Proceeds of Crime Bill

Public Bill Committee, 15 January 2002.

Standing Committee B

Clause 311 - Director's general Revenue functions

Nick Hawkins (Conservative, Surrey Heath)

I beg to move amendment No. 421, in page 180, line 10, leave out 'criminal' and insert 'unlawful'.

Bill O'Brien (Labour, Normanton)

With this it will be convenient to take the following amendments: No. 422, in page 180, line 14, leave out 'criminal' and insert 'unlawful'.

No. 483, in clause 320, page 185, line 10, leave out 'Criminal' and insert 'Unlawful'.

No. 424, in page 185, line 14, leave out 'criminal' and insert 'unlawful'.

No. 425, in page 185, line 18, leave out second 'criminal' and insert 'unlawful'.

Nick Hawkins (Conservative, Surrey Heath)

The amendments were suggested by the Law Society of Scotland. We considered them carefully and we believe that again, it is on to a good point. The amendments suggested by the society that we debated last week produced interesting debates, which we have all read in Hansard. It was certainly the Minister's view that the Law Society of Scotland had made some valid points.

There is particular advantage in the amendments before us, in that they would ensure consistency in the complex terminology between parts 5 and 6 of the Bill. The idea that it is important for such terminology to be consistent was mirrored in last week's discussions. It is important that a distinction be drawn between criminal and civil proceedings. Under the Bill, the director of the Assets Recovery Agency will discharge Revenue functions only when criminal proceedings are already concluded or when the Lord Advocate in Scotland has already decided not to proceed with a criminal prosecution. It is appropriate therefore to draw a distinction between the type of conduct that will come within the ambit of this part of the Bill and that which will be dealt with under its criminal provisions. By changing the word ''criminal'' to the word ''unlawful''—a change from which the other amendments would flow—such a distinction would be achieved. I shall listen with interest to what the Minister has to say.

Paul Stinchcombe (Labour, Wellingborough)

Clause 246 defines unlawful conduct as conduct that is unlawful under the criminal law of the country. As a matter of clarification, may I ask what the amendment would add to that?

Nick Hawkins (Conservative, Surrey Heath)

Part 6 refers to ''criminal'' conduct, and changing that to ''unlawful'' conduct would make the provision consistent with clause 246. As I have said, the purpose of the amendment is to ensure

consistency between parts 5 and 6 of the Bill. At present there is no such consistency. As the hon. Gentleman rightly says, unlawful conduct is defined under clause 246.

Norman Baker (Liberal Democrat, Lewes)

Will the hon. Gentleman clarify whether he is seeking to make a material difference to the Bill, or is simply engaged in a tidying-up exercise?

Nick Hawkins (Conservative, Surrey Heath)

There are distinctions between criminal conduct and unlawful conduct, but it would be helpful if there were consistency between parts 5 and 6 of the Bill.

Paul Stinchcombe (Labour, Wellingborough)

What are the differences between unlawful conduct and criminal conduct, in light of the definition under clause 246? Does the hon. Gentleman include within the definition of ''unlawful'' actions in breach of planning control?

Nick Hawkins (Conservative, Surrey Heath)

I must confess that I have not considered such action in respect of planning control. The Minister may shed some light on the subject in his response. However, ''unlawful'' conduct can go wider than merely criminal conduct. I shall have to think further about the implications of what the hon. Gentleman has just said about planning control. I need not take up the Committee's time further now, but a more lengthy discussion may arise from what the Minister says in his response.

Bob Ainsworth (Labour, Coventry North East)

The use of the term ''unlawful conduct'' in part 5 of the Bill is intended to reflect the fact that civil recovery and cash forfeiture proceedings are civil matters. Part 2, which we have already discussed at length, and part 7, which we will discuss later this week, clearly refer to criminal proceedings, so the use of the term ''criminal conduct'' is appropriate in those provisions.

I accept that, in most circumstances—as my hon. Friend the Member for Wellingborough (Mr. Stinchcombe) pointed out—there is no material difference between the two terms. Unlawful conduct has been defined in relation to conduct that is unlawful under the criminal law. However, part 5 proceedings are civil proceedings, and involve proving something to the civil standard of proof and applying the civil rules of evidence. In those circumstances, it would make no sense to use the word ''criminal''.

The amendments would not, however, remove the references to ''criminal property'' currently contained in part 6. Moreover, the reasons for using the term ''unlawful conduct'' in part 5 are not relevant to part 6. The term ''criminal conduct'' in this case is used in the context of the gateway that dictates whether the director may exercise his taxation function.

Nick Hawkins (Conservative, Surrey Heath)

Surely the point is that parts 5 and 6 are civil, rather than criminal, in nature. It would therefore be more consistent to use the same terminology in both those parts. That would mark the distinction that the Minister has been talking about between the civil and the criminal parts of the Bill. We will return to that matter when we discuss part 7.

Bob Ainsworth (Labour, Coventry North East)

We shall have the opportunity, either in the stand part debate or when we consider the more substantial amendments that follow, to discuss more widely the interaction between the Revenue and the director, and that the way in which he does his job. Part 5 dictates the civil proceedings. That is why different terminology was used in that part of the Bill.

Norman Baker (Liberal Democrat, Lewes)

I confess that I am having difficulty following what the Minister is saying. Is he arguing that the words ''criminal'' and ''unlawful'' are synonymous, or that the term ''unlawful'' is wider than the term ''criminal'', and therefore inappropriate—or is he simply saying that the terminology chosen reflects that part of the Bill, and not making any comments on the meaning of the words?

Bob Ainsworth (Labour, Coventry North East)

The latter, fundamentally. The use is different. It is not the same as what is defined in part 5, because those are issues that will appear in print in the civil courts. The reason for using the wording in part 6 is to provide a clear understanding, and it is important that we satisfy the Committee as to how we structure the Bill in that regard. We must ensure that the way in which the director operates his tax functions is clear and well defined. There should be an absolute minimum spillover into any other functions, and certainly no spillover into the way in which the Revenue operates. Those are important issues. People will need to be satisfied that we are not changing the way in which the Revenue operates. We are providing a clear gateway defining when the director can make an application to have a case transferred to his jurisdiction.

The purpose of the terminology is to define that gateway and to make it clear when something ceases to be within the realms of the Revenue and enters the realms of the director. We think that the terminology in the Bill is the most appropriate. It is not the same terminology as is necessary in part 5, to be used in front of the civil court.

Paul Stinchcombe (Labour, Wellingborough)

I am still slightly confused. Criminal conduct is defined in clause 320 and unlawful conduct is defined in clause 246. However, it is defined as conduct that is

''unlawful under the criminal law''.

What is the real difference between the terms?

Bob Ainsworth (Labour, Coventry North East)

As I said, we see no material difference between the two terms. It was important to use the correct terminology in part 5, and my hon. Friend will have noticed that the Opposition gave no clear answer when asked what the amendments would achieve by changing the wording in part 6.

Dominic Grieve (Conservative, Beaconsfield)

I shall speak about this at greater length in a moment, but there is a distinction, because there has been differentiation between criminal and unlawful conduct throughout the Bill. An assertion that a person has committed a crime is usually backed up by a conviction for that crime. If a person has not been convicted, their conduct, although it may constitute a crime, is described simply as unlawful.

I think that I am correct in saying—although I shall be grateful if the Minister will clarify this—that the taxation provisions can be enforced even when no crime has been proved against an individual. In such circumstances, would it not be better to follow the way in which the rest of the Bill is drafted and describe the person's conduct as unlawful rather than criminal?

Bob Ainsworth (Labour, Coventry North East)

Let me continue and say what I was going to say, because it touches on this important issue, which the hon. Gentleman and others may wish to explore on other amendments or during the clause stand part debate.

We must provide a clear gateway through which the director exercises his tax functions if he has reasonable grounds to suspect that income arises as a result of a person's criminal conduct. When considering the reasonable suspicion test, it is natural to refer to criminal rather than unlawful conduct, because many police powers that operate in the context of the criminal law depend on a reasonable suspicion test. Once the gateway criterion is met, unlike what happens under part 5 proceedings, the director is not required to prove in civil proceedings that conduct contrary to the criminal law has occurred. In fact, after the gateway criterion is met, the conduct is irrelevant. Therefore there is no reason why we should refer to unlawful rather than criminal conduct.

The question is who deals with the person's tax accounts during the set period. There should be a clear definition of when the director may apply for the transfer of the accounts. The trigger for that is a case passing the reasonable suspicion test that the property's source is criminal conduct. That is clear, and further clarity is not gained by changing the word to ''unlawful''.

Norman Baker (Liberal Democrat, Lewes)

I do not want to flog this subject to death, but the Minister did not answer the points made by his hon. Friend the Member for Wellingborough and the hon. Member for Beaconsfield (Mr. Grieve). Will he answer a simple question? Does he understand the word ''criminal'' to mean the same as the word ''unlawful'', or is it different?

Bob Ainsworth (Labour, Coventry North East)

We do not believe that changing the word would make a material difference. It would certainly not make the issue clearer than it is under the gateway test of the director's reasonable suspicion that the property against which he intends to make a tax demand is the product of criminal activity. I believe that that is clear, and I do not think that the amendment would make an improvement.

Paul Stinchcombe (Labour, Wellingborough)

I am afraid that I simply do not understand why we use two terms with different definitions to define the same kind of conduct.

Bob Ainsworth (Labour, Coventry North East)

We use them in two different parts of the Bill for two different purposes. That is all that I can say to my hon. Friend. Part 6 is about taxation powers, not about civil recovery, which is dealt with in part 5. We believe that ''criminal'' is the appropriate word, and unless someone can think of some good arguments about how to improve on it, what is the purpose of changing it?

Nick Hawkins (Conservative, Surrey Heath)

I suggest that there is a philosophical difference, which my hon. Friend the Member for Beaconsfield has sought to advance. There is also the question of the definition of ''unlawful conduct'' in clause 246, to which the hon. Member for Wellingborough has drawn attention. Clause 246 states that unlawful conduct is established

''on a balance of probabilities'',

whereas criminal conduct is normally decided to the standard of ''satisfied so sure'', or, by the old test, beyond reasonable doubt.

Bob Ainsworth (Labour, Coventry North East)

I have tried to tell the hon. Gentleman about the gateway, which provides not for the raising of tax but for the director to apply to the Board of Inland Revenue to take control of tax affairs for a set period. The gateway is that the director has reasonable grounds to suspect that property is the product of criminal activity. I have yet to hear anything from the hon. Gentleman that challenges our definition as the most appropriate one.

Mark Field (Conservative, Cities of London and Westminster)

Given the dancing on a pinhead that we have done about the meaning of words ''unlawful'' and ''criminal'', will the Minister tell the Committee the distinction, for a director who is considering the tax implications, between criminal conduct and unlawful conduct? Why is our term so unsatisfactory that he thinks it impossible to take our amendment on board?

Bob Ainsworth (Labour, Coventry North East)

I have already said that we cannot find any material difference. I have nothing to add to that.

David Tredinnick (Conservative, Bosworth)

I am not a lawyer, but I find the debate confusing and disturbing. It seems that we are using different terminology to mean the same thing in different parts of the Bill. Why do we use different terminology? In the interests of elucidation, we should use one simple term for one condition.

Bob Ainsworth (Labour, Coventry North East)

The different parts of the Bill do different things. It is beyond me why any hon. Member should be surprised that different terminology is used in different parts. Part 2, which deals with criminal confiscation, uses terminology for the initial freezing of assets different to that used in part 5. As parts of the Bill are to be used in different ways, there is no reason why terminology appropriate to the powers provided in those parts should not be used.

The only issue of substance is that of reasonable doubt. Criminal conduct is not always proved beyond reasonable doubt; the balance of probabilities applies to criminal conduct in part 2. There is no issue about levels of proof; I am not suggesting that. I have yet to hear an argument that shows that the proposed change would make a material difference.

Mr. Boris Johnson (Henley) rose—

Bob Ainsworth (Labour, Coventry North East)

I give way to the hobbit.

Boris Johnson (Conservative, Henley)

I am grateful to the elf—or the orc, or however the Minister styles himself. There is an

elementary difference between the words ''criminal'' and ''unlawful''. ''Unlawful'' is surely synonymous with illegal. It is possible to imagine something that is illegal but not criminal. I am not a lawyer, but you guys are meant to be able to work out that sort of thing.

Bob Ainsworth (Labour, Coventry North East)

I do not know what else I can do, other than repeat myself. We are trying to provide a gateway to show the circumstances in which a person's tax files can be transferred from the Revenue to the director. The terminology that we have chosen to use is that the director has ''reasonable grounds to suspect'' that the origin of whatever he is investigating—which is most likely to be property—is criminal gain. That is the gateway that we have provided. I do not understand how the amendment would improve on that, and therefore I am not minded to accept it.

David Tredinnick (Conservative, Bosworth)

I am sorry to press the Minister, but we have still not resolved the issue of whether the two terms mean something different. I see no reason why we should use one term in one part of the Bill and another term in another part. The House has Committees to consolidate legislation and make things clearer. They are specifically intended to avoid complication, as the Joint Committee on Statutory Instruments does all the time.

I understand the Minister's point. The phrase is convenient, perhaps the flow of English is better this way, and it is, perhaps, more meaningful to a lay person. However, learned counsel all over the Room are expressing anxieties about the definition, so it behoves him to tell the Committee that he will consider the matter. The Committee's purpose is to find such issues, which some clever Mr. Carman, for example, will light on in a trial, make much fun of and use to mock everyone and tie the jury up in knots because he is so clever with words, as are many hon., and learned, Gentlemen—who are cleverer than those of us who are not learned—

Bill O'Brien (Labour, Normanton)

Order. This is a long intervention.

David Tredinnick (Conservative, Bosworth)

I do not want to pursue the matter further, but the issue is of paramount importance, and the Minister has not yet convinced me. He should generously say that he will reconsider it.

Bob Ainsworth (Labour, Coventry North East)

I think that we have shown at various times in Committee that when substantive issues are raised, we are more than happy to consider them, and we intend to continue to do so. As I said, I see no material difference between the terms, but it is right to use terminology in one part of the Bill that is appropriate to that part. I do not envisage that causing great confusion or ridicule. If I did, I should be happy to consider the matter—but I do not.

Ian Davidson (Labour/Co-operative, Glasgow Pollok)

Does the Minister agree that this is one of those debates about how many angels can dance on the head of a pin, and that although it is a criminal waste of the Committee's time, it is not, unfortunately, unlawful?

Bob Ainsworth (Labour, Coventry North East)

That says it all.

Dominic Grieve (Conservative, Beaconsfield)

That intervention by the hon. Member for Glasgow, Pollok (Mr. Davidson) typifies what the

Committee should avoid. He said that something was criminal behaviour, but unfortunately, it was not unlawful. He used the expression ''criminal'' as a colloquial term, but used the word ''unlawful'' in its correct meaning. That is exactly the problem.

I agree with the Minister that changing the definition as we suggest would make no difference in practical terms. ''Unlawful'' can have a wider definition than ''criminal'', but the definition in the earlier clause—''unlawful conduct'' is conduct that constitutes a criminal offence—would narrow it down. ''Unlawful conduct'' can cover both criminal conduct and conduct that is outside the sanctions of the criminal law.

I do not want to get bogged down, but I refer in passing to the mention made of planning law. People who breach planning law can usually be proceeded against in the civil courts for an injunction, or prosecuted. In so far as people can be prosecuted for a breach of planning law, it would constitute a criminal offence that would fall within this section as it stands—or as it would stand if we were to amend it.

Paul Stinchcombe (Labour, Wellingborough)

I participated in an enforcement notice inquiry into action, or use of land, that breached planning controls. The man involved became a millionaire in two years, before proceedings could take place under an enforcement notice.

Dominic Grieve (Conservative, Beaconsfield)

The hon. Gentleman points to the difficulties involved in enforcement in planning cases, with which I am familiar. A person who carries out work on the land in breach of planning law is, depending on the precise circumstances, guilty of committing a criminal offence. I have prosecuted such people.

Paul Stinchcombe (Labour, Wellingborough)

Will the hon. Gentleman give way?

Dominic Grieve (Conservative, Beaconsfield)

No I shall not give way, as I do not want to get bogged down. [Hon. Members: '' Oh!''] All right, I will give way, although the point is somewhat tangential. A breach of the planning laws may give rise—and in my experience has given rise—to criminal offences for which people have been convicted.

Paul Stinchcombe (Labour, Wellingborough)

I suspect that the hon. Gentleman may have prosecuted people who were in breach of an enforcement or condition notice. He would certainly not have prosecuted anyone for simply carrying out development without planning permission.

Dominic Grieve (Conservative, Beaconsfield)

I understand the point that the hon. Gentleman is trying to make, but the enforcement notice is an administrative act that alerts people to the fact that they have breached planning laws. Failure to comply with the enforcement notice gives rise to the criminal offence. So, via the enforcement notice, a person who is in breach of planning regulations is on the road to committing a criminal offence.

David Tredinnick (Conservative, Bosworth)

Will my hon. Friend give way?

Dominic Grieve (Conservative, Beaconsfield)

No, I wish to move on to the main point.

Ultimately, the Committee can make words mean whatever we want. We could introduce a ''high treason'' clause, and then, under the interpretation clause, say that high treason related only to offences under the Road Traffic Offenders Act 1988. The clause would become law, but it would be nonsense. I accept the difficulty of defining terms precisely, but the choice of words matters.

I shall now give way to my hon. Friend the Member for Bosworth (Mr. Tredinnick) before moving on.

David Tredinnick (Conservative, Bosworth)

On another important issue concerning prosecutions in planning matters, Mr. Longwill, in my constituency—[Interruption.] I seek to remain in order, and I will be brief. Mr. Longwill was prosecuted for consistent breaches of enforcement orders and went to prison. In support of the point made by my hon. Friend, I emphasise the fact that breaches of planning law are cases upon which the criminal law bears, and we should recognise that.

Dominic Grieve (Conservative, Beaconsfield)

My hon. Friend is right. In my discussion with the hon. Member for Wellingborough, we approached the problem from two different directions. I took his initial comments to suggest that breaches of planning laws did not give rise to criminal sanctions. [Hon. Members: ''That is right''.] If no enforcement notice has been served, that may be correct. Nevertheless, an enforcement notice can follow upon such a breach and lead to prosecution, unless it is remedied. I accept that that is a two-stage rather than a one-stage process, but my point was that the criminal law could impinge upon such breaches.

It is axiomatic in part 6 that there need be no proof of a criminal offence against an individual before the director can take over the board's powers to tax; he need have only ''reasonable grounds to suspect'' criminal conduct. I understand the aim, but an unusual feature of the Bill is that we are starting to call things what they are not, as was discussed in earlier debates on the standard of proof. In fairness, the Minister mentioned that there was a civil standard in part 2. However, the offences that give rise to the confiscation provisions in part 2 must still be proved to a criminal standard. We are confronted with a situation in which the trigger that allows the director to start using fairly draconian powers—which the Committee will examine when it discusses the following group of amendments—is no more than a suspicion of criminal conduct. That is what the Law Society of Scotland is concerned about.

At no point in the proceedings under discussion is it necessary for criminal conduct to be proved against an individual. That is why the Law Society of Scotland took the view that it was odd that the trigger should be ''criminal conduct'', because, to an outsider at least, ''criminal conduct'' sounds as if it means conduct that gives rise to a conviction on the standard of proof—that is, a conviction about which one is satisfied and sure. No such standard of proof applies in part 6. Inserting the expression ''unlawful conduct''—while limiting the definition to mean such unlawful conduct as would constitute a criminal offence if it were

proved—would meet the Law Society of Scotland's anxiety that there is a creeping inconsistency of language within the different parts of the Bill.

The Law Society of Scotland's comments on the matter convinced me that the amendment should be tabled. If I were responsible for drafting the legislation, I would welcome its recommendation, because it would make the legislation more consistent with reality. The Committee should strive to ensure that the wording of the legislation accords with general principles of law, and with what a layman—or any person reading the legislation for the first time—would construe as a relationship with reality. In part 6, criminal conduct does not have to be proved, and the Law Society of Scotland's recommendation is designed to address that fact. It has raised a point that is philosophically and linguistically valid.

The Minister has rightly stated that the amendment would not make any difference to the thrust of the legislation. Therefore I commend it to him: it is merely a linguistic—or textual—change, and as it improves the legislation, it should be adopted.

Paul Stinchcombe (Labour, Wellingborough)

I would like the Minister to reconsider his view on this matter. My hon. Friend the Member for Glasgow, Pollok said that our debate was akin to discussing how many angels could dance on the head of a pin, but we need to get the wording of the legislation right to prevent lawyers from being able to have such discussions, at great expense. It is bad practice to use different words to define the same conduct. I am a lawyer, and if I see two different words in a Bill, I automatically assume that they are intended to mean two different things. If it were appropriate, I would dedicate much time and argument to persuading a judge that that was the case.

The general point that I am raising is especially valid with regard to the provision under discussion, because everyone intuitively knows that ''unlawful'' does not mean ''criminal''; it is a broader term.

I raised the point about planning with the hon. Member for Beaconsfield because the two-stage process is relevant to our discussion. The first stage is to breach planning control—to develop without planning permission—which is unlawful. A person who does that can raise millions of pounds. I know of someone who authorised the use of his farmland, which was near Heathrow, for car parking. As farmland it was worth £2,000 an acre, but by authorising its use as a car park, he made more than £1 million in pure profit before an enforcement notice could be served, and subsequently enforced. At that stage his conduct was unlawful; thereafter, it was criminal.

In the light of that factual scenario, why are we not making definitions mean precisely what we want them to mean? If the intention is to define identical conduct, identical terminology should be used, and if the intention is to define different conduct, different terminology should be used. If we do not do that, lawyers, whether they are Members of Parliament like me, or simply practising at the Bar„ will strive to argue—perhaps successfully, to the detriment of the

intentions of the Bill—that different words must have different meanings, or Parliament would not have enacted them.

David Tredinnick (Conservative, Bosworth)

The Minister may be trying to forge an unholy alliance. For the first time in my life, I find myself in agreement with the hon. Member for Wellingborough, whose constituency is not too far from my own in Leicestershire. If we go down the route that the Minister proposes, the tills will be ringing in the chambers of the Inns of Court. I foresee endless complications and arguments about what is and is not lawful, criminal, and so on. I know that he has eloquently explained why, in his opinion, the definitions in different parts of the Bill must be different—although I was somewhat surprised that while he was making that assertion, I did not see his officials in the Box writing furiously.

It seems to me that we have reached a critical point in the Bill. We run the risk of allowing it to return to the Floor of the House with this matter unresolved. As the hon. Member for Wellingborough said, the word ''unlawful'' does not mean criminal. It has a different meaning.

I shall illustrate the point with a significant planning case from my constituency involving not someone seeking to sell land at Heathrow for development, but a farmer called Alec Longwill, who had an enormous scrap heap of old vehicles, farming implements and equipment, which grew, like Topsy, at a farm near Market Bosworth. Hinckley and Bosworth borough council sought to restrict that unlawful activity. After much pressing and the making of enforcement orders, Mr. Longwill still refused to do anything about his extensive vehicle park, as he was trading in vehicles for farmers, and providing a useful service to part of the community. In the end, the council had to take criminal proceedings against him in connection with another matter—vehicle movements—and he was sent to prison, which is most unusual in a planning case. Not only was his activity unlawful, because it contravened the council's planning procedures and structure plan, but by virtue of his prosecution, conviction and imprisonment, he became a criminal. That is why we need to look at definitions.

What is an appropriate definition? To a layman, rather than a lawyer, an appropriate definition is a simple one. We have under discussion two appropriate definitions, which, apparently, are appropriate only in different parts of the Bill. One definition, although it is synonymous with the other, is said to be appropriate in one situation, whereas the other, which is synonymous with the first, is said to be appropriate in the second situation. Heaven knows how many clauses are in the Bill—it is a complex measure—and sometimes those of us who are not lawyers feel as if we are moving through treacle. We have had complex arguments about when civil law and criminal law apply, the niceties of the definitions, the penalties that apply in civil and criminal proceedings—to which the hon. Member for Redcar (Vera Baird) referred—and the reasons why one rather than the other applies.

Currently, the Bill contains exchangeable, interchangeable definitions, which can mean the same in one place but not in another. It may make

sense to the Minister, and I can understand the idea that it may be convenient to have two definitions, but in the world we live in, criminals can hire expensive lawyers—such as my hon. Friend the Member for Beaconsfield, who may well be jangling the change in his pocket now. He may still be indispensable, as I am sure that he was at one time. [Interruption.] Perhaps he will intervene and correct me if I am paying him compliments that I should not pay him.

I am sure that the hon. Member for Redcar, too, would qualify as an expensive barrister, if hired in private practice. [Interruption.] She said something that I did not hear then; I hope that it was not too uncomplimentary. I am just trying to illustrate my point. It would be generous of the Minister to say to the Committee, ''All right, we have had a lengthy debate. There are clearly some concerns and I shall reconsider the matter.''

Mark Field (Conservative, Cities of London and Westminster)

I endorse my hon. Friend's comments. I was also interested in what was said by the hon. Member for Wellingborough. I can only assume that, unlike Samson, after the shaving of his facial hair, he now has more energy to debate the Bill. Underlying all that has been said—possibly the untold story of why the Minister is so insistent that we continue to use the definition ''criminal'' rather than ''unlawful'' conduct—is, as my hon. Friend the Member for Beaconsfield rightly said, the fact that no criminal act needs have taken place, and the director will have great powers in relation to a range of taxes that we shall discuss later.

It is for that reason, above all, that the conduct concerned should be described as ''criminal''. In colloquial terms such conduct may be regarded as criminal, but clearly it is not so for the purposes of the criminal law in this country. That disguises the fact that such draconian powers are in the Bill. Such an argument has already been advanced both in Committee and on Second Reading. Firm powers will be handed to the agency and its director, yet no criminal act needs to have taken place. To that extent, therefore, words do matter. I appreciate that from the Minister's point of view, the phrase ''criminal conduct'' brushes under the carpet the fact that there are draconian powers under part 6. That is why we are so insistent that the word ''unlawful'' should be used. It would ensure clarity and not allow expensive lawyers to get their non-criminal clients off.

Bob Ainsworth (Labour, Coventry North East)

We have no intention of brushing the powers in the Bill under the carpet. All that holds me back from going into more detail about how the powers will and will not operate is that that would make our discussions drift far wider than the amendment.

The hon. Member for Bosworth said that he was concerned not only that I was being intransigent, but that the people in the Box were not writing furiously as I spoke. He should have listened to the hon. Member for Spelthorne (Mr. Wilshire), who said in a previous sitting that when the officials were writing furiously, he realised that he was on to something. Perhaps the hon. Gentleman should recognise that when they are not

writing furiously, he is not on to anything, and no one outside the Room is worried. Obviously, I accept that words are important. I do not have a legally trained mind, nor have I put on airs and graces in Committee to pretend that I have. None the less, I require that some argument be put to me—and the only one I have heard is that it is important that the words used in the Bill are consistent.

Part 2 refers to matters that will come before the criminal court, so the terminology used is relevant to the criminal legal system. Under part 5, issues will come before the civil courts, so it is important that the terminology used is appropriate to the civil legal system. The matter under discussion is neither a criminal nor a civil matter.

My hon. Friend the Member for Wellingborough said that he was anxious to prevent lawyers from making a fortune out of the Bill. From my common-sense approach—rather than a legal-minded one—I wonder in what circumstances lawyers will be able to do that. We are talking about the gateway—under the Bill, that will be defined by Parliament—when the tax affairs of an individual, when appropriate and when the mechanism allows, are handed from the Revenue to the director. That will not occur before the civil court or the criminal court. Our purpose is to decide what we want the director to have to show before he can say that he wants to control a person's tax accounts for a period. Therefore, clarification of our intentions is more important than consistency with other parts of the Bill.

Paul Stinchcombe (Labour, Wellingborough)

Does the Minister not fear that if two different formulations are used within a Bill, lawyers will strive to give them two different meanings, so as to define two different types of conduct?

Bob Ainsworth (Labour, Coventry North East)

I think that both terms are clearly defined. As I have said, the purpose of the clause is to provide a gateway that defines the circumstances in which the Revenue will give up a person's tax affairs for a time. Stating that the director must be satisfied that there are reasonable grounds to suspect that the proceeds that he is pursuing are the product of criminal activity provides a clear gateway.

If I hear an argument that shows that the Bill would be improved by changing the terminology, I will be more than happy to consider it. Frankly, I have not heard anything to convince me, and I ask hon. Gentlemen to accept that that has not been the case. When I reviewed the list of matters that I had agreed to reconsider under part 2, I was astonished by its length.

Dominic Grieve (Conservative, Beaconsfield)

The Minister is to be greatly commended for his flexibility in relation to part 2, and the various matters that he said he would consider. Does he not agree that if the point made by the hon. Member for Wellingborough—which I, too, tried to express—were correct, that in itself would be a good reason to alter the wording and thus improve the Bill? The Minister has not really touched on that.

Bob Ainsworth (Labour, Coventry North East)

I do not accept that. If I did, our discussion would have been a lot shorter.

Nick Hawkins (Conservative, Surrey Heath)

This has been a fascinating debate, because of the extent of cross-Committee and cross-party agreement—with the exception of the Minister. The hon. Member for Wellingborough has backed up in spades what I, and my hon. Friends the Members for Beaconsfield, for Henley (Mr. Johnson), for Cities of London and Westminster (Mr. Field) and for Bosworth, have been saying. It seems that the only person who cannot appreciate the significance of having the same wording in both parts 5 and 6—the civil parts of the Bill—is the Minister. In those circumstances, it is clear that we need to press the matter to a Division.

David Wilshire (Conservative, Spelthorne)

Before my hon. Friend finishes, I hope that he will make the obvious point that one of the biggest reasons for supporting the amendment is that it has not required any help from me.

Nick Hawkins (Conservative, Surrey Heath)

I always welcome help from my hon. Friend the Member for Spelthorne—not least for that intervention—and now I wish to press the amendment to a Division.

Question put, That the amendment be made:—

The Committee divided: Ayes 8, Noes 12.

Dominic Grieve (Conservative, Beaconsfield)

I beg to move amendment No. 479, in page 180, line 22, at end insert—

'(2A) No general Revenue function shall be exercised by the Director in any case where an enquiry has previously been carried out by the Board into the tax affairs of a person or company for the same period.'.

I hope that the amendment will provide a better opportunity than the clause stand part debate would allow for a general examination of the manner in which part 6 will work in practice. I must tell the Minister that I have little difficulty with the immediate idea that there may be circumstances in which it will be possible to exercise Revenue functions against individuals when none of the other powers in the Bill may be invoked. However, the power is unusual and I am unsure how it will dovetail with the ordinary powers of the Board of Inland Revenue when dealing with people's tax affairs, especially those of people who have not paid tax on income that they may have received.

I recall—the Minister may confirm this—that the fact that a person has an unlawful source of income does not mean that the Inland Revenue cannot tax it.

The Revenue may not know about the income, but if it did, it would be able to tax it. During my time as a barrister, I encountered civil court proceedings during which evidence, previously unknown to the Inland Revenue, emerged which, my instructing solicitor explained, led to the Revenue taking an interest in an individual's tax affairs. Therefore, the Revenue already has such powers.

At what point, and for what purpose, will the director usurp those powers to fulfil the desire to curb criminality that is set out in the Bill? Either the director or the Inland Revenue will be in a position to exercise the powers, although the sights of the Board of Inland Revenue may not be as focused on them as are those of the director when he performs his functions. I should be grateful to hear in some detail from the Minister about this matter, because we must be careful not to set up an easy-fix solution that enables the director to tax people in a way that the Board of Inland Revenue could not, simply because he cannot work the extensive and fairly draconian powers conferred on him for confiscation and civil recovery. Otherwise, we may end up with a palpable injustice.

Those are complex questions, and although I have read part 6, I do not know the answers. The Minister may be able to provide me with information about, and interpretations of, part 6 that I have not been able to work out for myself. Much will depend on the way in which it operates. That raises the issue, which we have previously discussed, of our anxiety about conferring huge discretionary powers that could be abused—although the Minister will reassure us that that is not the intention.

Stephen Hesford (Labour, Wirral West)

On a point of clarification, is it not almost certain that when the director becomes involved in an exercise of that kind, it will be to consider a period that the Revenue has already examined, as events may come to light some time down the line? Is this not therefore a wrecking amendment?

Dominic Grieve (Conservative, Beaconsfield)

It was not put forward as a wrecking amendment. I am prepared to accept that the result of my late night drafting may be that I would wreck a portion of the Bill, but that is unintentional. Much may depend on how the Board of Inland Revenue's powers are exercised. Perhaps I am wrong, but I understood that, subject to certain periods of limitation, there would be nothing to stop the board from conducting a further inquiry if information that it did not know about came to light. The Inland Revenue, rather like the Spanish inquisition, is always lurking just around the corner if one has not got it right. My understanding is that the board's powers are unfettered in that respect, so I do not think that the hon. Gentleman is necessarily right.

Stephen Hesford (Labour, Wirral West)

I am not a tax expert, and I did not intend to delve into this subject too deeply, but is it not true that the Inland Revenue has six years during which it may investigate each tax year?

Dominic Grieve (Conservative, Beaconsfield)

I am no tax expert either. Perhaps the Minister could give us that information. The Revenue may be subject to a six-year rule for civil recovery cases, but I am not aware that it is subject to any such

limitation for criminal offences. However, that is not my subject of expertise.

David Wilshire (Conservative, Spelthorne)

Having run my own businesses before I became a Member of Parliament, I believe that the distinction is that although the Revenue requires people to keep records for six years, its powers to reconsider a case are not tied in with what is on the mind of the hon. Member for Wirral, West (Stephen Hesford). We may need to do our research before we can say definitively how far back the Revenue's powers can go. As far as I know, the six-year rule applies to paperwork.

Dominic Grieve (Conservative, Beaconsfield)

My hon. Friend is almost certainly right. Once a period has passed and one no longer has the legal obligation to keep records about an event, it is likely to be difficult for an inquiry to elucidate information about it—and it would not be wrong if one no longer had those records to show the Revenue. That may answer the question asked by the hon. Member for Wirral, West. I am not aware of a time limit beyond which the Revenue cannot bring a prosecution.

Stephen Hesford (Labour, Wirral West)

I am not sure whether I meant criminal or revenue-collecting investigations.

Dominic Grieve (Conservative, Beaconsfield)

I am sure that the Minister will be able to enlighten us about that.

David Tredinnick (Conservative, Bosworth)

We ought also to consider the powers of Customs and Excise, because they might have a bearing on the matter.

Dominic Grieve (Conservative, Beaconsfield)

My recollection is that the powers of Customs and Excise are similar, but I am not an expert on that subject.

David Tredinnick (Conservative, Bosworth)

That may be the case, but is this not an issue that we ought to think about? My understanding is that the powers of Customs and Excise are even more draconian and extensive.

Bill O'Brien (Labour, Normanton)

Order. The amendment does not refer to Customs and Excise, and we have dealt with the question of the powers. I wish the hon. Member for Beaconsfield to move on and discuss his general point.

Dominic Grieve (Conservative, Beaconsfield)

I was bringing my remarks to a conclusion, Mr. O'Brien, when there was a series of interesting interventions.

The hon. Member for Wirral, West said that this was a wrecking amendment. He is wrong. It is intended to initiate a discussion about the relationship between the powers of the director and those of the Board of Inland Revenue. One way of doing that is to put forward an amendment that says, ''If the Inland Revenue have previously carried out an inquiry, the director should not carry out a further inquiry for the same period.'' However, one could qualify that by adding, for instance, ''unless further evidence has come to light.''

I tabled the amendment to stimulate a discussion, because the Committee should debate the matter. I understand the Government's point of view, but I have

niggles of anxiety that we might be introducing a short-cut procedure that could result in unfairness, or a perception of unfairness. I seek reassurance that that will not happen.

With regard to part 6 and clause 311, I have a sense that we are introducing a final fallback position for the director, if he cannot get anything else to stick. That might be a good thing, but I need reassurance that it would not lead to a regime so wholly unlike that of the Board of Inland Revenue that it will bring the tax system into disrepute. That issue needs to be addressed.

David Tredinnick (Conservative, Bosworth)

There is also a more general, and simple, concern. We are running the risk of introducing legislation that will allow people to be tried twice. That is a very simplistic lay person's way of expressing the concern—[Interruption.] The hon. Member for Glasgow, Pollok is breaking all the rules of the House by attempting to applaud me by clapping his hands, and I am deeply touched that he should want to do that on this jolly occasion.

A person might have to jump through two hoops, and that would go against the basic tenets of British justice. By expressing that concern, Opposition Members are not trying to wreck any part of this important Bill.

Ian Davidson (Labour/Co-operative, Glasgow Pollok)

May I describe a scenario to the hon. Gentleman? In a Scottish court, a bad person might receive a not proven verdict. I would be in favour of such bad people having to jump through hoops again. If nobody else can get them, the tax people should be able to get them.

David Tredinnick (Conservative, Bosworth)

The hon. Gentleman raises another interesting point—the fact that there are different approaches in Scotland and in England. Since the Act of Union, Scotland has been able to retain its separate legal system. The Under-Secretary should focus on whether the approach and application are significantly different north and south of border, and on whether, if that is the case, that should be addressed. He shakes his head. It seems unsatisfactory that someone should, in effect, be tried twice—or, to be more technically correct, that he should have to appear before two authorities. Speaking as an Englishman who represents a midlands constituency, I do not think that that rings well. However, the hon. Member for Glasgow, Pollok has told the Committee that in Scotland, when a villain is subject to the middle judgment of not proven—which essentially means that although the accused cannot be pinned down this time, he is certainly not innocent—

Ian Davidson (Labour/Co-operative, Glasgow Pollok)

Not proven means, ''We know he did it, but we can't prove it.''

David Tredinnick (Conservative, Bosworth)

Perhaps English law could learn something from Scottish law on that point. I am not sure whether the Prime Minister will find time for such a Bill during this Session, but there is a case for providing the option of such a judgment in English law.

We run the risk of introducing a measure that may be seen as unfair and unjust. I look forward to the Minister's reply.

Bob Ainsworth (Labour, Coventry North East)

Issues that rightly concern people have arisen from the discussion. As this is the lead clause in this part of the Bill, it may be appropriate if the debate on the amendment ranges widely, as the hon. Member for Beaconsfield said that he wanted it to. We may lose the opportunity for a clause stand part debate, but this may be the best way to discuss such issues.

Dominic Grieve (Conservative, Beaconsfield)

I confirm that that seems the sensible way of proceeding. Were we to have a wide-ranging debate on the amendment, I was not going to seek a clause stand part debate, although other amendments that have been tabled raise specific issues. I do not know whether that commends itself to the Committee.

Bob Ainsworth (Labour, Coventry North East)

I think that it has commended itself to you, Mr. O'Brien, as you seem to be nodding approval. That is the most important thing.

It may be helpful if I try to expand on how the powers are intended to be used. The hon. Member for Beaconsfield said that although the Revenue clearly had powers, he perceived a potential weakness, and there was a potential need for focus. That is exactly what is needed, as the Revenue also has a massive responsibility that ranges across the whole population of the United Kingdom, and it cannot therefore be expected to focus on the need to recover the proceeds of crime for the taxation system, as the director can and will be required to do. The hon. Gentleman said that the powers were unusual, which in the context of British law, they are. However, other jurisdictions in other parts of the world have given taxation powers to agencies that have been effective in recovering the proceeds of crime.

The hon. Member for Bosworth said that he was worried about people effectively being tried twice. I accept what the hon. Member for Beaconsfield said—that he did not intend to table a wrecking amendment. It is a wrecking amendment in part, but that was not his intention, which was to prise open the issues for debate. However, I cannot understand how the hon. Member for Bosworth can argue that someone is effectively being tried twice because they are obliged to pay tax on acquisitions that they have clearly made, and on which they have clearly not paid tax in any other way. If he is saying that, I do not think that it will resonate with any of his constituents. I do not think that that was what the hon. Member for Beaconsfield was saying, or that any law-abiding taxpayer in the country will sympathise with such an argument.

David Tredinnick (Conservative, Bosworth)

I am certainly not saying that we should let off offenders who have defrauded the Revenue. My point is that as the Bill stands, the offender may have to be assessed by two separate authorities for the same thing. I question whether that is necessary.

Bob Ainsworth (Labour, Coventry North East)

Let me go through the way in which the matter will be argued. We must bear in mind that we are trying to do two things. First, we will provide focus by introducing an effective power to levy tax where tax has not been paid on criminal gain. Secondly, as the hon. Member for Beaconsfield points out, while doing that we should do the

maximum to ensure that we do not bring the tax system into disrepute, or distort it, or change its powers or the way in which it operates. If we cannot satisfy people in that regard, there will be worries elsewhere than in the criminal fraternity about the powers that part 6 provides.

The original performance and innovation unit report on ''Recovering the Proceeds of Crime'' found that many criminal organisations generate substantial revenues that go untaxed. Those enjoying the proceeds of their criminality do so at the expense of the honest taxpayer paying his or her fair share of the tax burden. The use of taxation functions by the director against those enjoying the proceeds of crime will send a clear message that taxation is to be applied fairly and consistently to everyone.

The director will operate a hierarchy of options, as I mentioned when we debated part 2. He will consider whether criminal confiscation action is appropriate, and then whether to initiate civil recovery action. Only when those other approaches have been exhausted will the taxation functions arise. For example, the director may be satisfied that there is insufficient likelihood of the success of a civil recovery proceeding based on the available evidence, or he may decide to give priority to other civil recovery cases if he considers that action under part 6 would represent a more effective and efficient use of resources in a particular case.

Alternatively, the property may have been acquired outside the specified time limit for civil recovery proceedings to be successful. The code requires that to be six years in normal circumstances, although I am advised that in cases in which fraud is suspected, the Revenue can go back 20 years to determine whether to raise tax levies on income gained fraudulently. In such circumstances, the director will consider whether there are grounds for exercising his Revenue functions. He will not exercise his Revenue functions on the basis of referrals from the Inland Revenue. However, he will liaise with the Revenue to ensure that cases are handled in the most effective way.

The director will effectively stand in the shoes of the Board of Inland Revenue for the purposes of taxation. All the tax law that applies to the Inland Revenue will apply to the director, including its powers, such as the ability to raise tax assessments, potentially with penalties and interest, and all the safeguards and rights of protection afforded to the taxpayer. Those will apply equally to the director as to the Board of Inland Revenue. The director will apply the taxation system in the same way as the Inland Revenue, including its extra-statutory concessions. The effect of that is to try to maintain a single taxation system.

David Tredinnick (Conservative, Bosworth)

I am listening to the Minister with great interest, and I am grateful for that detailed and helpful explanation. Am I to understand that the director and the tax officer from the Revenue will sit in conclave and discuss a particular course of action? Will they themselves make a decision about which of them will proceed? Is discretion provided? Will those two people make up their own minds?

Bob Ainsworth (Labour, Coventry North East)

Once the file has been passed to the director, it will be for him to make the decision. He will obviously be able to consult the Revenue about other action and other investigations that have taken place, but we do not want him to become involved in pursuing tax evasion cases and other issues that are regularly handled by the Revenue and to start to invade and double-guess that area of responsibility. We are ensuring that that is not possible. The Revenue will not pass a person's case to the director and suggest that he deal with it on the basis that he might be more effective.

That is not to say that the Revenue does not have a responsibility to report criminality. If in the course of its normal functions it becomes aware of criminality, it will report that to the police or the Serious Fraud Office, for example. Such information might subsequently find its way into the director's hands, but not straight from the Revenue, because it is not the intention that he should deal with tax fraud and evasion. He will receive his cases from the criminal system and will be obliged to consider all his powers in the hierarchy that we have established. He can be given only cases in which prosecution has been ruled out as ineffective. He must then consider part 2 criminal confiscation or civil action against the individual involved. Only after he has decided that no such action is appropriate or possible in the circumstances should he consider levying a tax on the property.

David Tredinnick (Conservative, Bosworth)

To pursue this further, what is to stop the representative of the Revenue and the director having a quiet word and saying, ''I can't say this, but I can tell you that if you were to think this, it wouldn't be remiss.''? Two Parliaments ago, there was much debate about the register of the poll tax or community charge and council tax and the impact that it would have on the electoral roll—whether the number of people registering on the electoral roll would be reduced because of the fear of being subject to that tax. All sorts of safeguards were supposed to be in place. That may be an abstruse comparison, but I wonder whether a nod and a wink might be inevitable between the two people.

Bob Ainsworth (Labour, Coventry North East)

I understand the hon. Gentleman's point. In some circumstances, that will happen and will be appropriate. What will prevent that from happening is simple: the law. The rules of confidentiality that apply to the Revenue are strongly enforced on all Revenue staff and will apply as much to any discussions that Revenue staff have with the director as to anything else. However, that is not to say that discussions will not take place. When a file is in the director's hands, we would expect him to co-operate and discuss the case as appropriate with the Revenue. We want it to work in that direction, and we shall need a memorandum of understanding on how they conduct their business together. Having received a tax file, the director may need the Revenue to clarify issues about which it knows. We do not want the Revenue to use the director inappropriately to pursue taxpayers.

David Tredinnick (Conservative, Bosworth)

Will such a memorandum effectively be a heads of agreement about how to

proceed? Will it have force in law? Will it be based on what the remit of either party allows?

Bob Ainsworth (Labour, Coventry North East)

I do not know when we will be able to draft a memorandum and let people examine our proposals. I reassure the hon. Gentleman that we do not intend to allow the Revenue—either directly and openly or by a nod and a wink—to say to the director, ''Here is a case that you ought to be interested in.'' The director should receive his cases from the criminal system and the prosecution agencies, rather than from the Revenue because the Revenue may have pursued the matter unsuccessfully.

If a case is referred to the director by the prosecution agencies and he decides that his other powers are inappropriate or inoperable and considers whether to raise a tax levy against an individual, he may need to discuss that with the Revenue. We must ensure that that is permitted when it is appropriate. We do not want a free flow of cases from the Revenue to the director. The director will receive his cases only from the prosecuting authorities and the criminal justice system.

David Tredinnick (Conservative, Bosworth)

The Minister says that there will not be fishing expeditions by the director to the Revenue through which he could try to elicit more information than he is entitled to. Did I understand him correctly? He says that the director will approach the Revenue with a specific brief and that safeguards are present to prevent the Revenue from opening other issues with him such as separate cases or previous convictions. How would the safeguards apply in those instances?

It may help the Minister if I expand on that while he considers the briefing that he has received. I know that it can be difficult for a Minister to reply if he has not read the briefing.

Bob Ainsworth (Labour, Coventry North East)

The director will have powers of investigation and powers that are appropriate to certain parts of the Bill. He will use such powers as are appropriate. The Revenue has its own powers. It investigates tax fraud and taxpayers, and may levy tax on criminal gain.

We have made it absolutely clear in the Bill that the Revenue cannot pass on a case to the director. The Revenue will not be able to say, ''You have powers under part 4 or part 2 of the Bill. We are certain that this has been going on and if only you use those powers, that will come to light.'' If the Revenue became aware of criminality during its investigations, it would pass on a case not to the director but to the Serious Fraud Office and the police, and there would then be an investigation that would lead to a decision on whether to prosecute. If the police decided that clear criminal gain was involved but that a prosecution was not possible, they would pass on the case to the director to allow him to consider whether the proceeds of crime could be pursued.

Mark Field (Conservative, Cities of London and Westminster)

A concern that I have comes from a constituency matter with which I have recently dealt. There is an assumption that the police will deal with any case of fraudulence in which a criminal element is involved. In a matter of insolvency, that is not always the case. For example, I am acting on behalf of a

constituent whose business relied on another business that has become insolvent. There have, apparently, been shenanigans. My constituent's worry—and he has given me a list of the various agencies that he has contacted—is that the moment the business became insolvent, the police said that it was nothing to do with them and that there was now an administrator on board.

My hon. Friend the Member for Bosworth gave an example of a situation in which the police might not be involved, and if there were a tax-graded issue in an insolvency case, it would be returned—perhaps via the administrator—to the director. That is a worry and it struck me, when dealing with my constituent's situation, as an odd state of affairs.

I can understand where the police and the Department of Trade and Industry are coming from. Their view is that it is now a legal process and they should stay out of it. I wonder what comments the Minister has about how that potential problem can be avoided.

Bob Ainsworth (Labour, Coventry North East)

Parts of the Bill dictate how insolvency interacts with the powers of the director. Neither the Revenue nor a person who is put in charge of a company that is in receivership and insolvency will pass on cases to the director.

With regard to fishing expeditions, the Revenue will not, other than by accident, become aware of criminality. The function of the Revenue is to examine tax fraud and tax evasion. It is not the director's function to investigate such matters. In a case of tax fraud and evasion, the Revenue will keep that file. Under the powers, it will take action against the individual concerned in exactly the same way as it does now. Only if it becomes aware of some other criminality during its investigations will it be obliged—as it is now, we are not changing anything in that regard—to report the matter to the Serious Fraud Office, the police, the National Crime Squad or whoever is appropriate. It will continue to carry out its business in the same way as it does now.

David Tredinnick (Conservative, Bosworth)

I understand what the Minister is saying. If some other matter comes to light while the director is investigating a case, the Revenue will not pass that information to the director, but to the appropriate authority—which, in this case, is the police—for further investigation. The purpose of our exchange has been to tease out a little more information about that interface. He has helpfully done that, and has explained how it works.

However, the concern must remain that there might a conduit or a possibility of inappropriate behaviour. I qualify that point by saying that we are dealing with villains—the whole point is to try to stop the Revenue being defrauded and to bring to justice the wrongdoers. Nevertheless, to ensure that justice is properly served, we have to consider such aspects.

Bob Ainsworth (Labour, Coventry North East)

And ensure that there is no leakage of inappropriate cases into the hands of the director. The Revenue has its powers and it exercises them. In some circumstances, as the hon. Member for Beaconsfield said, they are fairly wide-ranging. It is appropriate that the Revenue should keep those

powers and continue to carry out its business in exactly the same way as it does now. We do not want the director to have the ability to do the Revenue's job for it.

When a case is referred for the confiscation of criminal assets, we want the director to have the same powers as the Revenue. Such referrals will occur only as a result of criminal investigation, not as a result of tax investigation. The tax authorities will have been examining the issues that it is appropriate for them to examine, and if they find certain matters they will not hand on the case to the police or the director but deal with it themselves, as they do now. We have tried to structure the Bill so that it will have no impact on the way in which the Revenue undertakes its job. When the director has control of a person's tax affairs, he will conduct himself in the same way as the Revenue.

We are not setting up two different taxation systems. The person will be adjudged for taxation in the same way, whether by the director or by the Revenue. He will be adjudged only by the director in those narrow circumstances in which there is a suspicion of criminal gain and that the origin of the property concerned was criminal. The director will rightly have such cases in his portfolio that have been passed to him by the appropriate authorities. As I have said, he will consider his revenue-raising powers only within the context of the hierarchy, having first gone through the prospects of criminal confiscation and civil recovery.

The director will have taxation functions for cases throughout the whole of the United Kingdom, including Scotland. During the Committee's consideration of part 1, I circulated a note setting out the intended relationship between confiscation, civil recovery and Revenue functions. It covered how cases may be referred to the director from Scottish Ministers when they decide not to pursue civil recovery. In such cases, the director may consider using his taxation powers.

For each case in which the director wishes to use taxation functions, he must first satisfy a qualifying condition. That is an important condition, because there is no intention under the Bill that there would be any change whatever to the taxation treatment of ordinary taxpayers. Such individuals and businesses will continue to have their taxation affairs dealt with by the Inland Revenue, whose powers will remain unaffected by this part of the Bill. It is important to emphasise that point, because we intend that the director use his taxation functions against only a small number of people in relation to the total taxpaying population. Such individuals or businesses will be able to be the subject of the director's taxation functions only when the qualifying condition has been satisfied.

The condition is that the director has reasonable grounds to suspect that income, gain, profits or a transfer of value is chargeable to the relevant tax, and resulted from criminal conduct. It is immaterial whether the conduct was carried out by the person to whom the income, gain, profits or transfer has accrued. In that context, the criminal conduct does not

include tax evasion, responsibility for which will still remain with the Inland Revenue. The Revenue's special compliance office will continue to be the body that investigates cases of tax fraud, and the Board of Inland Revenue will continue to be the prosecuting body for cases of tax fraud in England and Wales.

Dominic Grieve (Conservative, Beaconsfield)

I am grateful to the Minister for going into so much detail about the matter. He has acknowledged that it is most likely that the director of the Assets Recovery Agency will intervene or use such powers only when there is no other power that he can use. In those circumstances, is there not an argument that the only potential offence that has been disclosed is tax evasion? If so, is that not contrary to what the Minister has been saying and would it not become the board's responsibility, given that that would be the only failure that could be pinned against the individual or company concerned?

Is there not a conflict in that, because the Minister has also explained that the director will be receiving information, and that he will begin to operate, not because the Inland Revenue has passed him something in relation to that person but because the criminal enforcement agencies, including his own, have?

Bob Ainsworth (Labour, Coventry North East)

The hon. Gentleman is right. The director will levy tax in the same way as the Inland Revenue would. The only power that the director will have that is different from those of the Inland Revenue is that he will be able to designate a sourceless tax liability, so that he will not have to prove, beyond doubt, the origin of the taxable item, and the particular act of criminality that led to its acquisition.

How else can we do what we are trying to do? We are trying to introduce effective powers to use against people who have clearly gained by their criminality—they might own a property or an asset—but we also wish to isolate those powers, because it is important to provide the maximum bulwark against their seeping into the rest of the taxation system.

If we were to oblige the Inland Revenue to exercise those powers, we would wind up having to establish an organisation within the Inland Revenue to provide focus, and the gateways would be more difficult to control. The alternative is to remove those powers from the Inland Revenue in the limited circumstances to which I have referred, to provide absolute clarity about when they can be operated by the director, and to insist that he use them in the same manner as the Inland Revenue would.

That alternative way would keep the director and the Inland Revenue separate. It also has the potential to provide greater focus, because the director knows exactly what he is after—he knows the kinds of people with whom he is dealing, he has used his other powers against them, and he is now seeking to levy tax from them. That also keeps such matters completely divorced from the tasks that the Inland Revenue performs. For all those reasons, it provides a better structure than any other way of allocating the powers would provide.

David Tredinnick (Conservative, Bosworth)

Again, I am grateful to the Minister for that explanation, as is my hon. Friend the Member for Beaconsfield.

When we discussed the situation with regard to Scotland, the hon. Member for Glasgow, Pollok eloquently highlighted the differences between English and Scottish law. The Minister has explained that the Inland Revenue's powers cover the entire country—at least, I think that that is the case. Can he confirm that in this case there would be no special difference north of the border? Does his explanation of the matter apply north and south of Hadrian's Wall?

Bob Ainsworth (Labour, Coventry North East)

The differences north and south of the border are addressed in other parts of the Bill. Scottish Ministers will decide whether to pursue civil recovery, so north of the border such cases will effectively be passed between individuals, as the director will have no civil powers. If criminal confiscation has been deemed to be inappropriate, they will be passed to Scottish Ministers who will decide whether to pursue civil recovery. If they decide that civil recovery is not possible or feasible—because time has run out, or because one of the other reasons apply—they will pass the case to the director, who will decide whether to seek to levy tax.

The taxation powers will operate in exactly the same way north and south of the border. The other powers will be operated in a similar way, but they will be organised in accordance with the Scottish legal system, and they will be exercised by different people, because of the different way in which Scottish administration is structured.

David Tredinnick (Conservative, Bosworth)

Is the Minister saying that those powers will be exercised in the same way, but that they will be operated by different agencies?

Bob Ainsworth (Labour, Coventry North East)

Yes.

Ian Davidson (Labour/Co-operative, Glasgow Pollok)

Let me reassure the hon. Gentleman that things are similar in Scotland. We have income tax, electricity and running water. There are all sorts of similarities.

David Wilshire (Conservative, Spelthorne)

You do not have drawing rooms.

Ian Davidson (Labour/Co-operative, Glasgow Pollok)

Not in Pollok. In fact, there are few Conservatives—I am sorry, conservatories—left, as most of them have been eaten.

I thank the Minister for responding to the points made by the hon. Member for Bosworth, who invited him, as I heard it, to explain—I look forward to the first appearance of that word in Hansard. However, the Minister said at length that it was intended that there would be no leakage of cases. Will he clarify whether there will be leakage of information? It seems essential that information should go backwards and forwards between all the agencies in such circumstances, in order to ensure that one branch of Government is aware of information discovered by other branches. Artificial divisions might scupper cases against people who deserve to be penalised.

Bob Ainsworth (Labour, Coventry North East)

Those are important issues. Appropriate gateways for information are needed, to ensure, on the one hand, that there is not abuse, and on the other, that there is effective action. When the director takes over a particular person's tax file for a

set period, he will have the whole file. He will therefore have all the information that was available to the Revenue. As I said, we intend to establish a memorandum of understanding to allow for the circumstances in which information is passed between the Revenue and the director. I said earlier that I did not know the point at which it would be possible for that to be shared.

We have not yet set a memorandum of understanding, and we do not yet have a director of the agency. It was felt that we should allow the director to have input into the memorandum of understanding, rather than tying him hand and foot, before he even exists, as to how he will operate. We therefore intend to draw up the memorandum of understanding after the director is in place.

We do not intend that information gained by the director through his powers should then be passed back to the Revenue so that it can be used against the individual by the Revenue in other ways. When the person's tax files cease to be under the control of the director, it is intended that they should be filleted to make certain that the Revenue's powers are not accidentally extended because the director has had other abilities, and has been able to gain other information that the Revenue would not have been able to gain.

David Tredinnick (Conservative, Bosworth)

The Minister focused on the memorandum, which was the subject of an earlier exchange. As I understand it, he is saying that he wants to leave the director some discretion or latitude in terms of the way in which memorandums are assembled. Nevertheless, would it not be sensible to offer guidelines, which are different from direction? That would provide clarity.

Bob Ainsworth (Labour, Coventry North East)

I intended to allow input rather than discretion. We should at least listen to the individual who is expected to do the job thereafter before drawing up the memorandum of understanding that will tie him as to how he does that job.

I want to continue to fill people in on the Government's intentions. I am certain that there are drawing rooms in Scotland. There are posh people in Scotland, but there are no drawing rooms in the council houses of Pollok—

Bill O'Brien (Labour, Normanton)

Order. We should return to the subject under discussion.

Bob Ainsworth (Labour, Coventry North East)

If the qualifying condition is satisfied, the director will assume the responsibility for the taxes or the contributions for the periods in question. He will do that by serving a notice on the Board of Inland Revenue to state that, for certain taxes and contributions and for certain periods, he intends to carry out the general revenue functions as specified in the notice. Effectively, he will choose the most appropriate option for specific case from a menu of taxes or contributions for certain periods. While the notice is in effect, the Board of Inland Revenue will have no role in the tax affairs of the specified person or company to the extent set out in the notice. That is to ensure that a double taxation does not occur with regard to a particular liability.

However, the clause makes it clear that the director may withdraw the notice at any time, and that he must do that if the qualifying condition ceases to be satisfied. In the event of the withdrawal of the notice, the Revenue will consider the tax obligations of the person or company concerned.

The amendment would limit the director's taxation functions to those cases and periods into which the Inland Revenue had not carried out a previous inquiry. There are a number of cases in which, if the Revenue discovers new information following an inquiry, it may carry out a further inquiry. Under section 29 of the Taxes Management Act 1970, it is entitled to raise an assessment notwithstanding the closure of a previous inquiry. Section 29 of that Act sets out the conditions under which such an assessment may be raised.

An important feature of this Bill's development has been the maintenance of a single, national and consistent taxation system. The amendment would cause a variation from that because the director would be unable to make further inquiries or raise the discovery assessments that the Revenue may do. Additionally, if new information came to light that demonstrated that a tax assessment or further assessment was appropriate although the Revenue had carried out a previous inquiry into the same period of the same entity's tax affairs, barring the director from raising an assessment would place the subject of his inquiries at an advantage compared with other taxpayers.

The amendment implies that the director and the Revenue should not both assess the same tax. I assure the Committee that we do not intend to double-tax in that way, but that only the director will collect the tax, interest and penalties due. If the subject of the inquiry demonstrates that tax on the investigated income and gain was paid to the Inland Revenue, the director will not raise an assessment and he will serve notice of withdrawal. However, it would be a step further to accept the amendment and bar the director from making inquiries into cases that the Inland Revenue may investigate under the Taxes Acts.

I urge the hon. Member for Beaconsfield to withdraw the amendment. I hope that I have given a helpful explanation of how the powers will be used.

Dominic Grieve (Conservative, Beaconsfield)

I am grateful to the Minister for taking the time and trouble to give us an exposition of the background purposes of the Bill and the manner in which he intends it to operate. I intend to withdraw the amendment because he has given me cogent reasons to do so. In any event, the amendment was a probing amendment, designed to stimulate our discussion.

I want to flag up one issue that I do not intend to develop further now because we will return to it when we discuss my amendment to clause 313, which is in a similar probing mode. The Minister emphasised that a principal reason to reject the amendment is the need to maintain conformity in tax practice. He rightly stated that because the amendment did not contain a reference to further evidence that came to light, it

did not conform with section 29 of the Taxes Management Act 1970. We can return to that later.

As the Minister explained, the director will have access to far more information with which to pursue his inquiries than the Board of Inland Revenue. I have no difficulty with that. The director will, through the crime prevention system, have access to information that the board would not normally be able to obtain in its investigations. The Minister made it clear that that is one of the reasons why the director will be in a better position to secure tax than the board. As he explained, the file would have to be vetted before it went back to the board, in order to ensure that the director did not pass back information that could subsequently be used for the purposes of ordinary taxation.

The Minister touched on the ability to tax when unable to identify the source, an issue to which we shall return under clause 313. That is a profound difference, and is ultimately at the nub of setting up a parallel but separate taxation system. Although I accept what the Minister said, I shall want to consider the issue further when we discuss clause 313. It is an important distinction, and the Committee should understand it. It is not just a matter of the director being the better person to levy tax because he will be more focused on particular people; it is a matter of giving him powers and advantages that the board does not have.

I hope that it is clear that we will discuss the subject later—I see the Minister nodding. I alert him to my interest in the topic and agree with him that it would be most unwise to have different powers from those under section 29 of the Taxes Management Act 1970. I am grateful to him for starting the debate and beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Dominic Grieve (Conservative, Beaconsfield)

I beg to move amendment No. 476, in page 180, line 39, leave out subsection (8) and insert—

'(8) If apart from this section the Board's authorisation would be required for the exercise of a function, such authorisation of the Board must be obtained by the Director before any such function is exercised by him.'.

Bill O'Brien (Labour, Normanton)

With this it will be convenient to take amendment No. 478, in clause 315, page 182, line 31, after 'Director', insert 'jointly with the Board'.

Dominic Grieve (Conservative, Beaconsfield)

In the light of the discussion that we have had, I do not wish to labour the two amendments. However, they raise an issue that was not fully discussed in our earlier debate, so they are worth considering.

It is axiomatic that, once the director has given notice and seized on a tax issue, it is his decision making and discretion that will be exercised while he decides whether tax should be levied on a person or company. The Minister—I think I understood him correctly—emphasised that he would expect the director to liaise closely with the Board of Inland Revenue about the exercise of his functions. The Committee should consider where the discretionary buck stops. Does it stop with the director or, as I have suggested through my amendments, should a statutory

framework require the board to intervene? Should the board's view be sought, and if so, in what circumstances?

The two amendments are different. Subsection (8) appears to give blanket power to the director: he can exercise a power that has not been specifically conferred under part 6 without obtaining the board's authorisation. That is a Henry VIII provision. It may be that the powers conferred under part 6 are so wide, extensive and well drafted that the issue will not arise. However, amendment No. 476 seeks to provide that, should the director wish to exercise a power not specifically conferred under part 6, he would have to get the board's permission.

The Minister may be able to reassure me—amendment No. 476 is a probing amendment. However, it raises an important issue because subsection (8) appears to give wide powers to the director—potentially wider than the powers described by the Minister in his helpful opening comments.

Amendment No. 478 concerns transfers of value under clause 315. With regard to service of a notice, instead of vesting in a director

''the Revenue inheritance tax functions in relation to the transfer'',

those functions should be vested jointly with the Board of Inland Revenue.

Our debate has thus far concerned mainly income tax. However, clause 315 deals with inheritance tax and, effectively, transfers of value. Different tests and problems may arise or apply in respect of that. Clearly, the board has a great deal of experience in dealing with transfers of value and inheritance tax. My impression is that such matters tend to be dealt with by the capital taxes office—a discrete area in the Inland Revenue.

The director may be biting off more than he can chew, which is one reason why I suggested that those functions should be jointly exercised with the board rather than being left to his discretionary powers. What problems does the Minister foresee in relation to such a capital tax as opposed to taxing income in cases in which the source cannot be identified? Separate problems may arise, which is the reason for that amendment.

I emphasise that amendment No. 478 is also a probing amendment. I am concerned that we should not be so focused on income tax and the idea of income coming from a source that we do not blind ourselves to the capital tax issues. Indeed, I cannot help thinking that, in the context of criminality, capital tax and taxation of capital assets with no identifiable source may prove to be a better way of raising money than taxing people's income. I see the Minister nodding, so it is all the more important that we get this matter right. I await his comments.

Bob Ainsworth (Labour, Coventry North East)

The operational independence of the director is important if he is to be effective. Clause 2 sets out how the director is to operate his functions. Subsection (5) of that clause requires the director to have regard to any guidance issued to him by the Secretary of State. We debated the matter when we considered clause 2, and I circulated a paper to

Committee members that further clarified how that will operate in practice.

The director will be accountable to the Secretary of State for the operation of his functions. He will not be accountable to the Board of Inland Revenue, which is in turn accountable to Treasury Ministers. Clause 2 requires the director to exercise his functions in a way that is best calculated to contribute to the reduction of crime, and he will be accountable to the Secretary of State for his performance in that respect. The Board of Inland Revenue is accountable to Treasury Ministers in the operation of its functions, notably tax collection. Although the Revenue will contribute to the reduction of crime and will work with other Departments in doing so, its primary focus is on the efficient and effective collection of tax, and its performance measures have been developed accordingly.

The director's operational independence from the Inland Revenue will enable him to focus his efforts on the requirement that he contribute effectively to the reduction of crime. It is our intention that the director should operate the taxation system in a manner that is consistent with that of the Board of Inland Revenue. An important feature in the development of the Bill has been that a single, national and consistent taxation system should be maintained. The provisions in clause 318 cover that point in full and entitle the Board of Inland Revenue to access documentation and information that it considers appropriate in that respect.

Under the amendment, the director would be required to gain the board's authorisation before exercising his taxation functions. That would make the board responsible for the operation of the director's taxation functions, thereby restricting his independence and removing the line of accountability to the Secretary of State. That would limit the director's clear focus on contributing to the reduction of crime, and his freedom to operate within the guidance issued to him by the Secretary of State. It would be a needless bureaucratic stage in the process, as the Board of Inland Revenue can already be assured that the director's operation of the taxation function under clause 318 is consistent with its own functions.

Under amendment No. 478, which relates to inheritance tax and adopts a variation on the previous theme, the vesting of inheritance tax functions in the director would be done jointly with the board. The amendment would achieve little in practice. The purpose of clause 315(3) is to vest inheritance tax functions in the director when he has served notice on the Board of Inland Revenue of his intention. Clause 315(6) already provides that that does not divest the board, or an officer of the board, of that function. Providing for vesting to be joint with the director is, therefore, immaterial in providing for either party to be able to perform additional functions.

Nick Hawkins (Conservative, Surrey Heath)

I may be anticipating a debate that we should have when we discuss clause 315 and inheritance tax. I apologise if the Minister feels that I am doing so. I do not want to stray out of order. However, it is surprising that in this part of the Bill we should be giving the director—who is trying to access

ill-gotten gains—specific and detailed powers in relation to inheritance tax. Will the Minister explain the thinking behind that?

Bob Ainsworth (Labour, Coventry North East)

The hon. Member for Beaconsfield touched on the matter. It relates to a method of hiding ill-gotten gains by sticking them into a trust or an inheritance. My prejudice is that the provision may prove to be a very effective means of recovering proceeds of crime—perhaps more so than taxing income or revenue. It is not merely a small aside: it is central to how those funds are used and can be put beyond the reach of the current legal system.

Providing for joint vesting in relation to the director is immaterial. If, as it seems, that means that the director would have to confer with the board about every step in inheritance tax cases handled by his staff, the agency's role would become impossible. The board does not get involved in the day-to-day handling of all Revenue cases, and it would be just as impossible for it to exercise such oversight in relation to the agency's cases.

The provision for the board not to be divested of its taxation functions, even when the director has served notice, extends beyond inheritance tax into general taxation functions. That is provided for in subsection (7). I think that I have pointed out that clear lines of accountability are necessary. The tying up of the system is provided for in clause 318. The amendment would not add anything to those lines of accountability. It would do the reverse by blurring them and, potentially, taking them away. I ask the hon. Gentleman to withdraw the amendment.

Dominic Grieve (Conservative, Beaconsfield)

Again, I am grateful to the Minister for enabling us to widen the scope of the discussion further. He has provided me with some reassurance, and in relation to the amendments, which were probing, he has helped to clarify some of the relationships with the director, and the way in which they operate. I accept that the channel of accountability to the Home Secretary would be blurred if the amendments were accepted. However, one issue remains.

One of the purposes of the Board of Inland Revenue relates to its independence from political control. Clearly, it must enforce what Parliament says, but it also has wide discretion, and no one would seek to interfere with the way in which it operates—certainly not Treasury Ministers: if they thought that there was a loophole in the law, they might want to introduce further tax legislation, but the board is respected as an impartial arbiter in respect of taxation matters. The director will implement tax law, but as the Minister rightly said, he will do so for a different purpose: to reduce crime, or the proceeds of crime—I cannot remember the precise words that the Minister used. That may give rise to conflict between what is required for proper taxation, and what is required for the crime reduction fund.

The Minister emphasised several times during this morning's debate that he wishes the public to be reassured that the director, having taken on the mantle of the Inland Revenue, will operate in exactly the same way and under the same rules—except for one or two

areas that we shall examine—so people need not be worried. It is another area in which matters are blurred. The post of the director exists for a different purpose from that of the Inland Revenue. As long as Parliament and the public are satisfied about that, so be it. However, the issue causes me slight anxiety. I am sure that the amendments would not meet that anxiety satisfactorily, but at least they have enabled a discussion to take place about it.

I hope that the Minister will bear in mind my argument because I cannot help thinking that the matter may be returned to in the other place, given the unusual way in which something of a parallel taxation system is being created. The words of reassurance that we have heard in that such matters can be handled in exactly the way as they are now may be so, but several indicators show that, when the director intervenes, his motivation and purpose will be different from that of the board of the Inland Revenue and we may receive complaints about the different ways in which the tax system is being operated.

Bob Ainsworth (Labour, Coventry North East)

The director's motivation will not allow him to operate in a different way and outwith the policies laid down by the board. I hope that clause 318 will provide reassurance about how the director will operate within the interpretation that has been developed by the board and is thus at its discretion. His different motivation will dictate his priorities, the cases that he examines and the issues that he pursues. He will not be looking necessarily at maximising return. We had a debate earlier about efficiency and effectiveness. The director will be examining how to reduce criminality and will be using his resources to that end. Does clause 318 give the hon. Gentleman the reassurance that he seeks?

Dominic Grieve (Conservative, Beaconsfield)

Yes, clause 318 provides much reassurance. If it did not exist, I would be seriously worried about the matter, especially in relation to concessions that are important in an individual's dealings with the Inland Revenue. Such policy must be followed and adhered to. The Minister is right, but I hope that he does not mind my saying that the matter will merit some attention. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 311 ordered to stand part of the Bill.

Clause 312 ordered to stand part of the Bill.

Clause 313 - Source of income

Dominic Grieve (Conservative, Beaconsfield)

I beg to move amendment No. 477, in page 181, line 32, leave out subsection (1).

This is one of the most important issues that we shall discuss this morning. The clause, more than anything else, is the point at which ordinary taxation law and the powers of the director separate. That may be a good thing, but we must consider it carefully. Subsection (1) states:

''For the purpose of the exercise by the Director of any function vested in him by virtue of this Part it is immaterial that he cannot identify a source for any income.''

As I am not as well versed in tax law as I would like to be, it would be helpful if the Minister explained how the system works at present with the Inland Revenue. My understanding is that, before the Inland Revenue levies a tax on income, it must identify a source. The burden to do that is on the Inland Revenue rather than anybody else. That is a complex area and I am not aware of the board's powers and what assumptions, if any, may be made evidentially. We need an explanation.

The clause would not be in the Bill unless it had a purpose, which as I understand it is that in the future it will be possible to tax income without the identification of its source. Presumably, the burden will be on the individual or company to rebut the assumption that is made by the director and to show that money came from a source that should not be taxed, such as a gift or a win on the pools. However, income would be liable to taxation, so this is an important additional power.

It is all very well to say that the director steps into the Inland Revenue's shoes and is more focused, but we are giving him a power to tax in a way that the board cannot. I want to hear from the Minister how the distinction will work in practice.

The amendment is probing. If I had wanted to carry out a comprehensive amendment of the clause, I would have had to table amendments to other subsections. I deliberately did not set out to do that. Subsection (2) would require amendment. However, the matter is important because we have decided to bend or break tax rules for the purpose of reducing crime. We should know what we are doing before we agree to the clause, because we are trying to reduce crime by the mechanism of taxing people.

Bob Ainsworth (Labour, Coventry North East)

I hope that the hon. Gentleman was not saying that I deliberately suggested that the power is not the exception but a power that we are giving overtly to the director that is not part of the taxation system as it is operated at present, because it is.

The amendment would require the director always to identify the source of any income when he uses his taxation functions. Therefore, it would limit the director's actions, when using his taxation functions, to cases in which he can identify a source of income.

There will be a number of cases in which the director will be unable to use criminal confiscation or civil recovery to recover the proceeds of crime. However, in those cases, he may suspect that there is income or gain that results from criminal conduct and he may use his taxation functions as a further means to recover the proceeds of crime. The director would not have been able, through his investigations, to gain evidence at the civil standard that assets are the proceeds of crime, because otherwise he would have pursued the matter under part 5 and sought to confiscate the assets in their entirety. However, he may be suspicious that criminal conduct is a feature of the cases.

It follows that many such cases will be characterised by the lack of a clear audit trail of the source of certain assets and their financing. If the director is bound to identify the source of any income or gain, his efforts will be frustrated in the majority of the cases in which he wishes to use his taxation functions. If he is to make effective use of taxation functions, he should not be required to identify the source of income.

Paul Stinchcombe (Labour, Wellingborough)

Why do we need both subsections (1) and (2)?

Bob Ainsworth (Labour, Coventry North East)

Subsection (1) is needed to allow the director to carry out his revenue functions, including that of the making of a no-source assessment, notwithstanding that he has no knowledge of any source for the income or gains. Subsection (2) upholds the validity of the assessment once it is made.

The appeals that are provided for in other taxation regulations offer safeguards, as they will apply to the director.

The Revenue's practice of identifying a source arises as a result of a mixture of legislation in the Taxes Acts and case law. Some judgments in case law have resulted in the Revenue accepting that it must identify a source of income before it makes an assessment, and that has effectively become established in tax law. If we impose that limitation on the director, we will render the powers under part 6 entirely—or almost entirely—inoperable. That is why this single departure from normal taxation law is necessary.

Nick Hawkins (Conservative, Surrey Heath)

I understand what the Minister has said about subsections (1) and (2), but I am puzzled, because subsection (3) seems to be somewhat circular—although that might be due to my failure to understand it. Although I understand that it is necessary to make specific arrangements with regard to section 29 of the Taxes Management Act 1970, where there is a service on the board of a notice of withdrawal, I do not understand the use of the word ''invalid''. Can he explain why that word is included in subsection (3)?

Bob Ainsworth (Labour, Coventry North East)

Where the director withdraws his notice, he is effectively handing the case back to the normal taxation regime, and we are anxious not to extend the powers of the Revenue. We want the director to use his powers to pursue particular individuals in particular cases, and we also want to keep that separate from the rest of the taxation system. If subsection (3) did not exist, where the notice had been withdrawn, we would effectively be handing back to the Revenue the ability to levy a sourceless tax liability.

Nick Hawkins (Conservative, Surrey Heath)

That is what I understood to be the intention of subsection (3). I agree with the Minister. I would not want the legislation to extend the Revenue's general powers, and I understand his point that the director is being given special powers that are, for good reasons, wider than those of the Revenue.

However, I am still puzzled by the use of the word ''invalid'' in subsection (3). I am unsure whether the wording of that subsection will do what the Minister thinks it will. Surely, it should be saying something along the lines of, ''When the director withdraws from

the use of his powers, and they return to the Revenue, only the general powers will apply.'' I do not understand why any question of invalidity should arise. Subsection (3) is very oddly drafted.

Bob Ainsworth (Labour, Coventry North East)

There might be a mixture of liability. That is the point that is being addressed. The notice is being withdrawn, and the tax power is effectively being handed back to the normal taxation system. Therefore, the assessment is invalid only to the extent that it does not specify a source of income. If other parts of that assessment do specify a source of income, they remain valid and remain a liability, because those are the powers that the Revenue would have had anyway, had it been in charge of the case in that period. With regard to that part of the assessment where no source of income has been identified, the assessment should be rendered invalid because the Revenue does not have that power.

Nick Hawkins (Conservative, Surrey Heath)

Would not it be more logical and sensible to put the phrase the other way round? Rather than the assessment being invalid to one extent, the provision could state that it remains valid only where a source for the income is disclosed. Would not that be a neater, more positive and clearer expression?

Bob Ainsworth (Labour, Coventry North East)

It could well be, but I am told that once an assessment has been made, it cannot be unmade, except in accordance with the Taxes Management Act 1970. I hope that that goes some way towards explaining the reasoning behind the wording.

Nick Hawkins (Conservative, Surrey Heath)

Perhaps I may pursue the point a stage further now by making a short speech, rather than continuing to make interventions. I hope that the Minister will agree at least to reconsider the wording of subsection (3). A tax assessment would not have to be unmade in order to improve the wording. Surely, the provision should state that if the assessment is passed back to the normal Revenue processes, it remains valid where the source of income is specified? It could be rewritten to read, ''Any assessment is valid only to the extent that it does specify a source for the income.'' That would be make the issue clearer, ensuring that everybody understands that when the powers are operated, the normal powers of the Revenue are working only to their proper extent. In other words, subsection (3) introduces a totally unnecessary double negative that is confusing and unclear.

Bob Ainsworth (Labour, Coventry North East)

I do not pretend to be a taxation expert, and I do not think that the hon. Gentleman is one. It is not the first time that I have seen double negatives in legislation, nor will it be the last. I do not pretend to have the skills that parliamentary counsel have. I will, of course, consider the issue that the hon. Gentleman has raised. If the suggested rewording improves the clarity of the Bill, I will certainly consider it.

Dominic Grieve (Conservative, Beaconsfield)

Again, I am grateful to the Minister for having explained the import and impact of clause 313. We will have, I suppose, to wait to see how it works in practice. I can see the point behind it. Let us suppose that a person finds £25,000 in a cardboard box in somebody's cupboard—I must correct myself at this

point, because in those circumstances, I expect that the other powers under the Bill would be used. I have a niggling difficulty in trying to think of situations in which the director will want to exercise those Revenue functions because his other powers are insufficient. How would he identify a source of income? If he could not do so, would he say, ''I cannot identify the source, but I'm going to tax it.'' I suppose one example would be when there is a regular payment into a bank account, the source of which cannot be identified.

If £25,000 is found in a box in somebody's house, that person would probably be prosecuted under other

provisions for civil recovery. Alternatively, the confiscation provision could be used. Let us suppose that a person had no previous convictions and the confiscation provisions could not apply. If, on the balance of probabilities, it could not be shown that the money had been acquired through unlawful conduct, the money could be taxed on the basis that the burden would be on the person to show its provenance and demonstrate that it is not income.

It being One o'clock, The Chairman adjourned the Committee without Question put, pursuant to the Standing Order.

Adjourned till this day at half-past Four o'clock.

Standing Committee B

Clause 313 - Source of income

Dominic Grieve (Conservative, Beaconsfield)

As I was about to say before lunch, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 313 ordered to stand part of the Bill.

Bill O'Brien (Labour, Normanton)

If the Committee wishes, clauses 314 to 316 can be taken together.

Nick Hawkins (Conservative, Surrey Heath)

On a point of order, Mr. O'Brien. Can clauses 314, 315 and 316 be taken separately?Clause 314 Appeals

Clause 314 - Appeals

Nick Hawkins (Conservative, Surrey Heath)

I have only minor points to make about the clause. Will the Minister explain the thinking behind the appeal being made only to the special commissioners? My hon. Friend the Member for Beaconsfield (Mr. Grieve) and I were thinking about that, and we considered whether to table an amendment to the clause that would offer a parallel way of appeal to the High Court. On balance, however, we decided that because some issues will undoubtedly require specific taxation expertise, the Government may be right to leave such matters with the special commissioners. I should be grateful if the Minister would say whether, during the drafting of the Bill, those who advise the Government went through the same thought process, because this part deals with the extension of existing powers and will give the director special extended powers.

Did the Government consider introducing a role for the High Court? At present they have not, but I wanted to flag up the issue because I can envisage that in another place, some Law Lords with specific expertise may think that there should be the option of a parallel appeal to the High Court, for the protection of the individual. If that were to be considered in another place, it would be helpful to have heard about the Government's thinking in Committee.

Dominic Grieve (Conservative, Beaconsfield)

The Minister may wish to consider another issue in respect of the clause. In a sense, I was

pleased that the appeals procedure makes special provision that the

''Presiding Special Commissioner may nominate one or more assessors to assist the Special Commissioners'',

and that those assessors

''must have special knowledge and experience of the matter to which the appeal relates''.

I assume that means that, in the case of a tax matter that has been handled by the director, not the Board of Inland Revenue, there will be—for the purposes of an appeal—special commissioners who have particular or expert knowledge of proceeds of crime issues. I should not think that such people exist at present, so I presume that some steps will have to be taken to train them. Otherwise, the risk is that they will be drawn from within the law enforcement world, which would not be desirable. I sorry not to have tabled an amendment along those lines, but the idea is interesting. I do not expect that that expertise is currently available, because such legal procedure and practice are novel.

Bob Ainsworth (Labour, Coventry North East)

I am urged to put some of our thoughts about the High Court and the assistance of specialist knowledge on the record.

Clause 314 provides that when the director is exercising his Revenue functions, the right of appeal is to the special commissioners, who are independent and are administered by the Lord Chancellor's Department. They are separate from the commissioners of Inland Revenue and will be separate both from the director of the agency and from the Home Office.

The special commissioners will be able to hear appeals from those who have, for example, been the subject of an investigation by the director that has resulted in a no-source tax assessment. The special commissioners will consider the evidence that both parties bring before them and will determine questions of tax liability. There are further rights of appeal from the special commissioners to higher courts.

The right of appeal provided for under part 6 is an equivalent right to that enjoyed by taxpayers in their dealings with Inland Revenue. The one exception is that the right of appeal is limited to the special rather than the general commissioners. That is because the special commissioners have the specialised legal expertise that such cases will require. That does not deny the subject any right of appeal, but it directs the appeal to the appropriate commissioners for that type of hearing.

The special commissioners may need to be able to draw on specialist advice to hear those cases. The clause therefore provides for the appointment by the Lord Chancellor, after consultation with Scottish Ministers, of assessors with special knowledge and experience of matters relating to such appeal hearings. Such specialists may have particular expertise in financial investigation and valuations, for example. The Lord Chancellor will be responsible for the administration and remuneration of such appointments.

The clause will provide a valuable safeguard. It will provide a right of appeal against the director's taxation functions equivalent to that enjoyed by other taxpayers. The hon. Gentleman talked about the High Court. There are rights of appeal to the High Court on points of law, and further rights of appeal to the Court of Appeal and the House of Lords, if leave is granted.

Nick Hawkins (Conservative, Surrey Heath)

That obviously means an appeal from the special commissioners. It might be helpful to state that in the Bill for the benefit of those who will read about those new provisions in the Bill. The right of appeal from the special commissioners on a point of law is well known to tax practitioners, and to my hon. Friend the Member for Beaconsfield and me. However, we are introducing new powers, and jurisdiction is being widely extended and is bringing such work into a new field. If that is not stated in the Bill, it will contain a clause headed ''Appeals'' which does not mention appeals from the special commissioners, and the matter would be unclear to those reading it.

Bob Ainsworth (Labour, Coventry North East)

I accept what the hon. Gentleman says about what we include and what we do not include. We have said that we want to follow tax practice in its entirety, with the one major exception of tax levied on income the source of which is unknown. As he rightly says, the matter follows a route of which he and the hon. Member for Beaconsfield are aware. I am not sure whether it is necessary to include the details in the Bill. I shall reflect on whether that would help in any way. The Bill follows the route that is currently trodden in those cases.

There is a right of complaint against the actions of the director of the Assets Recovery Agency. When the director is operating his tax functions, there will be a right of recourse to the parliamentary ombudsman, the Parliamentary Commissioner for Administration, as there is against the actions of Inland Revenue when it operates its tax functions. That is provided for in schedule 8, paragraph 2. Therefore, there is another route to the High Court.

The assessors will—I hope—have specialist knowledge. Their expertise will be valuable to the special commissioners during such hearings. We want them to have expertise in financial investigation or value assessment, which might be particularly relevant when the special commissioners are hearing cases that involve no-source tax assessments by the director.

Although I am sure that expertise in financial assessment exists, I also agree with the hon. Member for Surrey Heath (Mr. Hawkins) that it will be necessary to develop that if we are to be fully effective in confiscating the proceeds of crime through the powers provided by the Bill. However, that is the kind of expertise that will be sought when sourceless tax assessments need to be conducted.

Dominic Grieve (Conservative, Beaconsfield)

I am sure that that is right.

Special commissioners with expertise in taxation have traditionally been drawn from a variety of sources—although they have tended not to be

connected with the Inland Revenue, to prevent questions about conflicts of interest from arising. However, it is noteworthy that the Minister has rightly appreciated that different types of special commissioners are now needed, and that raises the issue of how to find people with expertise in fields that have not been developed.

Bob Ainsworth (Labour, Coventry North East)

We are thinking about such issues in connection with financial investigation and value assessment.

The hon. Gentleman and his hon. Friend asked whether certain matters should be spelled out in the Bill. Confusion could be caused if we were to start to do that where we are not departing from tax law. We have made it clear that the legislation follows normal taxation law, with all its rights of appeal, unless the contrary is stated. I do not want to include things in one part of the Bill that might cause doubt about whether we are following the normal taxation law in all the other parts of the Bill. We could then fall into the sin of omission, unless we were to compile a long list. Therefore, it might be clearer merely to state that the normal procedures will be followed, except in certain areas.

Nick Hawkins (Conservative, Surrey Heath)

I am grateful to the Minister for his comments. The Bill is already very big, and I understand why he does not want to add much more to it. However, I was first called to the Bar in 1979, and during my career as a lawyer, and my—almost—10 years' service as a Member of Parliament, I have dealt with a lot of legislation. In my experience, most Bills describe the relevant appeal procedures; those are normally set out in full.

Therefore, the Bill under discussion is a special case. If a lay person—an accountant, for instance, who has not previously dealt with this area of law—were to read the Bill as it stands, he would get the impression that all he could do was appeal to the special commissioner, because there is no mention that he can go beyond that, on a point of law, to the High Court—and subsequently, if necessary, to the Court of Appeal and the House of Lords. As what we are discussing is a new procedure—an extension of the law, with new arrangements—if the appeal clauses were set out in the Bill, that would offer helpful guidance.

I have made my point, and the Minister has said that he will consider it, which I welcome. Although the clause stand part debate has been short, it has also been worth while, and I am sure that it will help to inform debate when the Bill passes to another place.

Question put and agreed to.

Clause 314 ordered to stand part of the Bill.

Clause 315 - Director's functions: transfers of value

Dominic Grieve (Conservative, Beaconsfield)

Before lunch, we touched on this clause when discussing an amendment that suggested a joint authority between the director and the Board of Inland Revenue. I did not pursue that, although the

Minister will be aware that I indicated interest in this clause, because it may achieve more recovery than the clauses that relate to income tax.

I also had an interest in the clause when I read the Bill, because it is noteworthy that inheritance tax functions, along with settlements, are singled out as requiring a clause to themselves, unlike the other functions of the Inland Revenue that the director will be able to discharge. I am thinking of capital gains tax, for example, which is referred to only in passing, and is not covered by a specific clause.

It would be helpful to have some understanding of examples to which the clause is likely to apply. The Minister may be able to help the Committee and tell us about the background issues. If a person comes into possession of a substantial capital asset and refuses to disclose its provenance or origin voluntarily, the merit of the measure is that one can subject that person to Morton's fork, because he must either explain that the asset was the result of criminal activity, in which case the Bill will enable the director to seize it under part 5 provisions, or claim that it was an inheritance or transfer for value. If it was, it should have been taxed if it fell within the seven-year period, and the director would be able to do that.

A safeguard exists for inheritance, in that the transfer is not subject to tax if it falls outside the seven-year period, and a transfer for value might not be subject to capital taxation. Will the provision therefore be easy to evade? Someone could simply put up another person to say that the asset was given as a present. Will the Minister help us? I am no great expert on taxation, and an understanding of how the system will work in practice might be helpful. I have always felt that it is more likely that capital assets rather than income assets could be seized or taxed in this manner. Why do the Government think that the measure would be such an effective tool?

Bob Ainsworth (Labour, Coventry North East)

The clause allows the director to exercise tax-gathering powers in relation to inheritance tax when there are reasonable grounds to suspect that the proceeds of crime have been passed on by gift or bequest. It is required to complete the director's portfolio of tax powers. It is easy enough to imagine cases in which criminals have given away their proceeds of crime or sought to hide them in a trust or abroad. Alternatively, criminals may simply die before the agency catches up with them. The director must be able to pursue the tax consequences of such dispositions of wealth in addition to the tax liabilities that arise as the wealth accumulates.

The provisions are essentially equivalent to those in clause 311 that involve income tax, capital gains tax and corporation tax. The detail differs, because the taxes involved are structured slightly differently, notably because inheritance tax is charged separately on distinct occasions of transfer—the main one being death—rather than for successive tax years, as is the case for other taxes. The procedural details and the rules for the director's take-up and conduct of cases run parallel to the tax provisions on other Revenue taxes in clause 311, and the same safeguards apply.

The hon. Gentleman asks whether the powers will be easily circumvented. He shares my prejudice that fixed assets may be more easily targeted than income. The challenge before lunch was to think of instances in which we would be unable to use some of the other powers relating to income, in which the tax power might be used. All that I can think of is cases in which bank accounts are not used all the time and it can be shown that a regular income is received by a known gangster—from prostitution or protection, for example—but we cannot trace the source, let alone come up with the necessary through investigation that would allow us to pursue the person through civil recovery. In some instances, people have a regular income that can be exposed, but the source cannot be proved—like the hon. Gentleman, I believe that that will be difficult to do in many cases.

People who are involved in drug trafficking or other organised crime may, because of the work in which they are involved, be candidates for a relatively low life expectancy. The issue of pursuing their ill-gotten gains beyond the grave may arise more often than it would in the case of Members of Parliament and others who live a more stable life. The clause may be needed far more often than we would imagine if we were thinking about ourselves, because of the dangerous criminal activity in which such people are involved. Therefore, although I accept that possibilities for circumventing the provision exist, as they do for other aspects of the legislation, it is still a necessary tool in the tax-gathering armoury.

Dominic Grieve (Conservative, Beaconsfield)

The Minister is right. The death rate for drug dealers seems to be rising, and if that continues, inheritances could be sensibly taxed in relation to proceeds of crime. That must be the primary function. I was flagging up an anxiety in that the Bill refers to transfers of value, but unless those transfers take place within seven years before death, they cannot be taxed under inheritance tax provisions. Under other provisions in the Bill they might be seized, but taxing them would be impossible. The provision would apply in the discrete case of the death of a suspected criminal, and would enable at least those assets to be taxed on transfer even if they had a tainted origin—assuming, that is, that they had not been declared in the usual way by the person inheriting them. That might happen, of course, in which case the tax would be collected in the ordinary way.

I understand the merit of the provision, and I am grateful for the opportunity to have had a discussion, because it highlights the limitations of part 6. That is not to say that part 6 should not be included, but we must not exaggerate the possibilities that it opens up. The Minister has always said that the provision was intended more as a last resort. I shall be interested to see how often it is used. I assume that although there will be issues of confidentiality, statistical information will at least be made available to Parliament, as time goes by, on the extent to which the provision has been used, and the amounts that have been taxed as a result.

Bob Ainsworth (Labour, Coventry North East)

Our intelligence, and the feedback that we have received on the Irish system, is that the taxation provisions are being extensively used.

Dominic Grieve (Conservative, Beaconsfield)

I had heard that in conversation with staff at the Irish embassy, as I am interested Irish affairs. I have a layman's approach to this matter—I have no specialist knowledge—and I would therefore be interested to understand how the provisions will operate to tax the assets concerned. As the Minister will be aware, I have scratched my head from time to time about how they will work in reality. I shall have to rely on the expertise of those who advise him.

Question put and agreed to.

Clause 315 ordered to stand part of the Bill.

Clause 316 - Director's functions: certain settlements

Nick Hawkins (Conservative, Surrey Heath)

I can be fairly brief in expressing my concerns about the clause.

In relation to the director's reasonable grounds for suspicion and the service of a notice, would a slightly wider explanation of the settlements concerned be necessary? I appreciate that there is a reference to the Inheritance Tax Act 1984, and, like my hon. Friend the Member for Beaconsfield, I am not an expert on inheritance tax. I once worked as tax clerk in the tax department of Reuters, as a vacation job when I was a student at Oxford, and I picked up little bits of Revenue law as a result. I also had to take a Revenue law paper in my Bar finals. However, I have never practised in Revenue law. If the Minister were to put an explanation on the record, it might help those in another place who may be tax experts. Debates in another place can be assisted if the issue has at least been explored in Committee in this place.

Bob Ainsworth (Labour, Coventry North East)

Again, let us put the position on the record.

The clause allows the director to exercise inheritance tax powers over criminal proceeds that have been put into a trust—the legal term is ''settlement''. The mainstream inheritance tax powers covered under clause 315 apply when wealth is transferred, and clause 315 consequently requires the director to identify transfers of wealth that he wishes to take under his jurisdiction. Assets in a trust can, exceptionally, be subject to inheritance tax every 10 years simply by virtue of continuing to be held in trust. Therefore, there is a need to supplement clause 315 in the case of trusts, so that the director can say which trusts he wants to get involved with, and for what period. Apart from that technical difference, the basic approach of clause 316, and the safeguards that apply, are essentially the same as for the director's other tax powers.

I hope that that helps the hon. Gentleman in terms of identifying the settlements concerned.

Nick Hawkins (Conservative, Surrey Heath)

Yes, it helps me to some extent. The Minister is right to say that, essentially, we are talking about trusts. That is how I read subsection (1). I hope that the provision will work as intended. As my hon. Friend the Member for Beaconsfield said at the end of his remarks on the previous clause, one would wish this clause well, and hope that it assists the director to

do his or her job. I am slightly puzzled about how it will do so, but that may be because of my lack of familiarity with the way in which inheritance tax operates in relation to settlements. I am content to allow those who are more knowledgeable to consider it in another place.

Clause 316 ordered to stand part of the Bill.

Clause 317 - Functions

Dominic Grieve (Conservative, Beaconsfield)

I beg to move amendment No. 480, in page 183, line 35, leave out paragraph (e).

Bill O'Brien (Labour, Normanton)

With this we may take the following amendments: No. 481, in page 183, line 36, leave out paragraph (f).

No. 482, in page 183, line 37, leave out paragraph (g).

Dominic Grieve (Conservative, Beaconsfield)

Clause 317 deals with functions. When I read it, I fully understood why the director might take over the functions of the Board of Inland Revenue in so far as it related to income tax, capital gains tax, corporation tax and—just about—national insurance contributions. However, when it came to statutory sick pay, statutory maternity pay and student loans, I wondered what lay behind the provision. Arguing against myself—as, at any rate, the amendment is probing—I acknowledge that administrative matters may have to be taken into account in relation to those elements in deciding the others, but I could not imagine the director taking a great interest in those three areas on their own. The best that I can do is listen carefully to what the Minister has to say, and when I am more enlightened, I may chip in and ask some more questions.

Nick Hawkins (Conservative, Surrey Heath)

Before the Minister responds, I want to say that I was somewhat less charitable than my hon. Friend the Member for Beaconsfield when we discussed this matter. My initial reaction was that the draftsman must have a vivid imagination concerning the kind of thing that could be the subject of criminal behaviour. Although I have been involved in fraud cases relating to national insurance contributions on one or two occasions during my practice at the Bar, I certainly have not been involved in cases relating to statutory maternity pay or sick pay. It will take a great deal for the Minister to convince me of the relevance of subsection (1)(e), (f) and (g) to the Bill. It seemed to me that a sledgehammer was being used to crack a nut. The provision seemed to fall into the category about which one could say, ''If it is not necessary for it to be there, it is necessary for it not to be there.'' I can just about agree with the inclusion of paragraph (d), on national insurance contributions—although even that is pushing it a bit—but the provision is supposed to be hitting at serious criminal wrongdoing. I find it difficult to understand why paragraphs (e), (f) and (g) should be in a Bill of this sort.

Bob Ainsworth (Labour, Coventry North East)

The hon. Gentleman should not underestimate other people's ingenuity. Some time ago, there was a case that he may have read about in the press, involving individual learning accounts,

which on the surface was surprising, but it was lucrative none the less. We are talking about serious people involved in serious activities. However, that is not necessarily the reason for the inclusion of the matters under discussion.

Nick Hawkins (Conservative, Surrey Heath)

I understand why the Minister raises that issue. I was equally concerned, as were all hon. Members, of every party, about the serious fraud involving individual learning accounts. As the Minister has raised it, it would be relevant for me to say that if the Government had taken a bit more notice of some of the concerns raised by my hon. Friends about the way in which the individual learning accounts scheme was set up, they might not have got themselves into quite such a mess. However, I shall not pursue that, as it would be wide of the debate.

The issue under discussion is taxation powers, which is different from organised fraud by supposed providers of individual learning accounts.

Bob Ainsworth (Labour, Coventry North East)

If the hon. Gentleman is inviting me to believe that he previously flagged up the issues, I would want to look into that in some detail, based on his past record.

Clause 317 was drafted to provide clarity about which taxation functions the director is to have and which are not appropriate. An important feature during the development of the Bill has been the maintenance of a single, national and consistent taxation system. The amendments would result in a variation from that, as the director would not be able to undertake such taxation functions. It would also be extremely difficult for the director to take on general revenue functions in relation to the subject as an employer, without taking on SSP, SMP and student loans, as they are part and parcel of the PAYE process. To attempt to disentangle such functions from the process would be an unnecessary and time-consuming activity.

The clause will provide for the Revenue to carry on with certain functions if that is more appropriate. Even when the director has served notice on the Board of Inland Revenue, the Revenue is not divested of such functions and may continue to operate in the delivery of certain tasks, such as the more resource-intensive routine functions, which will free up the director to focus on using his taxation functions in the best way to contribute to the reduction of crime.

When speaking to earlier amendments tabled to clause 311, I said that the Board of Inland Revenue had no role in the tax affairs of a specified person or company to the extent set out in the notice. That is not, in fact, the case: the director and the board may both exercise functions when that is appropriate. I wish to put the record straight so that there is no misunderstanding about the Bill.

Mark Lazarowicz (Labour/Co-operative, Edinburgh North and Leith)

Will the Minister clarify one point that may deal with the concerns expressed by Opposition Members? Am I right in thinking that the subsection (3) will considerably restrict the sort of widespread use of the Bill that they have described? Will it not provide real protection against the possibility of the Bill being misused as they have hinted might happen?

Bob Ainsworth (Labour, Coventry North East)

My hon. Friend is right. The last thing we want is for the director to wander into areas that are not appropriate to his functions. We have a list of matters for which he may take responsibility. We also have a list of matters for which he should most definitely not take responsibility. It is not our intention to tie the director to dealing with statutory sick pay and other such matters, but they are part of the system. To disentangle them would be a lot worse than dealing with them as they are dealt with now, under the Revenue's procedures. That is our basic argument. The hon. Gentleman said that it would take a tremendous argument to persuade him that such provisions were justified—but the matter is relatively simple, in that those are the areas that it is necessary to include so that the director can pursue his functions.

Ian Davidson (Labour/Co-operative, Glasgow Pollok)

The Minister has explained well why he would keep paragraphs (e), (f) and (g). I understand that most of the roles are covered by the Board of Inland Revenue, but given that corporation tax is listed under subsection (1), should not VAT also be listed? Some complex fraud and financial arrangements will include cheating on VAT. To some extent, VAT will be indistinguishable from income tax, capital gains tax and corporation tax. All such matters should surely be taken together. Will the Minister expand on that?

Bob Ainsworth (Labour, Coventry North East)

My hon. Friend is right. We are giving the director Revenue powers. VAT is not a Revenue function, but a function of Customs and Excise, whose powers are different from those of the Revenue. If we thought it necessary to involve the director in Customs and Excise powers, too, we would have included such a provision in the Bill and we would have had to justify it, but that is not a case that has been made to us.

As I have said, there is a case for pursuing the proceeds of crime by giving the director Revenue powers. However, VAT and the rest fall under the powers of Customs and Excise, which will continue to use the powers that are appropriate to it. Customs and Excise was consulted when the Bill was being drafted. It had a wide input with regard to what should and should not be included not only in part 6, but in the whole of the Bill.

Statutory sick pay, statutory maternity pay and the recovery of student loans may, however, have a bearing on the true tax position of an individual who is the subject of the director's inquiries. For the director to be able to establish the true tax position, he will need to have the full range of general revenue functions.

Nick Hawkins (Conservative, Surrey Heath)

I was not persuaded by the Minister's first point, but I understand that there may be substance to his second point. Rather than including the existing paragraphs (e), (f) and (g), we could follow the logic of the intervention by the hon. Member for Edinburgh, North and Leith (Mr. Lazarowicz). Will the Minister say why there should not be a new subsection (3)(g) saying that the director should not waste his time investigating the minutiae of statutory maternity pay, statutory sick pay and student loans? That would be another way of addressing the point.

Bob Ainsworth (Labour, Coventry North East)

I do not think that there is a necessity for a new subsection (3)(g) saying that the director should not waste his time. Having taken on the responsibility for the matter, the director has to be able to make an assessment. When the individual concerned is an employer, the director has to be able to take into account the way in which the other issues, as well as income tax, are being dealt with. It is self-evident, therefore, why the list and the safeguard list are written as they are. Clearly, there are areas into which the director should not be required to go, nor would he be wanted there.

Dominic Grieve (Conservative, Beaconsfield)

This has been an interesting debate. As my hon. Friend the Member for Surrey Heath said, the most cogent argument presented by the Minister is the need for the director to take such issues into account. When a tax assessment is issued, such factors will have to feature when we are dealing with an individual who is, for example, an employer. I can see that argument.

In the context of taxing money suspected to be the proceeds of criminal activity, it is a fairly far-fetched idea—although still possible—that connected to the criminal activity there would be a legitimate business that provided for statutory sick pay and statutory maternity pay. I am not sure where student loans fit into such an example. However, that illustrates the complexity of the system.

Will the Minister give us an assessment of how many staff would have to be transferred from the Inland Revenue to the director's office? I suspect that, to administer the system, that is what would happen, because it does not sound as if only the director and a couple of other people would be needed. In view of the overall complexity of the tax system, it seems more likely that a discrete department would have to be set up. In taxing individuals and companies in that way, the objective is not only to locate particular sums and ask for 40 per cent., but to take into account the complex tax regulations that cover issues such as sick pay and maternity pay in determining the correct figure.

Nick Hawkins (Conservative, Surrey Heath)

What my hon. Friend rightly says leads me to a further thought. In light of our increasing knowledge about the increasing complexity of the system, might the Minister be forced to review the compliance cost assessment that the Government must provide for all Bills? My hon. Friend and I might want to re-examine that in light of what he has just said.

Dominic Grieve (Conservative, Beaconsfield)

Perhaps the Minister would like to intervene or comment on that before I finish speaking. My hon. Friend is right, and I hope that the Minister will forgive us for raising the matter in this way. The Bill is Government legislation, and we want it to work, but the more I examine it, the more complicated the Revenue functions seem to be. The Minister may, however, say that the provision has not caused a problem in Ireland, which may be a compelling reason for not worrying about it.

Bob Ainsworth (Labour, Coventry North East)

We spoke earlier about the need for a memorandum of understanding on how the Revenue will work with the director. The jobs involved must be

done anyway. Therefore, regardless of whether Revenue staff do the routine jobs so as not to involve, and unnecessarily increase the number of, the people working for the director, the director will work the matter out in a common-sense way with the Revenue.

The hon. Gentleman should not minimise the issues involved. I should have thought that one of the most regular ways in which criminals try to legitimise their income is to set up front companies that employ people, pay statutory sick pay and do all the other things that companies must do. That is exactly how such activity goes on, and will be found out.

Dominic Grieve (Conservative, Beaconsfield)

The Minister is right, and I do not disagree with his analysis. However, he may agree that if a criminal sets up a front company for the purpose of laundering his assets, and the director cannot seize those assets under part 5 or the confiscation provisions in part 2, the mere fact of setting up a front company would normally imply that the criminal involved is prepared to pay tax in the ordinary way to the Board of Inland Revenue. However, we are discussing the director's use of taxing powers in order to tax money that in ordinary circumstances might be expected to escape the attention of the Board of Inland Revenue. I may have misunderstood the matter, but that is what I would normally assume lay behind the provision.

I accept that, as the Minister said earlier, as the director will focus on criminality and the proceeds of crime, he may turn his attention to a front business that is not only fuelled by ''funny money'' but does not pay tax properly. On the whole, history has shown that many people who engage in criminality do not pay their taxes, and try to minimise or evade tax generally, as well as having acquired their money unlawfully and illegitimately in the first place. I do not believe that there is a great deal between us, but if a business exists, the Board of Inland Revenue will try to tax it and will take all those factors into account.

Bob Ainsworth (Labour, Coventry North East)

Yes, but the most relevant point is the focus. There are many small businesses in my constituency, and as long as they order their affairs so as not to draw undue attention to themselves, the Revenue will not single out a particular shop or small business that fronts a scam and launders money derived from it. However, the director may get there, because of other intelligence that he has. The main issue is the focus.

Dominic Grieve (Conservative, Beaconsfield)

The Minister is right.

I have a cottage on the River Thames, and when I am staying there, I occasionally notice moored in the local marinas very large pleasure craft that never seem to do very much. They change hands from time to time, and I do not suppose that I will be spilling the beans if I mention that there are anecdotal rumours that money is often laundered by acquiring and selling those large assets. Such transactions might generate capital gains tax, for instance.

Large pleasure craft—

Mr. Davidson rose—

Nick Hawkins (Conservative, Surrey Heath)

Do they have drawing rooms?

Dominic Grieve (Conservative, Beaconsfield)

I do not know, but as they are often described as gin palaces, I suspect that a drawing room is the last thing they would have.

Ian Davidson (Labour/Co-operative, Glasgow Pollok)

I was going to ask what the rate of exchange was between a cottage on the Thames and sheep and cattle? How many sheep and cattle did the hon. Gentleman's relatives have to steal to fund the purchase of his ill-gotten gain? Will the Minister consider whether his cottage can be reclaimed by the state?

Dominic Grieve (Conservative, Beaconsfield)

My family benefits from the fact that its more nefarious activities were brought to an end by the union of the crowns in 1603. I am glad to tell the hon. Gentleman that as a result of that of that union, the people in the borders who were not deported to Northern Ireland, or, subsequently, to America—and who were not hanged, either—succeeded in transforming themselves into legitimate business men. That happened such a long time ago that even I would find it difficult to distinguish, for the benefit of the hon. Gentleman, between the assets that I own that are derived from criminality, and those that have subsequently been lawfully acquired.

Ian Davidson (Labour/Co-operative, Glasgow Pollok)

Is that the case for the defence?

Dominic Grieve (Conservative, Beaconsfield)

I return to the debate on the clause.

The Minister has persuaded me that I must not interfere with statutory sick pay, maternity pay or student loans, although I will be interested to see how those provisions work in practice. However, I am conscious of my own ignorance, and if those who sit in the other place have greater expertise, they will be able to draw on our discussion to point out any deficiencies that they identify in this part of the Bill.

I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 317 ordered to stand part of the Bill.

Clause 318 - Exercise of Revenue functions

Nick Hawkins (Conservative, Surrey Heath)

The clause addresses the exercise of Revenue functions. Subsection (1) splits up the general Revenue functions and the Revenue inheritance tax functions, and my hon. Friend the Member for Beaconsfield and I have expressed concerns about the way in which the inheritance tax provisions operate. I do not want to reopen that debate, but I wonder why it is necessary to split those functions between separate paragraphs.

I also want the Minister to clarify something. Concern has long been felt about extra-statutory concessions made by the Revenue—as I know from my own work at the Bar, although I do not have specific expertise in that field. Subsection (3) rightly states that the director is bound by

''(a) any interpretation of the law which has been published by the Board''

and

''(b) any concession which has been published by the Board and which is available generally to any person falling within its terms.''

Does paragraph (b) refer to all of what are called the extra-statutory concessions made by the Revenue, or is there some significance in the extra words? They appear to provide a condition that would be available to anyone who falls within the terms?

I ask that question because some extra-statutory concessions are made only to certain classes of persons. An example of that—which will be particularly familiar to my hon. Friend the Member for Beaconsfield, the hon. Member for Wellingborough (Mr. Stinchcombe) and me—is that extra-statutory concessions were adopted for many years in relation to practising barristers. That is the kind of thing that would always get the goat of the hon. Member for Glasgow, Pollok (Mr. Davidson).

Will the Minister tell us more about extra-statutory concessions?

Bob Ainsworth (Labour, Coventry North East)

That is the one to pay for wigs and gowns. Once upon a time in the car industry, I enjoyed a sharp tool allowance; I did an honest day's work for my remuneration then.

Ian Davidson (Labour/Co-operative, Glasgow Pollok)

When you were a Whip.

Bob Ainsworth (Labour, Coventry North East)

Clause 318 requires the director of the agency to apply the taxation system in the same way as the Board of Inland Revenue. He must apply the material published by the board on the interpretation of the law and the extra-statutory concessions. He must also take account of any other material published by the board. The important effect of that is the maintenance of a single, national and consistent taxation system. Without the provision, the Board of Inland Revenue and the director might apply different interpretations of tax law.

The clause also limits the delegation of taxation functions by the director to his staff, rather than to anyone else who provides him with services. It will send out the important message that the director will apply tax law in the same way as the Board of Inland Revenue. That reinforces the point that taxation will be applied fairly and equally to everyone.

The hon. Member for Surrey Heath mentioned his continued concern that inheritance tax is signified separately from other taxation provisions. That is a purely technical necessity. Inheritance tax has not been singled out in any way. The structure of current legislation is the reason why the Bill was drafted in that way.

Nick Hawkins (Conservative, Surrey Heath)

I am grateful to the Minister. I accept his second point; I was simply asking for clarification about inheritance tax.

In connection with the extra-statutory concessions, I was fascinated to hear about the Minister's sharp tool allowance. Clearly, I must research that further. [Interruption.] I did not hear what the hon. Member for Glasgow, Pollok said, so I shall give way to him.

Ian Davidson (Labour/Co-operative, Glasgow Pollok)

You still don't get the point.

Nick Hawkins (Conservative, Surrey Heath)

I am not sure whether the Minister fully answered the question about whether some extra-statutory concessions that do not apply generally would apply here. I understand that the director will work in exactly the same way as the Inland Revenue

does at present. That is fine. That will be on the record in Hansard, and will help any person who wishes to rely on an extra-statutory concession in the future.

Question put and agreed to.

Clause 318 ordered to stand part of the Bill.

Clause 319 - Declarations

Dominic Grieve (Conservative, Beaconsfield)

May I deal with this clause and schedule 5 at the same time? That will avoid any need for a substantive debate on schedule 5.

Clearly, the oaths provided in schedule 5 are designed to ensure that the same degree of confidentiality will apply as the Minister explained applies to the Inland Revenue generally. What problems will be caused by the taxation functions of the Assets Recovery Agency being discharged by staff who might perform the other functions of the agency, too?

The Inland Revenue's status and reputation for confidentiality is substantially based on the fact that it is a discrete organisation. I know that we talk about Chinese walls in solicitors' firms when there may be conflicts of interest. However, I wonder how the process has been thought through in practice. If staff are interchanged to perform the different functions of the Assets Recovery Agency, it could cause problems. I wonder if the Minister and his advisers have given any thought to ensuring that such problems do not arise.

Bob Ainsworth (Labour, Coventry North East)

Clause 319 requires the director and his staff to make a declaration of non-disclosure of taxpayer information. The text of the declarations that they must make is set out in schedule 5. The declarations are similar in wording to those that the law requires the commissioners of Inland Revenue, and Inland Revenue staff, to make. They will place the agency on an equivalent footing to the Inland Revenue in relation to the confidentiality of taxpayer information. The Inland Revenue has always given great importance to the confidentiality of such information, and it follows that that information should not be vulnerable to inappropriate disclosures just because it is held by the Assets Recovery Agency.

The declaration states that the person who signs it will not make any disclosures of information that they receive through their functions under this part of the Bill. The exceptions to the rule are disclosures made for the purpose of carrying out the functions, for the purposes of a prosecution for any offence relating to inland revenue, or in any other such cases required or permitted by law.

I do not know what more we can do. The hon. Gentleman mentions a difficulty that can be dealt with only if we get the right culture into the new agency. I am sure that the Revenue has struggled with the issue.

It has, over a long period, built a reputation. The hon. Gentleman is right to say that it is aided by having a discrete function. I do not believe that the agency will always have specialist staff who deal only with taxation, although that may be the case to some extent. It will certainly help the staff to stick to the declarations that they are required to make.

I do not believe that we can make any more provision within the Bill to ensure that the same standards apply to the staff of the agency as to those of the Revenue. That will require effective management and the establishment of the kind of culture that we want, which will lead not only to the expertise necessary to ensure that some of the Bill's powers are used well, but also to the maintenance of the confidentiality that we want people to expect.

Clause 319 ordered to stand part of the Bill.

Schedule 5 agreed to.

Clause 320 - Interpretation

Nick Hawkins (Conservative, Surrey Heath)

I beg to move amendment No. 484, in page 185, line 13, at end insert—

'(1A) Nothing in this section may be construed to permit investigation of matters which do not constitute offences within the United Kingdom.'.

My hon. Friends and I tabled the amendment because of a debate—indeed, more than one debate—that we had not long before Christmas. The Minister will recall it well. The Opposition expressed grave concerns about the Government's proposals for the so-called European Union arrest warrant. In the light of the concern expressed not only by Opposition Members but by the media—extensively, in some quarters—it is important that we do not allow matters that are not offences under UK law to form the basis for instant arrests on the order of a foreign court.

I would be out of order if I tried to repeat our extensive debates on the EU arrest warrant. Nevertheless, we want it made clear in the Bill that we are not including things that are not offences in British law. We are suspicious that the Government constantly follow a European agenda to extend the purview of the law. I am only sorry that my hon. Friend the Member for Henley (Mr. Johnson) is not in Committee at present, because he certainly waxed lyrical in the debates on the European Union arrest warrant in European Standing Committee B, as the Minister will recall.

It is thus left to me to make the case that in the light of subsection (1)(a) and (b), it would be helpful to add:

''Nothing in this section may be construed to permit investigation of matters which do not constitute offences within the United Kingdom.''

I shall listen with interest to what the Minister has to say. I hope that he will put on the record the fact that he does not want the Bill to be a further extension of the arguments that he advanced during our debates on the EU arrest warrant.

Bob Ainsworth (Labour, Coventry North East)

I can reveal to the hon. Gentleman that the reason why my speaking note is so long is that there are about three different versions of it, depending

on what on earth he is trying to get at. Obviously, my officials do not have the same mindset that some of us are only too well aware of, with the fear of foreigners and foreign jurisprudence, particularly when it comes to Europe. Such matters invade all the aspects of some of the issues that certain hon. Members feel obliged to raise in all corners of this place.

Nick Hawkins (Conservative, Surrey Heath)

The only thing that surprises me is that the Minister, having gone through all the problems that the Government had when they did not produce the right documents, should have seen immediately when the amendment was tabled precisely what we were getting at. Never mind his officials, he should have worked that out.

Bob Ainsworth (Labour, Coventry North East)

Nobody else in Committee knows what the hon. Gentleman is talking about. I certainly do not feel obliged to explain it.

Amendment No. 484 would insert a new provision in the Bill that would make it clear that nothing under clause 320 could be taken to authorise the investigation of matters not constituting offences within the United Kingdom. The clause is about the interpretation of part 6. Subsection (1) defines criminal conduct for the purposes of clause 311 and for the purposes of the definition of criminal property under clause 320.

Under clause 311, criminal conduct is relevant to the gateway criterion to be satisfied in order for the director to exercise his income tax, capital gains tax and corporation tax functions. He must have reasonable grounds to suspect that there is a tax obligation arising from the criminal conduct. The definition of criminal property under clause 320 is relevant to the gateway criterion. I am talking about criminal activity and the British tax system. The hon. Member for Surrey Heath will be hugely pleased to hear that if criminality has occurred in another European country, that does not preclude us from using the powers under the Bill. I am sure that he would want that to be the case.

Nick Hawkins (Conservative, Surrey Heath)

I am grateful to the Minister for part of what he said. We would not want to avoid the United Kingdom authorities having the right to deal with matters that are properly regarded as criminal under our courts. I do not want to bore Committee members, but he will remember our extensive debate when we discussed the EU arrest warrant about generic terms being used in the European directive that is the background to the warrant proposals. That encompasses phrases that are not known under United Kingdom law. I am not wildly suspicious of foreigners as the Minister accused me of being, but I want to have the same certainty under our law as we have always had traditionally, and not vague terms. If I recall correctly, one of them was something like ''xenophobia'', while another was ''swindling'', or some such generic term. Swindling might incorporate specific offences, but in this country we have always fought against the inclusion of generic, sweeping terms and concentrated on specific offences. We and our courts are comfortable with that, and I feel strongly that we should retain it.

My hon. Friend the Member for Cities of London and Westminster (Mr. Field) has concerns on behalf of businesses in his constituency in that regard, and I know that the City of London was worried about the use of such generic terms in relation to the EU arrest warrant proposals. That led, in part, to some of the great media interest in the matter, to which we shall return on future occasions on the Floor of the House, as the Home Secretary has given an undertaking that primary legislation will be introduced in that regard. At this stage, however, I am happy with the Minister's reassurance that we are dealing with UK tax law only. Anyone who has concerns in the future will no doubt be able to rely on the record of what he has said in Hansard.

Mark Field (Conservative, Cities of London and Westminster)

Committee members who have read about my background in this week's edition of The House Magazine in which I was the featured Member of Parliament—in the absence of my hon. Friend the Member for Henley, I can say that that publication is almost as exciting as The Spectator—will know that my mother is German. Not all Conservatives are wild anti-Europeans. Equally, and rightly, we are concerned about the potential effect of the EU arrest warrant. My hon. Friend the Member for Surrey Heath made points aptly in that regard. We may not need a fully fledged amendment, but the words of the Minister would suffice.

Bob Ainsworth (Labour, Coventry North East)

What on earth does the amendment have to do with the European arrest warrant?

Mark Field (Conservative, Cities of London and Westminster)

I suspect that it was one of those late-night or early-morning amendments that were tabled to try to confuse the Minister or, dare I say it, to cause his civil servants to have even more grey hairs. I am surprised that there are only three versions—I was expecting considerably more permutations on which the Minister would have to speak.

It is legitimate to ensure, at least, that if the EU arrest warrant were extended in relation to a raft of new offences, only offences that were criminal offences in the UK would be included, even if they had been committed abroad. That would be sensible. The Minister has provided a certain amount of comfort to my hon. Friend, who will no doubt have the final say on the matter.

Nick Hawkins (Conservative, Surrey Heath)

I certainly welcome the contribution of my hon. Friend, who has reinforced our concerns. Although I would emphasise that the amendment relates directly to the EU arrest warrant, it was not simply an exercise in trying to cause more grey hairs for the Minister's civil servants. In the light of his reassurance, however, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Dominic Grieve (Conservative, Beaconsfield)

I beg to move amendment No. 485, in page 185, line 20, leave out from 'indirectly)' to end of line 22.

Subsection (4) states:

''Property is criminal property if it constitutes a person's benefit from criminal conduct or it represents such a benefit (in whole or part and whether directly or indirectly), and it is immaterial—

(a) who carried out the conduct;

(b) who benefited from it.''

The amendment would remove the words,

''it is immaterial—

(a) who carried out the conduct

(b) who benefited from it.''

Two issues arise from that. First, the words appear to be otiose. I do not understand what they add to the clause. On the face of it, the clause is understandable, straightforward and comprehensible without their inclusion. What would be the effect of their removal?

The second issue goes a little further, and I would like enlightenment on it. Clearly, the trigger for the director's involvement is criminal conduct, which we discussed earlier. However, I infer that persons possessing property must have committed criminal conduct in relation to that property before they could be taxed on it. The mere fact of possessing property that has a criminal origin does not mean necessarily that one has committed an offence that would make one liable to taxation. That must be the case.

Both the wording of the clause and the definition of criminal property are curious. The Minister may be able to explain all that to me without difficulty. Are persons in possession of criminal property liable to taxation only if it is their personal benefit, or if they have committed, or are suspected of committing, a criminal offence in relation to it? I would be grateful for clarification on that, because otherwise the basis of clause 311 seems to unravel and we are dealing with a wider matter than the suspected criminal conduct of an individual.

Bob Ainsworth (Labour, Coventry North East)

The amendment would change the definition in the clause of when property is criminal property. The definition is relevant only to clauses 315 and 316, which make provision for the director's role in cases in which inheritance tax is payable, because the term is not used elsewhere in part 6.

Under the current definition, property is criminal property if it constitutes a person's benefit from criminal conduct or it represents such a benefit in whole or in part and whether directly or indirectly. Subsection (4) puts it beyond doubt that it is irrelevant who carried out the conduct and who benefited from it. It is, in effect, the same provision that is applied in clause 311 to the income and gains covered by that clause, but adapted to the language of inheritance tax.

The revised definition would remove the reference to its being immaterial who carried out the conduct and who benefited from it. It would not, however—the hon. Gentleman is right—remove the reference to a person's indirect benefit from criminal conduct.

It is not clear that removing the reference would necessarily prevent the director from exercising his inheritance tax functions in cases in which the person who is taxed did not commit the criminal conduct. However, an undesirable element of doubt could arise if the suggested text were deleted.

We intend for the director to be able to exercise his taxation function in any case in which he has reasonable grounds to suspect that the criminal conduct or criminal property test is satisfied. The director will determine whether that would contribute to the reduction of crime in particular circumstances. In cases in which the person liable to be taxed is not suspected of involvement in criminal activities, it is unlikely that the director would, in most cases, exercise his taxation functions. In those circumstances, I ask the hon. Gentleman to withdraw the amendment.

Dominic Grieve (Conservative, Beaconsfield)

I am grateful to the Minister. He has helped to clarify the matter. I am also grateful for confirmation that deleting half of subsection (4) would not make a big difference.

The wider issues still trouble me slightly. Let me take an example. I find it difficult to think of concrete examples for part 6, although I always try to apply my mind to the Bill in that way. Let us imagine a godfather figure who has large quantities of assets that are suspected to have been acquired as a result of criminal conduct. He dies and the inheritance tax falls due on his estate. There is no difficulty in that example because the suspected criminal conduct is that of the person who is dead, and it is his estate that falls liable to taxation. However, he may have made inter vivos gifts that would fall into the hands of another person, who would be expected to declare any gift to the Revenue if it was taxable. That person may not be suspected of any criminal conduct. I hope that the Minister understands my point.

When we discussed clause 311, it was emphasised that we were talking about the director intervening when an interest had accrued

''as a result of the person's or another's criminal conduct''.

Those were the only circumstances in which he could intervene and take over the board's functions. Clause 320(4) introduces the concept of criminal property that may be in the possession of someone who has not committed any criminal conduct. That is why I was interested to probe the issue. It seemed a departure from the principle set out in clause 311.

The Minister has partially reassured me on the issue, but—and I emphasise that I do not know the answer to my question—I remain slightly perplexed about the example of, for instance, an inter vivos gift. Money might pass to a person who has not committed any criminal conduct, and it might be thought that the money should be taxed. Even if the money were not declared to the Board of Inland Revenue, it would still be the board's responsibility, because the director's responsibilities do not impinge on breaches of tax law, as the Minister explained. The responsibilities relate only to breaches of the wider criminal law, in which he may intervene.

I am sorry if that is muddling to the Minister. In fact, it is muddling to me. His officials seem to have cottoned on to that. I wonder whether ''criminal property'' constitutes a distinct category. People who are not suspected of any criminal conduct may be taxed. That is the best way that I can put the matter to the Minister, who seems to have received a message

from someone who may have understood what I am trying to say.

Bob Ainsworth (Labour, Coventry North East)

I am convinced that the hon. Gentleman never sleeps. I am fascinated by the pleasure that he gets when he is satisfied that he is right about the way in which the Bill works, and about whatever it is that he stumbled across at 2 o'clock yesterday morning, or over the weekend.

If a person has not been involved in criminality, the director will not as a matter of routine become involved. The issue will involve his taxation powers only when it has passed down the hierarchy, having been passed to him because some criminal activity had been pursued. He will be involved only if various investigations have been undertaken as to whether criminal confiscation or civil recovery can be used, and whether a tax liability has been avoided. That is self-evident.

Part of the director's function is to reduce crime. We do not want to punch a hole in the director's abilities, and there is therefore no intention of departing from the principle in clause 311, whether it involves inheritance tax, income tax or another tax liability. The person who is taxed needs to be shown to have committed the criminality. I do not know whether the hon. Gentleman is confusing himself; he is to some extent confusing me. I do not believe that I shall have satisfied him on all the issues that he raised.

Dominic Grieve (Conservative, Beaconsfield)

I am very grateful to the Minister, who has substantially answered my question. It was always my understanding that the wording of clause 311 governs the whole of part 6: it identifies when the director can take over Inland Revenue functions. I merely highlight that there might be an inconsistency in the wording of clause 311 in the case of an inter vivos transfer of assets within the seven-year period to a person who has not committed a criminal offence but whom the director wants to investigate for taxation purposes. In such circumstances, the wording of clause 311 might preclude his doing so. That is my late-night anxiety. I have shared it with him; it can now be his anxiety to share with his officials. I shall not trouble the Committee further.

The rest of the debate is in Hansard.