Asked by: Lord Allen of Kensington (Labour - Life peer)
Question to the HM Treasury:
To ask Her Majesty's Government what assessment they have made of the impact on (1) jobs, and (2) public finances, of the ending of participation in the VAT Retail Export Scheme; and what action they plan to take to offset any such impact.
Answered by Lord Agnew of Oulton
Ahead of the end of the transition period, the Government has announced the VAT and excise duty treatment of goods purchased by individuals for personal use and carried in their luggage arriving from or going overseas (passengers). The following rules will apply from 1 January 2021:
- Passengers travelling from Great Britain to any destination outside the United Kingdom (UK) will be able to purchase duty-free excise goods once they have passed security controls at ports, airports, and international rail stations.
- Personal allowances will apply to passengers entering Great Britain from a destination outside of the UK, with alcohol allowances significantly increased.
- The VAT Retail Export Scheme (RES) in Great Britain will not be extended to EU residents and will be withdrawn for all passengers.
- The concessionary treatment on tax-free sales for non-excise goods will be removed across the UK.
The Government published a consultation which ran from 11 March to 20 May. During this time the Government held a number of virtual meetings with stakeholders to hear their views and received 73 responses to the consultation. The Government is also continuing to meet and discuss with stakeholders following the announcement of these policies.
The detailed rationale for these changes are included in the written ministerial statement and summary of responses to the recent consultation. A technical note has also been issued to stakeholders to expand on this document and to respond to issues raised by stakeholders.
HMRC estimate that VAT RES refunds cost around £0.5 billion in VAT in 2019 for around 1.2 million non-EU visitors. In 2019 the ONS estimate there were substantially more EU visitors (24.8 million) than non-EU passengers (16.0 million) to the UK. This implies an extension to EU residents would significantly increase the cost by up to an estimated £0.9 billion. This would result in a large amount of deadweight loss by subsidising spending from EU visitors which already happens without a refund mechanism in place, potentially taking the total cost up to around £1.4 billion per annum.
The concessionary treatment on tax-free sales currently affects airports that fly to non-EU destinations. The extension of duty-free sales to EU bound passengers will be a significant boost to all airports in England, Scotland and Wales, including smaller regional airports which have not been able to offer duty-free to the EU before.
HMRC estimate that around £150 million of VAT is not charged as a result of tax-free airside sales. As with the VAT RES, extending the relief to the EU would significantly increase the cost of the scheme and result in a large amount of deadweight loss by subsidising spending from EU-bound passengers which already happens.
The final costings will be subject to scrutiny by the independent Office for Budget Responsibility and will be set out at the next forecast.
The Government also recognises the challenges the aviation sector is facing as it recovers from the impacts of Covid-19 and has supported the sector throughout the pandemic, and continues to do so, including schemes to raise capital, flexibilities with tax bills, and financial support for employees.
Asked by: Lord Allen of Kensington (Labour - Life peer)
Question to the HM Treasury:
To ask Her Majesty's Government what assessment they have made of the survey results published by Make UK in its report Manufacturing Monitor, published on 7 September, and in particular the 62 per cent of respondents who thought the Coronavirus Job Retention Scheme should be extended for critical sectors; and what action they plan to take as a result.
Answered by Lord Agnew of Oulton
The Government is aware of the intense disruption businesses in the manufacturing sector have faced due to the pandemic and has sympathy with all those affected.
The Coronavirus Job Retention Scheme (CJRS) was designed to be in place only as a temporary measure while businesses regrouped and responded to the crisis. It would be challenging to extend the CJRS for specific sectors in a fair and deliverable way and it would also be difficult to do so without creating distortion, particularly as some firms work across multiple sectors.
The CJRS will remain open until the end of October, and other schemes in the Government’s unprecedented package of support for businesses remain open for those who need it.
The Government is continuing to collect evidence on the impact of the pandemic, including on specific sectors, and to work with businesses and representative groups. This will of course inform the Government’s efforts to support the recovery heading into the autumn.
Asked by: Lord Allen of Kensington (Labour - Life peer)
Question to the HM Treasury:
To ask Her Majesty's Government whether they will take into account the multi-channel nature of retail sales when (1) undertaking their fundamental review of business rates, and (2) considering the introduction of any form of online sales tax.
Answered by Lord Agnew of Oulton
On 21 July, HM Treasury published a Call for Evidence for the fundamental review of business rates. The Call for Evidence invites stakeholders to contribute their views on ideas for reform on all elements of the business rates system and on alternative taxes.
As set out in the Call for Evidence, the fundamental review will have an interim report in Autumn 2020, ahead of concluding in Spring 2021.
The Government will consider all relevant evidence submitted to the review.
Asked by: Lord Allen of Kensington (Labour - Life peer)
Question to the HM Treasury:
To ask Her Majesty's Government what plans they have to extend the VAT cut for the hospitality and tourism sector to high street retailers.
Answered by Lord Agnew of Oulton
In light of the COVID-19 outbreak, the Chancellor has introduced a range of measures to help individuals and businesses through the pandemic, including grants, loans and relief from business rates at a cost of more than £300 billion.
The temporary reduced rate of VAT will support the tourism and hospitality sectors and will help over 150,000 businesses and protect over 2.4 million jobs. There are currently no plans to expand the scope of the temporary VAT reduction to include high street retail businesses. However, the Government keeps all taxes under review.
Asked by: Lord Allen of Kensington (Labour - Life peer)
Question to the HM Treasury:
To ask Her Majesty's Government when they expect to issue a call for evidence as part of the fundamental review of business rates, announced on 11 March; and when they anticipate that review to complete.
Answered by Lord Agnew of Oulton
On 21 July, HM Treasury published a Call for Evidence for the fundamental review of business rates. The Call for Evidence invites stakeholders to contribute their views on ideas for reform on all elements of the business rates system and on alternative taxes.
As set out in the Call for Evidence, the fundamental review will have an interim report in Autumn 2020, ahead of concluding in Spring 2021.
The Call for Evidence can be found on the gov.uk website.
Asked by: Lord Allen of Kensington (Labour - Life peer)
Question to the HM Treasury:
To ask Her Majesty's Government what action they will take to encourage mortgage lenders to reduce the proof of income burden on applicants who are self-employed.
Answered by Lord Agnew of Oulton
The proof of income information requirements from lenders for all mortgage applicants, including self-employed individuals, are commercial decisions and the Government does not seek to intervene.
However, the current FCA rules on how firms should assess the affordability of mortgages from applicants are deliberately framed to accommodate both salaried and self-employed borrowers.
New applicants will be asked to provide information on their income and expenditure, but FCA rules allow firms to decide for themselves how best they satisfy themselves regarding income information. FCA rules are not reliant on documents such as payslips, for example lenders could choose to use company accounts or projected business plans.
Asked by: Lord Allen of Kensington (Labour - Life peer)
Question to the HM Treasury:
To ask Her Majesty's Government what progress they have made in developing a scheme to provide financial support to directors of small businesses who pay themselves through a dividend; and what steps they have taken since the Prime Minister committed to look into the options for that group of people on 27 May.
Answered by Lord Agnew of Oulton
Those who pay themselves a salary through their own company are eligible for the Coronavirus Job Retention Scheme (CJRS). The CJRS is available to employers, including owner-managers, and individuals paying themselves a salary through a PAYE scheme are eligible. Where furloughed directors, including companies with a sole director, need to carry out particular duties to fulfil their statutory obligations, they may do so provided it is no more than would reasonably be judged necessary for that purpose.
Dividends are not covered by the CJRS or the Self-Employment Income Support Scheme (SEISS). Income from dividends is a return on investment in the company, rather than wages. Under current reporting mechanisms it is not possible for HM Revenue and Customs (HMRC) to distinguish between dividends derived from an individual’s own company and dividends from other sources, and between dividends in lieu of employment income and as returns from other corporate activity.
The Government has worked with stakeholders and carefully considered the case for providing a new system for those who pay themselves through dividends. However, targeting additional support for those who pay their wages via dividends is much more complex than existing income support schemes. Unlike announced support schemes, which use information HMRC already hold, such a scheme would require owner-managers to make a claim and submit information that HMRC could not efficiently or consistently verify to ensure payments were made to eligible companies, for eligible activity.
The Government has heard the suggestion made that HMRC could adopt a ‘pay now, claw back later’ approach. However, such an approach would be highly resource-intensive to ensure appropriate compliance, and there is a high risk that incorrect or fraudulent payments could not be recovered, ultimately at the cost of UK taxpayers.
The Chancellor of the Exchequer has said there will be no further extension or changes to the SEISS or CJRS. However, other support is available. The CJRS and SEISS continue to be just two elements of a comprehensive package of support for individuals and businesses. This package includes Bounce Back loans, tax deferrals, rental support,?increased levels of Universal Credit, mortgage holidays, and other business support grants.
Asked by: Lord Allen of Kensington (Labour - Life peer)
Question to the HM Treasury:
To ask Her Majesty's Government what assessment they have made of the proposals for a Furloughed Space Grant Scheme, put forward by the British Retail Consortium and the British Property Federation; and what plans they have, if any, to implement such a scheme.
Answered by Lord Agnew of Oulton
In this difficult period, the government is making sure that people and businesses have access to the support they need as quickly as possible. That is why the Government has announced unprecedented support to protect against the current economic emergency, including immediate steps to give businesses access to cash to pay its rent, salaries or suppliers. Alongside this, the Government has also taken temporary steps to protect commercial tenants from eviction as well as to safeguard UK high streets against aggressive debt recovery actions during the coronavirus pandemic.
Asked by: Lord Allen of Kensington (Labour - Life peer)
Question to the HM Treasury:
To ask Her Majesty's Government how many of the 750 Treasury roles due to be moved to a new ‘economic campus’ in the North of England will be recruited from the local labour market; how many of these roles will be (1) of Grade 7 or below, and (2) of Grade SCS1 and above; and when they expect these roles will be filled.
Answered by Lord Agnew of Oulton
As announced at the Budget on 11 March, the government will establish a significant new campus in the north of England focused on economic decision making. It will contain at least 750 roles, made up of teams from HMT, BEIS, DIT and MHCLG. We expect the implementation timetable to be set out at the forthcoming Spending Review, though we hope the new office will be fully operational by the end of this Parliament.
The exact grade mix and range of roles that the Treasury will provide has yet to be finalised, and is subject to internal consultation with the teams involved. However, we expect a full range of roles and grades, including SCS, to be represented. The Treasury roles will be filled with a mixture of local recruitment and staff who choose to relocate.
Asked by: Lord Allen of Kensington (Labour - Life peer)
Question to the HM Treasury:
To ask Her Majesty's Government what plans they have to ensure that (1) retail workers, and (2) the retail sector, are compensated for loss of earnings and revenue resulting from the COVID-19 outbreak.
Answered by Lord Agnew of Oulton
The government has unveiled a comprehensive and sizable package of direct fiscal support for business through tax relief and cash grants.
Businesses in the retail, hospitality and leisure sectors in England will not have to pay business rates for 12 months, to support firms with costs and cashflow. This includes £25,000 for retail leisure and hospitality businesses up to £51,000 rateable value, and £10,000 for smaller retail, leisure and hospitality businesses, and several hundred thousand businesses eligible for small business or rural rate relief.
We will also support businesses by deferring Valued Added Tax (VAT) payments for 3 months, Taxpayers will be given until the end of the 2020-21 tax year to pay any liabilities that have accumulated during the deferral period. Retailers can also access other support mechanisms, including Coronavirus Business Interruption Loans.
Under the Coronavirus Job Retention Scheme, all UK employers with a PAYE scheme will be able to access support to continue paying employees 80% of their wages, up to £2,500 per month, to safeguard workers from being made redundant.