Amendments made: 19, in clause 39, page 24, line 34, leave out from “person” to end of line 38 and insert

“fails to make a payment in accordance with a requirement imposed by subsections (1) to (3) of section 23 (refunds of payments made from childcare accounts),”.

This amendment, and amendment 20, are consequential on amendment 18. They provide that a childcare provider who does not comply with the requirement to pay the repayable amount to the account provider is liable to pay the top-up element of the payment to HMRC.

Amendment 20, in clause 39, page 24, line 39, leave out “repayment” and insert “payment”. —(Priti Patel.)

The explanatory statement for amendment 19 also applies to this amendment.

Question proposed, That the clause, as amended, stand part of the Bill.

I have a point of clarification. Clause 39 deals with the recovery of top-ups in cases in which parents or HMRC have made an error. It suggests that top-up payments will be recoverable if they have been paid to a person who was not entitled to them. Presumably that covers payments HMRC has made in error. If so, how would it recover those payments? It would be helpful if the Minister could clarify that for the Committee.

Clause 39 sets out other cases in which HMRC can recover top-up payments that have been made to parents and completes the set of clauses about payment recovery.

The clause allows HMRC to recover top-up payments if they are made to a person who is not entitled to them. It also allows it to recover such payments when they have been spent on something other than qualified child care. As I explained when we considered clause 20 last week, such a payment is known as a prohibited payment.

The clause also allows HMRC to recover top-up payments when a repayment is made directly to an account holder. That might occur when, contrary to the requirement in clause 23, a child care provider makes a repayment directly to a parent, rather than into the child care account. Part of that repayment will represent the top-up payment from the Government, so the parent will be liable to pay the top-up element to HMRC.

When a prohibited payment has been made, there is provision in the clause to recover funds from any person who dishonestly caused or allowed that payment to be made. It is possible, for instance, for there to be collusion between a parent and a child care provider, and the clause will ensure the effective recovery of public funds in such circumstances. HMRC’s ability to recover top-up payments extends to cases where such payments have been made due to the dishonesty of a director or officer of a company.

We anticipate that the vast majority of parents will comply with the scheme rules and that HMRC will not have to recover top-up payments from them. However, the clause is needed to deal with cases in which that is not the case. Specifically on the hon. Lady’s question, HMRC will have the ability to recover payments from parents, but its technical means and the way it functions will also give it the ability to pay into accounts. There should, therefore, be no problem with recovering top-up payments or putting money back into accounts.

It is worth highlighting again that we have talked extensively about keeping the scheme simple—simplicity is at its core. That is very much about ensuring that information about registration and children is correct so that there is no room for errors to occur.

I thank the Minister for her reply, but I should clarify that my query relates to cases in which HMRC may have made an error. It is not unheard of for HMRC to make a payment into an account that then needs to be recovered, and parents on lower incomes, in particular, will be concerned about that. Does the clause cover such situations? If so, have the Government thought through how they would approach a case in which HMRC, rather than a parent, has made an error in terms of payments into an account?

I thank the hon. Lady for restating her point. Simplicity is central to the scheme, and it is worth touching on the balance of the account. We have spoken about 80% being the parent contribution and 20% being the top-up funds. It is therefore extremely unlikely that there would be an error by HMRC. The scheme has been designed that way so that HMRC cannot make an error. I recognise the hon. Lady’s point that errors do happen, and that is true in other aspects of the tax  system, but this is totally different, and the scheme has been designed in a different way. It is not comparable to other HMRC schemes.

Question put and agreed to.

Clause 39, as amended, accordingly ordered to stand part of the Bill.

Clause 40 ordered to stand part of the Bill.