is a plucky little measure. Is the hon. Gentleman proposing that there should be a charge, or will it be free tax and accountancy advice for multinational companies?
Mr. Hammond: It is not free tax advice. The experience of pre-clearance regimes shows that if they work properly, they save resources on both sides. The Revenue has limited resources. If a pre-clearance regime is working properly, the Revenue, having agreed in advance the details of how that scheme will be treated, will not have to spend large amounts of time trawling taxpayers' returns to ascertain whether they comply with the scheme. A pre-clearance regime is intended as a protection for the taxpayer, although I suggest that it could also be of benefit to the Revenue. However, its principal purpose is neither of those, but to ensure that we do not inadvertently inflict a negative burden on the UK economy through the creation of uncertainty and that we maintain the UK's position as a relatively attractive place for inward investment.
New clause 2 aims to enable the taxpayer to have a clear right of appeal against a Revenue notice per se. If I have interpreted the Bill correctly, the Minister will tell me that there is a right of appeal because the taxpayer in receipt of a notice will do what he has to do—make his self-assessment return—and if the Revenue disagrees with it, the right of appeal will arise in the normal way. I understand that perfectly.
However, we would rather that there were the ability to appeal against the issue of a notice, rather than just against the assessment. Subsection (1) gives a company given a notice under clause 24 or 26 30 days to appeal to the special commissioners on the grounds that those clauses do not apply to them in respect of the transaction or transactions in question. Subsection (2) gives both the company and the commissioners the right to appeal against a decision by the special commissioners within 30 days of the determination of the appeal.
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The company or the commissioners can require the appeal to be reheard by the tribunal. Special commissioners must transmit any relevant documents that they have to the tribunal for the purpose of that rehearing. Subsection (3) gives the tribunal the same powers that the special commissioners have under subsection (1), and subsection (4) defines the power of the special commissioners and the tribunal with regard to altering or cancelling a notice under clauses 24 or 26. They will have the power to alter or cancel a notice, or vary or quash an assessment made in accordance with such a notice. I accept that they would have a power to vary or quash an assessment under the present appeal regime, but they would not have the power to cancel the notice.
The Minister will tell us that a notice does not really matter and ask why anyone would want to appeal against one, or have one withdrawn. However, a company may wish to establish that a notice has been wrongly issued and does not fall within the scope of the legislation, not only for the purposes of the immediate transaction in hand but for gaining certainty about that transaction or class of transaction. We see no logical reason why there should not be a properly defined appeal procedure against the issue of a notice, just as there is such a procedure against the issue of an assessment.
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