Asked by: Daniel Kawczynski (Conservative - Shrewsbury and Atcham)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, whether insurance companies are permitted to deduct the cost of furlough payments made to staff in a business insurance claim for flood damage.
Answered by John Glen
Insurers must treat customers fairly and firms are required to do so under the Financial Conduct Authority’s (FCA) rules.
As insurance policies differ significantly, businesses are encouraged to check the terms and conditions of their specific policy and contact their providers. The individual policy wording generally sets out the basis on which the sum due to the policyholder following an insured event will be calculated. Insurers should therefore calculate claims payments due to the policyholder in accordance with the terms and conditions of the relevant policy.
Asked by: Daniel Kawczynski (Conservative - Shrewsbury and Atcham)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, what assessment he has made of the potential merits of extending the Coronavirus Job Retention Scheme for specific sectors, such as aerospace and aviation, to avoid redundancies due to reduced orders as a result of the covid-19 outbreak.
Answered by Jesse Norman - Shadow Leader of the House of Commons
The Coronavirus Job Retention Scheme was designed as a temporary, economy-wide measure to support businesses while widespread restrictions were in place. Closing the scheme at the end of September is designed to strike the right balance between supporting the economy as it opens up, continuing to provide support and protect incomes, and ensuring that incentives are in place to get people back to work as demand returns. This approach has worked; the OBR have estimated that without the short-term fiscal easing announced in the Budget, and in particular the CJRS extension, unemployment would have been about 300,000 higher in the fourth quarter of this year than the 2.2 million in the central forecast.
The Government recognises the particular challenges that the travel industry has faced as a result of COVID-19. In England travel agents have recently benefited from Restart Grants worth up to £6,000, and can continue to benefit from the £2 billion of discretionary grant funding that has been made available to local authorities in England through the Additional Restrictions Grant (ARG). Furthermore, the aviation and aerospace sectors are being supported with over £12 billion that has been made available through loan guarantees, support for exporters, the Bank of England’s Covid Corporate Financing Facility (CCFF) and grants for research and development. In addition, airports continue to benefit from the renewed Airport and Ground Operations Support Scheme announced at Budget.
The Global Travel Taskforce (GTT) report sets out a clear framework for the Government’s objective of establishing a safe and sustainable return to international travel, which is key to enabling the sector’s recovery. It has been created following extensive engagement with the international travel and tourism industries, and changes following the recent checkpoint review of the GTT are a vital step in enabling the recovery of travel operators and those whose jobs rely on the travel industry.
The Government has shown throughout the pandemic that it is prepared to adapt support if the path of the virus changes. It continues to engage closely with sectors across the economy, including the travel industry, in order to understand their recovery horizons as the vaccine is rolled out and restrictions ease.
Asked by: Daniel Kawczynski (Conservative - Shrewsbury and Atcham)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, how the FCA and PRA plan to (a) manage and (b) control the new value transfer mechanisms from decentralised finance that will potentially see asset and cash ownership of UK PLC leave the UK.
Answered by John Glen
This is a matter for the Financial Conduct Authority (FCA), and the Prudential Regulation Authority (PRA), which are operationally independent from Government. The question has been passed on to the FCA and PRA. The FCA and PRA will reply directly to the honourable Member by letter. A copy of the letter will be placed in the Library of the House.
Asked by: Daniel Kawczynski (Conservative - Shrewsbury and Atcham)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, whether the Government has made an assessment of the potential merits of introducing a sterling- based stable coin in the UK.
Answered by John Glen
The Government launched a consultation on its regulatory approach to cryptoassets and stablecoins on 7 January. This set out the view that stablecoins, which seek to stabilise their value, could be used as widespread means of payment and potentially deliver improvements in cross-border transactions. At the same time, depending on scale and nature of use, these developments could pose similar financial stability and consumer risks as traditional regulated payment systems.
The Government’s proposed approach would make sure stablecoins meet the same high standards we expect of other payment methods. The Government is considering responses and will outline next steps in due course. Any steps taken in light of this consultation will aim to balance the potential risk to consumers with the ambition to foster competition and innovation in the sector.
Alongside this, the UK, like many countries globally, is actively exploring the potential role of central bank digital currencies: an electronic form of central bank money that could be used by households and businesses to make payments. The Bank of England published a discussion paper in March 2020, which considered the possibility of a retail central bank digital currency.
At Fintech Week 2021, the Chancellor announced a new Taskforce led by HM Treasury and the Bank of England to lead the UK’s exploration of a central bank digital currency, with separate forums to engage civil society and technology experts. The Taskforce aims to ensure a strategic approach is adopted between the UK authorities as they explore a central bank digital currency, in line with their statutory objectives, and to promote close coordination between them. The Government and the Bank of England have not yet made a decision on whether to introduce a central bank digital currency in the UK, and will engage widely with stakeholders on the benefits, risks and practicalities of doing so.
Asked by: Daniel Kawczynski (Conservative - Shrewsbury and Atcham)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, what estimate he has made of the potential value of Capital Gains Tax liability owed by UK residents in respect of Bitcoin trading and Decentralised Finance assets for each tax year from 2013-14 to date; what discussions he has had with representatives of the (a) Bank of England, (b) Prudential Regulation Authority (PRA) and (c) Financial Conduct Authority (FCA) on the potential merits of introducing a sterling-based cryptocurrency; what assessment he has taken of the potential effect of Bitcoin trading and Decentralised Finance on Money Supply measurements (i) M1, (ii) M2 and (iii) M3 and how that effect is measured; what assessment he has made for the implications of his Department’s policies on how the (A) PRA and (B) FCA will manage and control the Decentralised Finance transfer mechanisms in respect of the potential flow of assets and cash leaving the UK instantly; whether he plans to review the FCA’s regulatory (I) mechanisms and (II) performance in enforcing the banning of sales of cryptoasset derivatives to retail consumers; whether the FCA has introduced an authorisation and registration scheme for cryptoasset derivatives; what assessment he has made of the potential effect of the time taken to register cryptoasset derivatives with the FCA; what steps he is taking to ensure tax deriving from Bitcoin trading and Decentralised Finance is collected effectively; whether his Department has conducted an assessment of the potential merits of the FCA restricting UK banks from participating in the Decentralised Finance; what comparative assessment he has made of US and European financial firms’ participation in Decentralised Finance compared with that of UK firms; and for what reasons Euro clearing of financial instruments is moving out of the City of London.
Answered by John Glen
No estimate has been made on the potential value of capital gains tax (CGT) that are due on gains from cryptoassets held as investments or any tax liabilities arising from decentralised finance (also known as DeFi). The self-assessment form does not currently separate capital gains made on cryptoassets from other assets. As a result, a reliable estimate for CGT due from cryptoassets would only be available at a disproportionate cost.
The recently released cryptoassets manual, one the most detailed publications from any tax administration, explains the tax consequences of different types of transactions involving cryptoassets for both business accepting them as well as individuals using them. HMRC has taken action, including using powers provided by Parliament to gather data, to identify and investigate those that have failed to declare their tax liabilities.
Regarding the possible merits of a sterling-based stablecoin, I refer the Honourable Gentleman to the answer given to PQ UIN 37102.
On the issue of money supply, Bitcoin trading or decentralised finance will need to become a significant source of lending to the real economy in the UK before they have a notable impact on money supply measurements.
Regarding the Financial Conduct Authority (FCA) and the Prudential Regulation Authority’s (PRA) role with respect to decentralised finance, I refer the Honourable Gentleman to the answer given to PQ UIN 37103.
With regards to the FCA’s cryptoasset derivatives ban for retail consumers, the FCA stated that it found these products to be ill-suited for retail consumers due to potential harms, including the high risk of suffering losses. The FCA has noted that it will keep this prohibition under review. The FCA is an independent body and its decision to take the ban forward after consultation is based on powers granted to the FCA under statute, pursuant to the FCA’s objectives which include protecting consumers, enhancing market integrity and promoting competition.
Regarding the possible merits of the FCA restricting UK banks’ access to decentralised finance, the FCA is an independent regulator, and considers the risks of banks engaging in decentralised finance as one of the many risks it considers. Most decentralised finance activities are not regulated in the UK. Accordingly, the Government does not have accurate information on the number of entities operating in the UK in comparison to the EU and the US.
On the issue of clearing, the EU has granted a temporary equivalence decision to UK Central Counterparties (CCPs) which lasts until June 2022.
Therefore, without any further action by EU authorities, certain UK CCPs may need to begin offboarding EU clearing members by the end of March 2022 in order to be ready for equivalence expiring in June 2022.
However, letting equivalence expire in June next year would raise the cost of clearing for firms, particularly EU ones, and present significant financial stability risks. The Government therefore hopes that equivalence would not be allowed to expire in June 2022. As it stands, the Government has seen limited evidence of activity moving.
Asked by: Daniel Kawczynski (Conservative - Shrewsbury and Atcham)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, what assessment he has made of the capability of the FCA of enforcing the ban on Binance Markets Ltd operating in the UK.
Answered by John Glen
On 26 June the FCA issued a consumer warning stating that due to the imposition of requirements, Binance Markets Limited is not currently permitted to undertake any regulated activities without the FCA’s prior written consent. The FCA asked Binance.com to display the consumer warning on their website.
The FCA’s announcement relates to the UK entity (Binance Markets Limited) and does not apply to the Binance group (Binance.com) based outside the UK, which can continue to interact with UK consumers.
On 25 August, the FCA published its supervisory notice on Binance Markets Limited, alongside a consumer statement, which confirmed that Binance Markets Limited complied with FCA requirements.
The FCA is an independent body and its action regarding Binance Markets Limited is based on powers granted to the FCA under statute, pursuant to the FCA’s objectives which include protecting consumers, ensuring market integrity and promoting competition.
Asked by: Daniel Kawczynski (Conservative - Shrewsbury and Atcham)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, how much capital gains tax was collected from decentralised finance in each year tax year from 2013 to 2020.
Answered by Jesse Norman - Shadow Leader of the House of Commons
Capital Gains Tax (CGT) is due on gains from cryptoassets held as investments which are taxed in line with CGT tax rates and exemptions rules as for other assets. The Self-Assessment form does not currently separate capital gains made on cryptoassets from other assets. As a result, a reliable estimate for Capital Gains Tax due from cryptoassets would only be available at a disproportionate cost.
Decentralised Finance (also known as DeFi) is a comparatively recent innovation with notable uptake during mid-2020. Amounts arising from decentralised finance are, generally, liable to either Income Tax or Capital Gains Tax. However, as with cryptoassets, the Self-Assessment form does not separate capital gains and/or income arising from decentralised finance. As a result, a reliable estimate of Capital Gains Tax or Income Tax collected from decentralised finance would only be available at a disproportionate cost.
Asked by: Daniel Kawczynski (Conservative - Shrewsbury and Atcham)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, what estimate he has made of the amount of capital gains tax (a) collected and (b) that remains outstanding owed from taxpayers under (i) Bitcoin trading and (ii) other financial activity in decentralised finance in each tax year between 2013 and 2020.
Answered by Jesse Norman - Shadow Leader of the House of Commons
Capital Gains Tax (CGT) is due on gains from cryptoassets held as investments which are taxed in line with CGT tax rates and exemptions rules as for other assets. The Self-Assessment form does not currently separate capital gains made on cryptoassets from other assets. As a result, a reliable estimate for Capital Gains Tax due from cryptoassets would only be available at a disproportionate cost.
Decentralised Finance (also known as DeFi) is a comparatively recent innovation with notable uptake during mid-2020. Amounts arising from decentralised finance are, generally, liable to either Income Tax or Capital Gains Tax. However, as with cryptoassets, the Self-Assessment form does not separate capital gains and/or income arising from decentralised finance. As a result, a reliable estimate of Capital Gains Tax or Income Tax collected from decentralised finance would only be available at a disproportionate cost.
Asked by: Daniel Kawczynski (Conservative - Shrewsbury and Atcham)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, what estimate he has made, applying the Laffer curve, of the potential effect on tax revenues of a reduction in corporation tax.
Answered by Jesse Norman - Shadow Leader of the House of Commons
The fiscal and economic impact of changes in the rate of Corporation Tax (CT) have been set out in the Office for Budget Responsibility’s (OBR’s) Economic and Fiscal Outlooks which are published alongside fiscal events.
The most recent forecast, published in March 2021, includes the revenue raised from the announcement made at Budget 2021: that the main rate will increase to 25% from April 2023, which is forecast to raise over £45 billion across the next 5 years.
This forecast incorporates adjustments to reflect behavioural responses from businesses to changes in the rate of CT.