Clause 228 - Overpayment relief: generally prevailing practice exclusion and EU law

Part of Finance Bill – in a Public Bill Committee am 3:45 pm ar 20 Mehefin 2013.

Danfonwch hysbysiad imi am ddadleuon fel hyn

Photo of David Gauke David Gauke The Exchequer Secretary 3:45, 20 Mehefin 2013

I am grateful to the hon. Gentleman for his specific questions, but before I deal with them, I shall provide some brief background to the measures.

Clause 228 ensures that legislation provides for a consistent approach to claims for overpaid tax and the application of overpayment. Clause 229 makes a small  technical amendment to overpayment relief provisions to ensure that there is a consistent time limit for overpayment relief claims.

Overpayment relief is intended to provide a final opportunity for taxpayers to reclaim overpaid tax. A general restriction within overpayment relief means that relief is not available when a return was submitted in accordance with the practice generally prevailing at the time that return was made. In cases when overpayments are claimed in relation to EU law, it is a general principle that member states must allow an effective means of restitution. A recent judgment of the Supreme Court, while not dealing directly with overpayment relief, suggested that the application of practice generally prevailing could mean that overpayment relief does not provide an effective means of restitution under EU law. That could lead to claimants seeking common-law restitution in the case of such EU law claims, which would undermine the purpose of the legislation of providing a single remedy that would apply to all taxpayers. In addition, common-law claims may have much longer time limits than claims for overpayment relief and could result in substantially larger amounts being repaid, which would introduce inconsistency and unfairness between taxpayers.

The changes made by clause 228 will ensure that overpayment relief applies to all repayment claims, whether or not the overpayment arises as a result of EU law, which achieves the original policy intention. That will be done by removing the “practice generally prevailing” restriction in cases when the claim relates to tax paid contrary to EU law. The change will put on a statutory footing HMRC’s current practice of disapplying the “practice generally prevailing” restriction. Clause 229 ensures that the time limit for claims for overpayment relief following a mistake in a return runs in every case from the return year. That change is likely to be relevant to only a small number of businesses.

The hon. Member for Nottingham East asks why there is a transitional element. The answer is that we want to be consistent with EU law. He also asked about the anomaly in the time limits for claims. The time limit for overpayment relief is four years. Six years is the limit for common-law claims. Tax law allows for only four years, and we want to put that matter beyond doubt, so I hope that that provides clarity. I hope that the Committee will agree to clauses 228 and 229.