Damian Hinds
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Finance Bill (Sixth sitting)
Damian Hinds Excerpts(7 years, 10 months ago)
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Rebecca Long Bailey
I will be very brief. Clauses 130 and 131 increase the rates of landfill tax in line with retail prices index inflation from 1 April 2017 and 1 April 2018. We have no issues with that change and support the clauses. However, it would be helpful if the Minister could provide the latest figures for the levels of waste being sent to landfill in comparison with last year. After all, the purpose of the tax is to reduce the amount of waste sent to landfill, so it would be good to know if it is working in practice.
On a similar note, the 2016 Budget announced a consultation on landfill tax reform over the summer. I understand that there is an intention to consult on amending the definition of a taxable disposal of waste at a landfill site and clarifying the scope of the tax. According to the ENTRUST website, full proposals are being set out in a document later in 2016 and any changes legislated for in the Finance Bill 2017. Will the Minister confirm the exact timetable, if he is aware of it, for that consultation?
Finally, as the Financial Secretary and the Exchequer Secretary will no doubt be aware, the Government carried out a consultation on reforming the landfill communities fund last year. The LCF provides funding for certain specified projects in an area affected by a landfill site. Draft regulations were then published that would make a detrimental change to the way the fund operates. The regulations proposed the removal of provisions for third parties to contribute 10% of landfill operators’ contributions to projects, and instead make it compulsory for landfill operators to fund the 10% themselves.
As the scheme is voluntary, stakeholders were rightly concerned that landfill operators would simply withdraw from the scheme and that an important funding stream would be lost. I wrote a submission to the consultation on the regulations, and I am pleased to say that the Government withdrew that particular part of the regulations, which were subsequently laid before the House on Budget day. I would like to take this opportunity to thank the Ministers for taking my advice.
The Exchequer Secretary to the Treasury (Damian Hinds)
It is a pleasure to serve under your chairmanship once again, Mr Howarth. As the hon. Lady said, clauses 130 and 131 increase both the standard and lower rates of landfill tax in England, Wales and Northern Ireland in line with RPI from April 2017 and again from April 2018. She asked how successful landfill tax has been in reducing the amount of waste sent to landfill. Although I do not have the year-on-year figures in front of me, since 1996, when landfill tax was introduced, the amount of waste disposed of at landfill sites has nearly halved, while recycling rates have increased threefold. Of course, reducing landfilling of waste benefits the economy, as we make better use of valuable resources rather than throwing them away. At the same time it helps us reduce greenhouse gas emissions from decomposing waste and meet our climate change targets.
When disposed of at a landfill site, each tonne of standard-rated material is currently taxed at £84.40. Less environmentally damaging waste pays the lower rate of £2.65 per tonne. The clauses make amendments to the Finance Act 1996 to increase the standard and lower rates of landfill tax in line with inflation, based on the RPI, rounded to the nearest 5p. The changes will therefore see rates per tonne of £86.10 and £2.70 respectively from 1 April 2017 and £88.95 and £2.80 respectively from 1 April 2018.
Landfill tax already provides a disincentive to landfill by making it an expensive waste treatment method compared with alternatives. By increasing rates in line with inflation, we maintain the incentive for industry to continue the move towards a more sustainable circular economy. In addition, we know that certainty is important to the waste management industry. The clauses will mean that businesses can have the confidence to invest in new facilities and technology, knowing that those will offer a long-term, economically viable alternative to landfill. That is why the changes will set rates as far ahead as March 2019. The clauses provide certainty on both the standard and lower rates of landfill tax, confirming that they will not be eroded by inflation and maintaining the incentives to invest in more sustainable waste treatment.
I note the hon. Lady’s comments on the landfill communities fund. Of course, the Government decided to retain and reform that fund, and she is correct about the changes made and then adapted on the 10% contribution. The guidance from ENTRUST does encourage operators to make that type of contribution. The hon. Lady also asked about the consultation on the definitions for types of waste. The consultation runs from 26 May until 18 August.
Christian Matheson (City of Chester) (Lab)
It is a pleasure to see you in the chair once again, Mr Howarth. I wish to speak only briefly. My hon. Friend the Member for Salford and Eccles reminds us that the Scottish National party Government in Scotland have chosen to reduce APD. It is nice to hear that for once they have actually done something with the tax powers they have been given, because of course they have been dodging other tax powers despite having the authority to exercise them.
May I echo the words of my hon. Friend the Member for Salford and Eccles? The tourism industry across the UK is crying out for clarity on APD, because of the devolution issues. The differences in air passenger duty now make it financially viable for a family of five to drive from the north-west of England, the area that I—and your good self, Mr Howarth—represent, up to Scotland to save money. Those price differentials now mean that that makes sense, so they are damaging the tourism industry and the airport sector outside London.
The impression of the tourism industry—fairly held, I think—is that Treasury Ministers have been kicking the issue into the long grass for a long while. They have been looking for a solution, not finding one and then having a further review. My hon. Friend has outlined some of that. I therefore stress to Ministers again that there has to be a long-term and sustainable answer to those variables in air passenger duty. The existing situation is not sustainable, so the sooner we get a consistent and sustainable balance that the tourism industry can live with, the better for our economy as a whole.
Damian Hinds
Clause 137 makes changes to ensure that the rates of APD for 2016-17 increase in line with RPI, so that the aviation sector continues to play its part in contributing towards general taxation and reducing the deficit.
As the hon. Member for Salford and Eccles rightly said, APD raises a little more than £3 billion annually, so it is an important part of Government revenue. The increase in rates has effect from 1 April this year and was announced at Budget 2015 to give the industry sufficient notice of the change in rates. The low level of inflation and the rounding of APD rates to the nearest £1 mean that short-haul rates will remain frozen for a fifth year in a row, which will be to the benefit of about 80% of passengers.
The hon. Members for Salford and Eccles and for City of Chester raised the important subject of APD devolution and the options that the Government have been considering. To be clear, APD will be under the control of the Scottish Parliament, but the Scottish Government are still consulting, so no change has yet been made. The three options in the discussion paper published at summer Budget 2015 were correctly identified by the hon. Lady: to devolve the setting of APD within England; to vary the rates within England; or to provide aid to regional airports. The issues are complex and we continue to consider the various options. I am not in a position to give a specific date, but we will of course respond in due course.
APD is a fair and efficient tax, where the amount paid corresponds to the distance and class of travel of the passenger. The changes under the clause will ensure that the aviation sector continues to play its part in contributing towards general taxation.
Question put and agreed to.
Clause 137 accordingly ordered to stand part of the Bill.
Clause 138
VED: rates for light passenger vehicles, light goods vehicles, motorcycles etc
Question proposed, That the clause stand part of the Bill.
Rebecca Long Bailey
The clause increases the rate of vehicle excise duty on certain vehicles in line with RPI for the financial year 2016-17. This is standard practice, as VED rates have increased in line with inflation since 2010. Labour has not opposed that and I have no intention of doing so today, but I have some issues to take up with the Minister.
I want to repeat on the record how opposed we were to the last raft of changes to VED made in the previous Finance Bill. These changes put a stop to the link between the level of carbon dioxide emissions and the rate of vehicle excise duty. There is now simply a flat rate after the first year, with a surcharge on cars that cost more than £40,000. We simply do not see the Government’s justification for removing incentives for lower-polluting cars. I would be grateful if the Minister clarified that. Aside from that issue, I am happy for this clause to stand part of the Bill.
Damian Hinds
Clause 138 makes changes to vehicle excise duty rates for cars, vans and motorcycles, with effect from 1 April 2016. For cars first registered prior to 1 March 2001, vehicle excise duty is based on the car’s engine size. The rates of duty for those cars and vans before 1 March 2001 increase by £5 only as a result of this clause. For cars first registered on or after 1 March 2001, vehicle excise duty is based on the car’s carbon dioxide emissions. There are currently 13 CO2 bands. One rate is payable in the first year, and a separate, standard rate is payable in all subsequent years. For about 98% of those cars, the payment will be no more than £5 extra in 2016-17. That means that a motorist already owning a popular family Ford Focus will pay only £5 more.
First-year rates influence the purchasing choices of drivers buying brand-new cars. They act as a signal at the point of purchase that people can save money by choosing a cleaner car. In response to what the hon. Lady said about the 2017 reforms, it is not true that we have removed the incentives on CO2. First-year rates have an extra effect: the so-called “sticker price” effect. There is also the zero rate for zero-emission cars.
We had a fairness and a sustainability challenge on vehicle excise duty. The sustainability challenge was due to the projected decline in revenues as more and more cars come into the lowest charging bands, and the fairness challenge was due to the fact that people who can afford only an older, second-hand car would pay more than those who can afford to change their car every couple of years.
This measure will mean that the highest-emitting new cars will pay first-year rates of £1,120—an increase of £20—and rates for the cleanest cars will remain unchanged at zero. The clause also increases the standard rate of duty for vans first registered from March 2001 onwards by £5 only. Finally, rates for motorcycles will also increase in line with inflation. Motorcyclists will see an increase of no more than £2.
Question put and agreed to.
Clause 138 accordingly ordered to stand part of the Bill.
Clause 139
VED: extension of old vehicles exemption from 1 April 2017
Question proposed, That the clause stand part of the Bill.
Rebecca Long Bailey
This clause extends the exemption from vehicle excise duty to vehicles constructed 40 or more years ago on an automatic rolling basis on 1 April each year. The VED exemption is intended to support classic vehicles, which the Government consider—and I agree—to be an important part of the nation’s heritage. It appears to be a simple legislative change to create a rolling 40-year exemption, rather than requiring separate legislation year by year. We did not oppose the equivalent measure in the Finance Act 2014 when the Budget 2014 proposal for a rolling exemption was debated, and we do not oppose this clause today.
However, the Minister is not going to get off that lightly. I would like him to address a couple of my concerns. The policy paper indicates that the clause has no Exchequer impact, but the tax information and impact note for the original measure in Budget 2014 projected an impact of £5 million in 2016-17, £10 million in 2017-18 and £15 million in 2018-19. Will the Minister clarify whether there has been a change in the Treasury’s assessment of the impact of the measure, or whether the zero impact assessment relates purely to the technical change to the legislative mechanism, rather than the underlying policy?
Furthermore, the original note stated that in 2014-15 the measure will
“have an advantageous impact for the owners of around 10,000 classic vehicles...Every year thereafter, the number of classic vehicles will increase as additional cohorts of vehicles are included in the exemption. It is estimated that an additional 10,000 classic vehicles will be affected in each year of the scorecard.”
As of 30 September 2011, 162,734 cars and 152,836 other vehicles were exempt from VED on the grounds of age. Will the Minister confirm that the figure of 10,000 vehicles in the HMRC policy paper is additional to the figures in previous years, and will he give us an update on the total number of vehicles, either today or later in writing?
Damian Hinds
I rise to speak to a fairly uncontroversial clause on the exemption of classic vehicles from VED. The Government believe that classic vehicles are an important part of the nation’s heritage. According to the Historic Vehicle Research Institute, the historical car industry employs about 28,000 people in the UK. The VED exemption is designed to support the maintenance and use of classic vehicles.
The classic vehicles VED exemption was first introduced under the Conservative Government in 1996 on a rolling 25-year basis. The Labour Government froze the exemption in 1998 so that it applied only to vehicles built after 1 January 1973. The Government announced in Budget 2013 that they would extend the exemption to vehicles built before 1 January 1974. Budget 2014 went further, announcing the introduction of a new rolling 40-year VED exemption for all vehicles, which extended the exemption to vehicles constructed before 1 January 1975 and 1 January 1976, to come into effect on 1 April 2015 and 1 April 2016 respectively.
Clause 139 places the VED exemption on a permanent basis so that, from 1 April each year, vehicles constructed more than 40 years before 1 January of that year will be automatically exempt from paying VED. In 2016-17, the exemption is worth £145 or £235 depending on the vehicle’s engine size. As the hon. Lady said, the Government estimate that about 10,000 owners of classic vehicles will benefit each year, and that is additional to previous figures.
The operational cost of the programme to the DVLA is the negligible cost of updating its IT systems, which will need to be done each year. The standard in the financial statements and in setting out projections rounds down to the nearest £5 million, which means that the cost of a single year is less than £5 million and is therefore classed as negligible. However, the tax information and impact note refers to a rolling programme, so we have to add up the less than £5 million each time.
This measure ensures administrative and legislative efficiency by automatically extending the classic car exemption on a permanent basis. I hope the clause stands part of the Bill.
Question put and agreed to.
Clause 139 accordingly ordered to stand part of the Bill.
Clause 140 ordered to stand part of the Bill.
Clause 141
Fuel duties: aqua methanol etc
Question proposed, That the clause stand part of the Bill.
The Chair
With this it will be convenient to discuss that schedule 17 be the Seventeenth schedule to the Bill.
Damian Hinds
The clause will introduce a reduced duty rate for aqua methanol that is set aside for use as fuel in any engine, motor or other machinery. Aqua methanol is a new, greener fuel that is 95% methanol and 5% water. The reduced duty rate is intended to incentivise the uptake of aqua methanol, as the hon. Lady said, as a greener alternative fuel to petrol and diesel.
The Government are committed to improving air quality in the UK through the reduction of carbon dioxide and nitrogen dioxide emissions. Every year, around 50,000 people die prematurely due to poor air quality. Road vehicles account for around 92% of UK transport carbon dioxide emissions and 80% of nitrogen dioxide emissions in roadside locations.
Successive Governments will need to de-carbonise the road transport sector in the UK if we are to deliver on our commitments to reduce greenhouse gas emissions —as I know both the hon. Lady and I are committed to doing. Indeed, the fourth carbon budget requires successive Governments to reduce greenhouse gas emissions by 51% relative to their 1990 levels by 2027. Any action to meet those targets will need to include the deployment of new greener alternative fuels, and aqua methanol is one of those. Incentivising its use has the potential to contribute to the UK meeting its air quality targets through reductions in the use of diesel, which is the largest source of nitrogen dioxide emissions.
In the 2013 autumn statement, the Government announced that the differential between the lower duty rate for alternative road fuel gases and the main duty rate for petrol and diesel would be maintained until 2024. In the 2014 Budget the Government went further, announcing that we would also apply a reduced fuel duty rate to aqua methanol. The clause follows through on that commitment. It introduces a reduced duty rate of 7.9p per litre for aqua methanol to the main rate of 57.95p per litre. The decisions on aqua methanol were outlined in the autumn statement in 2014 and the costings of the policy remain consistent with our forecasts at that time, although the delay to the introduction of the new rate means costs to the Exchequer have also been delayed.
The reduced duty rate was recalculated based on fuel duty changes and the energy content. The clause legislates for the reduced rate of excise duty for aqua methanol, which will incentivise the uptake of that alternative fuel and help us to deliver on the commitment to reduce greenhouse gas emissions and improve air quality in our towns and cities.
Question put and agreed to.
Clause 141 accordingly ordered to stand part of the Bill.
Schedule 17 agreed to.
Clause 142
Tobacco products duty: rates
Question proposed, That the clause stand part of the Bill.
Rebecca Long Bailey
The Committee will be pleased to hear that I have just a few sentences to say about this clause. For the benefit of the Committee, the clause simply deals with increases in the rates of tobacco duty. I will not go into detail because I am sure the Minister will cover the specifics, but I want to illustrate some of the issues I noticed in the HMRC policy paper. The policy paper refers only to the 5% increase for hand-rolling tobacco and states that this measure alone is expected to raise £10 million each year to 2020-21. Will the Minister provide us with the expected Exchequer impact for all the measures in the clause, either now or later in writing?
Alistair Darling announced in the last Labour Government’s final Budget that tobacco duty would rise by 1% above inflation in 2010 and by 2% above inflation for the following four years thereafter. The Opposition therefore support the introduction of the escalator in the Finance Act 2014 and we will certainly support this clause today.
Damian Hinds
Clause 142 makes changes to ensure that the tobacco duty regime continues to work as part of the Government’s wider health agenda to reduce smoking prevalence. The clause implements tobacco duty increases of 2% above the RPI rate of inflation for all products and an additional 3% increase for hand-rolling tobacco, meaning a 5% increase in total for hand-rolling tobacco. The Government are committed to reducing smoking rates, especially among young people. Smoking is the single largest cause of preventable illness and premature death in this country. It accounts for around 100,000 deaths a year and kills around half of all long-term users. Reducing the affordability of tobacco products through taxation is widely acknowledged to be effective in reducing smoking prevalence.
The changes that have already come into effect have added 21p to a packet of 20 cigarettes and 44p to a 30g pouch of hand-rolling tobacco. Research shows that, as well as establishing high tobacco duty rates, maintaining those high rates is also important in reducing smoking prevalence. That is why, as was announced in the 2014 Budget, annual duty increases of 2% above inflation will continue until the end of the Parliament. I should clarify for the hon. Lady that that means they are already in the projections for the public finances and that the overall impact of the two changes is as published in the Budget scorecard. The clause implements the tobacco duty rate increase of 2% above inflation and an additional 3% for hand-rolling tobacco, which supports our wider health agenda.
Question put and agreed to.
Clause 142 accordingly ordered to stand part of the Bill.
Clause 143
Alcoholic liquor duties: rates
Question proposed, That the clause stand part of the Bill.
Rebecca Long Bailey
The clause increases the rates of alcohol duty on wine and some ciders and perries in line with inflation. The changes took effect on 21 March. In discussing the clause, I want to touch on one type of alcohol duty that is notably not being increased in line with inflation.
Damian Hinds
Clause 143 sets out changes to alcohol duty rates from 21 March this year. It was announced in the Budget that the duty on beer, spirits and most ciders would be frozen this year and that the duty on most wines and higher-strength sparkling cider would rise with inflation. With those changes, we continue to support the pub industry, which plays such an important part in British cultural life. To respond to the hon. Lady’s point about what is most advantageous to the on-trade—to pubs—beer is considered to have a greater price sensitivity effect than wine, by a number of estimates.
The British Beer and Pub Association estimates that about 30 million adults visit a pub at least once a month. As I think all hon. Members would acknowledge, pubs are important community assets that promote responsible drinking in a generally friendly atmosphere. In the Budget, the Government therefore took further action to support the sector. Given that about two thirds of alcohol sold in pubs is beer, we froze duty on a typical pint of beer, following three consecutive beer duty cuts that were widely welcomed. The Government’s support for pubs means that a typical pint of beer is now 10p cheaper than it would have been if we had not ended the beer duty escalator in 2013. I am sure that is welcome news to many, many pub goers. In the BBPA’s assessment, the three beer duty cuts have created 19,000 jobs. The duty freeze will offer further support to pubs. The duty on high and low-strength beer will also be frozen, which offers the sector a continued incentive to expand the choice of those drinks to consumers.
The Government’s key priority for this Parliament is to restore the public finances to a sustainable position. We outlined in the Budget our commitment to fiscal sustainability, and the decisions taken on duty rates must, of course, reflect that.
The clause provides for duty on most wines to increase by RPI only. Under these changes, the duty on beer and wine will remain broadly similar, and the duty rate on wine above 22% ABV will continue to be the same as that for spirits. The hon. Lady may have a particular interest in this point: the price of a bottle of wine is now 7% lower than it would have been if we had not ended the wine duty escalator in 2014.
The clause also sets out that duty on high-strength sparkling cider is increased by RPI only, which means that it continues to be the same as for sparkling wine of equivalent strength. It was also announced in the Budget that the duty on all other ciders would be frozen. That means that a typical litre of cider is now 4p cheaper than it would have been if we had not ended the cider duty escalator in 2014. The freeze in cider duty supports the industry, which has high production costs and plays an important role in many local economies, particularly in some of our rural areas.
The Budget also froze duty on spirits. As Scottish National party Members and others will acknowledge, Scotch is one of the great British success stories. Its exports are estimated to be worth nearly £4 billion, and account for about 20% of total food and drink exports. The freeze in spirits duty will provide further support to the Scotch industry. It means that a 70 cl bottle of whisky is now 87p lower in price than it would have been if we had not ended the spirits duty escalator.
The freeze will help elsewhere, too, including by supporting the global thirst for British gin. According to the Wine and Spirit Trade Association, 140 million bottles were exported in 2014, which is an impressive 37% increase in five years. Government statistics also show that between 2010 and 2015 a total of 174 new spirit distilleries opened in the UK, with 56 new licences issued in the past year alone. The announcements made in this year’s Budget and in 2014 and 2015 have increased the confidence in the sector.
The changes to alcohol duty rates in the clause ensure that responsible drinkers are not penalised. It is right to point out the Government’s continuing care and concern for the wider health agenda on alcohol consumption, but it is important not to penalise responsible drinkers. We recognise that not everyone is a responsible drinker, and we have taken a targeted approach to tackling alcohol-related harm. For example, to encourage the consumption and production of lower-strength beer, the Government place higher duties on super-strength beer and cider. Licensing rules are also in place to help to tackle irresponsible alcohol consumption. For example, local authorities can now introduce early morning restriction orders more easily.
The clause reaffirms the Government’s commitment to supporting the pubs industry and responsible drinkers.
Question put and agreed to.
Clause 143 accordingly ordered to stand part of the Bill.
Clause 155
Simple assessments
Question proposed, That the clause stand part of the Bill.
The Chair
Having considered alcoholic liquor duties, we now stagger towards clause 155, with which we will consider the following:
That schedule 23 be the Twenty-third schedule to the Bill.
Clauses 156 and 157 stand part.
Rebecca Long Bailey
The clause relates to gift aid and will allow HMRC to impose penalties on intermediaries that fail to comply with new requirements on gift aid declarations, as set out in secondary legislation that has not yet been published. A technical consultation on those draft regulations is apparently being carried out later this year. To understand the clause, therefore, the Committee might find some background useful.
The Government want to make it easier to claim gift aid on donations given through digital channels. At the moment, a charity requires a gift aid declaration from a donor in order to be able to claim gift aid. Where donations are made by an intermediary—through a website such as justgiving.com, or by text—the situation is difficult, because the intermediary has to collect the declaration from the donor and then pass it on to the charity.
The Government therefore carried out a consultation on digital giving, which ran from July to September 2013, and published their response in April 2014. The consultation received more than 100 responses, and I understand that meetings have been held with representatives of both charities and intermediaries. The Government’s intention, as I understand it, is to allow gift aid declarations to be made by intermediaries representing individuals, and to allow charities to use such declarations to claim gift aid. The primary legislation that gave the Government the power to do that was enacted in the Finance Act 2014. Clause 161 simply amends that legislation so that the regulations, when published, may also include a penalty for intermediaries who fail to comply with the requirement, as well as a right of appeal against those penalties. Regulations for the requirements and penalties will be published later this year.
According to the policy paper, the Exchequer impact of the changes are not known, but the measure is expected to decrease net receipts, as there will be a higher level of gift aid on donations. The paper also states that the measure will affect only intermediaries who fail to comply with legislation, and that they may incur one-off costs to put systems in place to implement the changes. However, estimates of the impact will be made when details of the measure have been finalised.
We completely agree with making it easier for gift aid to be claimed on donations where it is complicated to do so, and we are happy to support the clause, but perhaps the Minister will provide more detail of what the regulations will contain and what the requirements on intermediaries will be.
Damian Hinds
I am grateful to the hon. Lady for this opportunity to put on the record a little more of the detail and some of the reasoning behind the measure. Clause 161 gives HMRC the power to impose penalties on intermediaries operating in the charity sector if they fail to comply with new requirements to be set out in regulations. These regulations are designed to make it easier for charities to claim gift aid through digital channels, and draft regulations have been made available to the Committee.
Clause 161 lays the groundwork for delivering the Government’s commitment to giving intermediaries working in the charity sector a greater role in administering gift aid, which allows charitable donations to be made tax-free. Donors can now give through multiple digital channels, including SMS text donations, online portals and, more recently, Twitter. Gift aid legislation has not always kept up with these developments, so in autumn statement 2013, the Government announced plans to explore ways in which charity intermediaries could be given a greater role in administering gift aid. We have worked closely with representatives of charities and intermediaries to develop proposals to give additional flexibility in claiming gift aid through digital channels. The clause is a necessary step in delivering those proposals. It gives HMRC the ability to charge penalties to intermediaries that do not operate within the new rules. This will help to ensure that the additional flexibility for claiming gift aid is not misused, and so help to protect the income and reputation of charities throughout the country.
It may be helpful if I briefly set out how the new proposals will work. Before a charity can claim gift aid on a donation it has received, the donor must have completed a declaration stating both that the donation is eligible for gift aid and that they want the charity to be able to reclaim the tax paid on that donation. Essentially, this allows the donor to give an intermediary permission to complete a gift aid declaration on his or her behalf in respect of donations made through that intermediary. That permission will last for the rest of the tax year, negating the need to complete a gift aid declaration every time a donation is made. Donors will, of course, have the right to cancel that permission at any time. As with any tax relief, the Government must ensure that the gift aid is claimed only when it is right to do so, and clearly rules must be in place to ensure that.
These rules are in everyone’s best interests. They protect the use of taxpayers’ money and the reputation of those charities that benefit from gift aid relief, and encourage intermediaries to act responsibly. For example, it is only right that intermediaries should let donors know the total value of gift aid claimed on their donations over the course of a tax year, as this could affect their tax liability. Consequently, there will be new obligations on intermediaries who choose to offer the new process set out in regulations. Failure to comply with those obligations could result in intermediaries facing a penalty.
If a penalty is imposed, it will be £50 per failure to comply, up to a limit of £3,000 a year. I should stress that although there must be a sanction against those who are careless or negligent, it is not anticipated that HMRC will charge these penalties routinely. There will be scope to suspend them to enable intermediaries to rectify any shortcomings in processes, and of course there will be a right of appeal against a decision to impose a penalty. I want to make it clear that the Government do not propose applying new penalties on charities; they will apply only to intermediaries.
Clause 161 amends the Income Tax Act 2007 to set out when a penalty may be imposed, and the maximum amount that can be imposed for failure to comply, and it confers appeal rights. It also provides that the clause will take effect from a date appointed in regulations. The Government recognise that intermediaries can and indeed do play an important role in assisting charities to get the benefit of gift aid. It is necessary to ensure that the processes under which they operate are robust and not misused to the detriment of charities or their generous donors.
Question put and agreed to.
Clause 161 accordingly ordered to stand part of the Bill.
Clause 162
Proceedings under customs and excise Acts: prosecuting authority
Question proposed, That the clause stand part of the Bill.
Rebecca Long Bailey
Clause 162 amends part XI of the Customs and Excise Management Act 1979 to remove reference to the commissioners from the definition of “prosecuting authority” for Scotland and Northern Ireland. It will also insert the Director of Public Prosecutions for Northern Ireland as the relevant prosecuting authority for Northern Ireland.
We see the clause as a minor amending clause that tidies up the measures in the 1979 Act relating to Scotland and Northern Ireland. We believe that it is sensible to ensure that the time limit for summary offences does not start to run before the date at which the prosecuting authority has knowledge of sufficient evidence to warrant the proceedings.
We have no concerns about the clause and are happy to support it, but I will stray slightly from the exact detail of the clause and ask the Minister what initial consideration the Treasury has given to the future of customs checks on the border between Northern Ireland and the Republic of Ireland following the EU referendum. I am sure that he is aware that the Irish border has been free of customs checks since 1993 as a result of the single market. A return to customs checks would be damaging to the British and Irish economy, and may well have implications for the Office of the Director of Public Prosecutions for Northern Ireland. Perhaps the Minister can address that concern, either today or in writing at a later date.
Damian Hinds
As the hon. Lady and all members of the Committee know, a number of issues will have to be addressed in due course. The clause does not relate to the subject of the question she asked.
Clause 162 amends the Customs and Excise Management Act 1979 to correct outdated references to the prosecuting authorities in Northern Ireland and Scotland. By doing so, it will ensure that time limits for starting proceedings will apply only to the correct authorities. The clause is purely technical and is not a change of policy.
Question put and agreed to.
Clause 162 accordingly ordered to stand part of the Bill.
Clause 163
Detention and seizure under CEMA 1979: notice requirements etc
Question proposed, That the clause stand part of the Bill.
Rebecca Long Bailey
Again, I have just got a few comments, because the clause is largely uncontroversial. It simply amends the 1979 Act to permit Border Force officers to treat the driver of a vehicle or someone comparable as if they were representatives of the goods being seized. It seems uncontroversial, but it has implications for vehicle drivers, including road haulage drivers. I am not aware of any concerns expressed by potential stakeholders, but what consultation has taken place with the Road Haulage Association in particular, the British International Freight Association and the office of the independent chief inspector of borders and immigration?
Damian Hinds
Clause 163 makes provision for an officer of HMRC to treat a person, when seizing or detaining goods, as if they are a representative of the owner of the goods, wherever that person has or appears to have possession or control over those goods.
Under current legislation, when detaining or seizing goods, there is no requirement for an officer to serve a notice of detention or notice of seizure on the person present if the officer believes that that person is a servant or agent of the owner of those goods. Whether a driver can be considered an agent or servant of the owner affects the processes that the officers seizing or detaining goods must follow. However, drivers of vehicles carrying such goods often claim distance from the owner, making it difficult for HMRC successfully to consider them to be an agent or servant of the owner. That leaves HMRC trying to find an owner in what is usually a complex, fraudulent supply chain.
The changes made by clause 163 will allow officers to treat the driver, or a person in a comparable position, as if he or she were a representative of the owner and, therefore, not legally entitled to a notice of detention or a notice of seizure. It will make the operational duties of officers of Her Majesty’s Revenue and Customs more effective. Currently, those who purport to be owners are arguing that they have not had their legal right to appeal because they were not served with a notice.
HMRC has a duty to take robust action to deal with those who smuggle illicit goods of any description into the UK. By making explicit provision for the driver to be treated the same as an agent or servant, it will reduce the resource required in trying to identify the owner of the goods in what is usually a fraudulent and potentially complex supply chain.
The measure was consulted on in December 2015 for eight weeks. One response was received, and an individual reply was sent. The main thrust of the response was a request for clarification on the rights of appeal, and on whether the legislation would affect the rights of the owner to appeal against the seizure. HMRC was able to explain that the legislation would not affect those rights; appeal rights were not compromised. It was a consolidated response from industry, including hauliers.
To conclude, the measure removes the need for an officer to serve a notice on someone who has, or appears to have, possession or control of anything that is detained or seized. By doing that, the measure clarifies procedure for officers and those from whom the goods are detained or seized. It also removes significant operational barriers for HMRC in its pursuit of reduced excise tax gaps.
Question put and agreed to.
Clause 163 accordingly ordered to stand part of the Bill.
Clause 164
Data-gathering powers: providers of payment or intermediary services
Question proposed, That the clause stand part of the Bill.
Rebecca Long Bailey
Clause 167 introduces a raw tobacco approval scheme for users of and dealers in raw tobacco. Raw tobacco is not subject to excise duty or possession controls when it is not yet in a smokable form. The Government state that tobacco duty evasion is becoming increasingly prevalent through raw tobacco, which is freely and legally imported and either processed into smoking products in unregistered premises or sold in small quantities to consumers for home processing. To try to combat that, the Government carried out a consultation on the control of raw tobacco, and proposed an approval scheme.
The clause introduces a raw tobacco approval scheme that requires a person undertaking any activity involving raw tobacco to be approved and registered with HMRC. If a person is found to be undertaking an uncontrolled activity without registering with HMRC, the penalties that can be issued are either £250 or an amount equal to the duty that would have been charged on the relevant quantity of smoking tobacco at the lowest rate of duty. On that point, will the Minister confirm why the Government set the penalty at the lowest rate of duty? They could have gone for the hand-rolling rate, which would have doubled the penalty.
The clause allows exemptions to be granted to those who have a legitimate use of raw tobacco that does not involve the manufacturing of smoking products. HMRC expects that 20 to 24 businesses—mainly tobacco product manufacturers, importers, brokers and testing centres—will register. I understand that the Government are going to undertake a post-implementation review, which we welcome.
The aim is to address tobacco duty evasion by prohibiting the use of raw tobacco by unapproved persons to prevent the illegal manufacture of tobacco products. The clause will also make it a lot easier for border forces to seize tobacco and check whether it is destined for an approved person.
I understand that the new scheme will be largely built on existing registration processes, minimising the administrative impact on legitimate users of raw tobacco. For example, tobacco manufacturers already have duty approval, which will just be extended to include raw tobacco approval. Does the Minister feel that that addresses the Tobacco Manufacturers Association’s concerns that the measure will place additional burdens on legitimate users of raw tobacco?
The Labour party welcomes any measures to crack down on tax evasion and avoidance. We will therefore support the clause.
Damian Hinds
Clause 167 makes changes prohibiting any unapproved person from carrying out any activity involving raw tobacco. That will reduce the risk of evasion of tobacco excise duty and prevent the illegal manufacture of tobacco products. The approval scheme will be set out in regulations made under powers in this clause, and tailored to reflect a proportionate response to the risk presented. It will build on existing approval processes where appropriate to minimise the impact on legitimate users of raw tobacco.
Raw tobacco that is not yet in a smokable form is not subject to excise duty and the associated movement controls in the UK. There is a significant risk of tobacco products duty evasion through raw tobacco being freely and legally imported. It can be processed into illicit tobacco products in unregistered premises or sold in small quantities to consumers for home processing. We have identified no legitimate use for significant quantities of raw tobacco in the UK, other than for the manufacture of smoking products.
The Government are aware that raw tobacco is occasionally used in very small quantities for non-smoking purposes, such as beekeeping, pigeon bedding and fertiliser production. We have identified no significant non-smoking uses for large volumes of raw tobacco in the United Kingdom. Dialogue has been sought with the representatives of the potential niche uses, and the scheme has been designed with an understanding of those alternative uses and the extent of the risk presented.
The illicit manufacture of cigarettes and hand-rolling tobacco in the UK from raw tobacco deprives the Exchequer of the duty that should be paid, upon which we rely to fund our public services. It also makes cheaper illicit tobacco products more accessible, undermining the Government’s public health objectives.
The clause will assist in preventing the evasion of excise duty through the use of raw tobacco. It amends the Tobacco Products Duty Act 1979, prohibiting any person from carrying out any activity involving raw tobacco unless the person holds approval from HMRC. The changes will give HMRC powers to set out the details of the approval scheme in regulations, including how to apply for approval and what conditions and restrictions might apply to an approval. The clause will enable HMRC and Border Force officers to identify and seize raw tobacco if there is no evidence to show that the raw tobacco is destined for either an approved person or a premises that is specified in an approval. It also provides appropriate sanctions, including penalties and forfeiture, where any unapproved person has any involvement with raw tobacco.
From the consultation responses, it is expected that between 20 and 40 businesses will apply for approval. The one-off costs of familiarisation with the scheme and of making the application will be negligible. The raw tobacco scheme will protect £10 million of revenue per year by 2017-18, as certified by the Office for Budget Responsibility. The tobacco rate that applies to other smoking tobacco can be charged only until a tobacco product is produced, and if that happens, the correct tobacco rate will of course apply from that point. The clause will reduce the risk of evasion of excise duty by prohibiting activities involving raw tobacco by an unapproved person, to prevent the illegal manufacture of tobacco products.
Question put and agreed to.
Clause 167 accordingly ordered to stand part of the Bill.
Clause 168
Powers to obtain information about certain tax advantages
Question proposed, That the clause stand part of the Bill.
The Chair
With this it will be convenient to discuss the following:
That schedule 24 be the Twenty-fourth schedule to the Bill.
Clauses 169 and 170 stand part.