National Insurance Contributions Bill
Lucy Frazer ExcerptsTuesday 1st March 2022
(2 years, 1 month ago)
Commons ChamberRead Full debate National Insurance Contributions Act 2022 View all National Insurance Contributions Act 2022 Debates Read Hansard Text Watch Debate Read Debate Ministerial Extracts Amendment Paper: Commons Consideration of Lords Amendments as at 1 March 2022 - (1 Mar 2022)
Madam Deputy Speaker (Dame Rosie Winterton)
I must draw the House’s attention to the fact that financial privilege is engaged by all of the Lords amendments 2, 4, 1, 3, 5, 6, 7, 8, 9, 10, 11 and 12. If any of the Lords amendments are agreed to, I will cause the customary entry waiving Commons financial privilege to be entered in the Journal.
Clause 2
Freeport conditions
5.51 pm
The Financial Secretary to the Treasury (Lucy Frazer)
I beg to move, That this House disagrees with Lords amendment 2.
Madam Deputy Speaker
With this it will be convenient to discuss the following:
Lords amendment 4, and Government motion to disagree.
Lords amendments 1, 3 and 5 to 12.
Lucy Frazer
I welcome this small but important Bill on its return to this House and I am pleased to speak to it for the first time. I pay tribute to my ministerial colleague, Viscount Younger of Leckie, for his work on it in the other place, and to my right hon. Friend the Member for Hereford and South Herefordshire (Jesse Norman), who so capably led it when it was first before the House.
There are 12 Lords amendments for our consideration today and I will first address Lords amendments 2 and 4, which, as Madam Deputy Speaker has highlighted, engage the financial privilege of this House. The Government ask the House to reject them for the reasons that I will set out. Lords amendment 2 is the first of two amendments on which the other place voted to make changes to the Bill. It adds an additional condition whereby freeport national insurance contribution relief would be available only if the freeport governance body maintained a public record of beneficial ownership of businesses operating in the freeport tax site.
The Government believe that the Lords amendment, which was made by the other place, is unnecessary and should not be accepted. Throughout the bidding prospectus and subsequent business case processes, prospective freeports were required to set out how they will manage the risk of illicit activity. Those plans were scrutinised by officials in the Border Force, Her Majesty’s Revenue and Customs, the National Crime Agency and others.
Additionally, the freeports bidding prospectus set out that each freeport must agree a governance structure with the Government. While each port can design its own governance structure to meet the local needs of the port, it must meet the criteria set out by the Government in the freeports bidding guidance. That means that the Government already require each freeport governance body to undertake reasonable efforts to verify the beneficial ownership of businesses operating within the freeport tax site and to make that information available to HMRC, law enforcement agencies and other relevant public bodies. It is therefore a condition of being granted freeport status that there is an appropriate level of oversight.
That is a proportionate approach, which means that the local area and law enforcement can take effective measures to ensure the security and propriety of operations within the freeport. The difference between the amendment and the existing requirement on freeport governance bodies is simply a requirement for the freeport governance body to make its record of beneficial ownership available to the general public, as well as to law enforcement.
Given the nature of the information, we do not think it would be appropriate for the freeport governance body to release this information publicly. This is because the freeport governance board is a third party, and therefore does not have the locus to release such information about a business to the public. The second reason is that such a requirement would also partially duplicate the People with Significant Control register at Companies House where there is already an onus on the company itself to provide information.
However, hon. Members will also be aware that, as a Government, we are bringing in a number of measures to ensure that we have transparency. Last week, the Prime Minister announced the Economic Crime (Transparency and Enforcement) Bill to further crack down on dirty money and maintain the UK’s position as a world leader in corporate transparency, and we have heard much of that in this House today. That Bill will introduce a register of overseas entities beneficial ownership of UK property to crack down on foreign criminals using UK property to launder money. It will reform our unexplained wealth orders regime to help target more corrupt elites and it will strengthen the Treasury’s ability to take action against sanction breaches.
We will also publish details of the planned fundamental reform of Companies House, which is designed to clamp down on money laundering and illicit finance. Once the register of overseas entities is implemented, it will be the first of its kind in the world. That is good news for the UK, enhancing our strong reputation as an honest and trusted place in which to do business. I hope that, with these assurances, this House will reject Lords amendment 2.
Lords amendment 4 is the second amendment on which the other place voted to make changes to the Bill. It provides the Treasury with the power to amend the eligibility period attached to zero-rate relief for armed forces veterans. The Government believe that this amendment made by the other place is not necessary and should not be accepted. I will explain to this House why that is the case. The Government have considered this measure in detail and consulted extensively on the relief. It included a policy consultation that ran from July to October 2020 and a technical consultation that ran from January to March 2021. A significant number of respondents agreed that the relief is a positive step forward towards supporting the recruitment of veterans and could help break down the barriers and negative perceptions surrounding veterans.
After considering the responses, we felt that a 12-month qualifying period struck the right balance between supporting veterans as they transitioned to civilian life and wider taxpayers’ interests. Members should also be aware that employer representatives, such as the Federation of Small Businesses, welcomed the 12-month relief when it was announced. This policy provides employers in the 2021-22 tax year with up to £5,500 of relief. It is also one part of the Government’s broader strategy to support veterans.
The Government recently published the veterans’ strategy action plan for 2022 to2024. That contains more than 60 policy commitments worth more than £70 million in a diverse range of areas, reflecting the varied streams of Government support on offer.
Furthermore, at the 2021 Budget and spending review, £10 million was provided to support mental health via charities provisions and £5 million to the health innovation fund, providing cutting-edge treatment for veterans. In August 2021, £2.7 million was provided to strengthen veteran health support further, including facilitating the expansion of Op Courage, and a further £5 million was provided in September 2021 for those struggling after the Afghanistan withdrawal. The Bill already contains other levers to increase the generosity of this relief, if needed, such as increasing the threshold that employers of veterans start paying NICs and extending the overall period of the relief. These proposed additional powers are therefore not necessary. With these reassurances, I hope that the House will reject Lords amendment 4.
The remaining 10 Lords amendments were tabled by the Government and I hope that this House will support them. Lords amendments 1, 3 and 5 to 9 legislate for the threshold at which employers that qualify for these reliefs start to pay NICs. The amendments set the threshold for the 2022-23 tax year for freeport employers and for the 2021-22 and 2022-23 tax year for the employers of veterans. These thresholds have been set at £25,000 per annum for freeport employers and £50,270 for employers of veterans. Both those figures have been publicly communicated during the Bill’s passage. These thresholds are normally set through regulations, but due to the timing of this Bill they are being set in primary legislation.
Lucy Frazer
With the leave of the House, I will make a few comments in response to hon. Members.
The hon. Member for Ealing North (James Murray) mentioned tax rises and national insurance contributions. The Government recognise the impact that they will have on those to whom they are applied, but it is vital that we tackle social care—we cannot avoid taking it on. He will know, because we have debated them many times, the measures that the Government are taking to ensure that those on the lowest incomes get the protection that they need. For example, we are increasing the national living wage and cutting tax for low-income families in relation to universal credit.
This, however, is a debate about some other measures, and one of the important measures that have been raised relates to transparency. The hon. Member for Ealing North suggested that we had been slow to act, while the hon. Member for Richmond Park (Sarah Olney) rightly said that we should pause and look again. Let me emphasise that we have not been slow to act, in the sense that we were the first country in the G20 to create a free, fully public beneficial ownership register, and on that register we have 5.6 million names and more than 4.4 million UK companies. We have not been slow to act, and we have looked again, because we are introducing a register of beneficial owners of overseas entities, we are introducing further powers in relation to unexplained wealth orders, and we are introducing further powers to sanction for the Office of Financial Sanctions Implementation.
Moreover, today the Government are publishing a detailed White Paper that will upgrade the powers in relation to Companies House. For example, anyone setting up, running, owning or controlling a company in the UK will need to verify their identity with Companies House. Companies House will be given the power to challenge information that appears dubious, and will be empowered to inform security agencies of potential wrongdoing. Company agents from overseas will no longer be able to create companies in the UK. So we are taking measures now, and we have reflected before taking those steps.
The hon. Member for Gordon (Richard Thomson) raised the issue of veterans, and I too am proud that we are introducing measures to make it easier to employ them. We have set out our reasons for keeping the measure in relation to the 12-month period, and I highlighted them in my opening speech, but, as Members will know, we will review that policy in 2023. I am also pleased that, as the hon. Member for Gordon said, the UK and Scottish Governments announced the establishment of two freeports earlier this month.
For those reasons, I hope that the House will agree with the points that I have made.
Question put, That this House disagrees with Lords amendment 2.
Draft Social Security (Contributions) (Rates, Limits and Thresholds Amendments and National Insurance Funds Payments) Regulations 2022
Draft Tax Credits, Child Benefits and Guardians Allowance Up-rating Regulations 2022
Lucy Frazer Excerpts(2 years, 2 months ago)
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The Chair
Hon. Members should send their speaking notes by email to hansardnotes@parliament.uk—in the unlikely event of Members wishing to speak. Similarly, officials in the Gallery should communicate with Ministers electronically. We are expecting a Division in the Chamber in about 15 minutes’ time, so if we cannot get our business done within that timescale, we will have to suspend and come back 35 minutes later, because I understand that there might be two or three votes. No pressure, team.
The Financial Secretary to the Treasury (Lucy Frazer)
I beg to move,
That the Committee has considered the draft Social Security (Contributions) (Rates, Limits and Thresholds Amendments and National Insurance Funds Payments) Regulations 2022.
The Chair
With this it will be convenient to consider the draft Tax Credits, Child Benefit and Guardian’s Allowance Up-rating Regulations 2022.
Lucy Frazer
These regulations set the national insurance contribution limits and thresholds as well as the rates of a number of national insurance contributions for the 2022-23 tax year, and make provision for a Treasury grant to be paid into the national insurance fund if required. As Members are aware, national insurance contributions or NICs are a key element of the nation’s welfare safety net, helping to support workers through ill health, unemployment and old age. They allow people to make contributions when they are in work in order to receive contributory benefits when they are not working. NICs receipts go towards funding contributory benefits as well as the NHS.
As announced at the Budget, the Government are using the September consumer prices index figure of 3.1% as the basis for setting all national insurance limits and thresholds and the rates of class 2 and 3 national insurance contributions for 2022-23. September CPI is the standard measure to increase NICs thresholds and class 2 and 3 rates. I will first outline the specific changes to the class 1 primary threshold and class 4 lower profits limit. The primary threshold and lower profits limit indicate the point at which employees and the self-employed start paying class 1 and class 4 NICs respectively. These thresholds will rise from £9,568 to £9,880 per year. The rates of class 1 and 4 NICs are unchanged by these regulations. The rates of class 1 and 4 NICs have already been increased, to 13.25% and 10.25% respectively, through the Health and Social Care Levy Act 2021. Increases to the primary threshold and lower profits limit do not impact on state pension eligibility. This is determined by the lower earnings limit for employees, which will increase, in line with CPI, from £6,240 in 2021-22 to £6,396 in 2022-23. I will come shortly to payment of class 2 NICs for the self-employed.
The upper earnings limit, the point at which the main rate of employee NICs drops to 3.25%, is aligned with the higher rate threshold for income tax. It was announced at spring Budget 2021 that the income tax higher rate threshold and the upper earnings limit would remain frozen at £50,270 until 2025-26. Similarly, the upper profits limit is the point at which the main rate for class 4 NICs drops to 3.25%. This will also remain at £50,270 per year.
As well as class 4 NICs, the self-employed pay class 2 NICs. The rate of class 2 NICs will increase from £3.05 in 2021-22 to £3.15 in 2022-23. The small profits threshold is the point above which the self-employed must pay class 2 NICs. This will increase from £6,515 in 2021-22 to £6,725 in 2022-23.
Class 3 NICs allow people to voluntarily top up their national insurance record. The rate for class 3 will increase, in line with inflation, from £15.40 a week in 2021-22 to £15.85 in 2022-23. The secondary threshold is the point at which employers start paying employer NICs on their employees’ salary. That threshold will increase from £8,840 in 2021-22 to £9,100 in 2022-23. The threshold at which employers of people under 21 and apprentices under 25 start to pay employer NICs on those employee salaries will remain frozen at £50,270 per year, to maintain alignment with the UEL.
The regulations also make provision for a Treasury grant of up to 17% of forecast annual benefit expenditure to be paid into the national insurance fund, if needed, during 2022-23. A similar provision will be made in respect of the Northern Ireland national insurance fund. A Government Actuary’s Department report laid alongside the re-rating regulations forecast that a Treasury grant will not be required in 2022-23, but in view of the economic challenges created by the covid pandemic, the Government consider it prudent to make the maximum provision at this stage. I trust that is a useful overview of the changes we are making to adjust contributions to the Exchequer in line with inflation.
On the second statutory instrument, the Government are committed to delivering a welfare system that is fair for claimants and taxpayers, while providing a strong safety net for those who need it most. The draft regulations will ensure tax credits, child benefit and guardian’s allowance increase in line with the consumer prices index, which measured inflation at 3.1% in the year to September 2021.
Mr Barry Sheerman (Huddersfield) (Lab/Co-op)
Some of us have not seen this statutory instrument. I was only given one when I came in. I did not realise there were two statutory instruments.
Lucy Frazer
I am grateful for that helpful intervention. In summary, this proposed legislation makes changes to the rates, limits and thresholds for national insurance contributions, makes provision for a Treasury grant and increases the rates of tax credits, child benefit and guardian’s allowance in line with prices. These are important and necessary steps, and I hope colleagues will support them.
Lucy Frazer
In response to the hon. Member for Ealing North, in my opening speech I set out in some detail how the thresholds will increase for those starting to pay NICs. I am happy to combine information on those thresholds with that on the social care levy in writing to the hon. Gentleman.
James Murray
On a point of clarification, I was asking about the increase in the primary threshold and the increase in NICs for 2022-23. As the Minister will know, the health and social care levy is not due to come in for another year.
Lucy Frazer
In my introductory remarks, I set out how each threshold will be increased, but I am happy to set that out in writing to him. He also spoke about the steps we are taking to protect the most vulnerable. He will know that, last September, we put in place a support package of half a billion pounds to support the most vulnerable. He will have heard the Chancellor’s statement only last month about the steps we are taking in response to the energy price increases. He will also be aware of the £400 billion support provided by the Chancellor in the past two years.
The SIs before us are important to ensure that we continue to uprate the thresholds.
Mr Sheerman
I do not want to extend the debate to excession because I know that we are in a hurry on account of Divisions in the House, but a Government Minister—a colleague of the Minister—has just resigned from the Government because of the amount of fraud that has been allowed to happen in our country under the present Chancellor’s guidance. Indeed, it was his legislation. Will the Minister confirm that £3.4 billion was lost? What could we have done with that £3.4 billion to ameliorate the impact of the NIC increase?
Lucy Frazer
I value the hon. Gentleman’s contribution to the debate. He has obviously followed the issue very closely so he will know of the steps the Chancellor has taken to ensure that we combat fraud not only in relation to the coronavirus schemes but more broadly. The hon. Gentleman will have heard the Chancellor talk about the coronavirus fraud taskforce that has been set up—more than 1,000 people are now engaged to tackle fraud and the taskforce has already recovered half a billion pounds and is set to recover a further billion.
James Murray
May I again ask the Minister to respond to my second point about the second SI before the Committee and confirm what the level of the working tax credit basic element will be in April 2022 compared with the same time two years previously?
Margaret Greenwood (Wirral West) (Lab)
Will the Minister also set out for us what the SIs will mean for levels of child poverty, because I am very concerned that more than 4 million children are already living in poverty, and the rate seems to getting worse?
The Chair
Given the interest in the Committee, it would be helpful if the Minister sent a copy of her response to all members of the Committee.
Treasury
Lucy Frazer Excerpts(2 years, 2 months ago)
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Lucy Frazer
We have cut tax for low-income families by introducing the universal credit taper rate, saving working families £1,000 a month.
[Official Report, 2 February 2022, Vol. 708, c. 373.]
Letter of correction from the Financial Secretary to the Treasury, the right hon. and learned Member for South East Cambridgeshire (Lucy Frazer):
An error has been identified in the response given to the hon. Member for Ealing North (James Murray) at Report stage of the Finance (No. 2) Bill.
The correct response should have been:
Lucy Frazer
We have cut tax for low-income families by reducing the universal credit taper rate and increasing the work allowance, saving working families £1,000 a year.
Finance (No. 2) Bill
Lucy Frazer ExcerptsWednesday 2nd February 2022
(2 years, 2 months ago)
Commons ChamberRead Full debate Finance Act 2022 View all Finance Act 2022 Debates Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Consideration of Bill Amendments as at 2 February 2022 - large print - (2 Feb 2022)
The Financial Secretary to the Treasury (Lucy Frazer)
I beg to move, That the clause be read a Second time.
Madam Deputy Speaker (Dame Eleanor Laing)
With this it will be convenient to discuss the following:
Government new clause 3—Public interest business protection tax.
New clause 2—Review of impact of section 25 (Tonnage tax)—
‘(1) The Chancellor must review the impact of the changes made by section 25 of this Act (Tonnage tax), and lay a report of that review before the House of Commons, within 12 months of that section coming into force.
(2) The review carried out under subsection (1) must include assessment of the impact of the provisions of that section on—
(a) the training of UK—
(i) cadets and
(ii) ratings, and
(b) the employment of UK—
(i) cadets and
(ii) ratings
by operators of qualifying ships.
(3) The review carried out under subsection (1) must include assessment of the effect of changes to flagging arrangements made by subsections 25(6) and (7).’
This new clause would require the Government to report to the House on the impact of the provisions of clause 25 on the training and employment of UK seafarers.
New clause 4—Reviews of Economic crime (anti-money laundering) levy—
‘(1) The Government must publish a review of the operation of the Economic Crime (Anti-Money Laundering) Levy by 31 December 2027.
(2) The Government must publish on 31 December each year until the establishment of a register of beneficial owners of overseas entities that own UK property—
(a) an assessment of the contribution to the effectiveness of the Levy that such a register would make; and
(b) an update on progress toward implementing such a register.’
This new clause would put into law the Government’s commitment to undertake a review of the Levy by the end of 2027, and require them to publish an assessment every year until a register of beneficial owners of overseas entities that own UK property is in place an assessment of what impact such a register would have on the effectiveness of the Levy, and progress toward the register being established.
New clause 5—Review of the impact of the extension of temporary increase in annual investment allowance—
‘The Chancellor of the Exchequer must, within three months of the end of tax year 2022-23, publish a review of decisions by companies to invest in the UK in 2022-23, which must report on which companies, broken down by size, sector, and country of ownership, have benefited from the annual investment allowance; and this assessment must also assess the merits of the existence of the superdeduction in light of the AIA.’
This new clause would require a review of which companies have benefited from the Annual Investment Allowance in 2022-23, broken down by size, sector, and country of ownership, and an assessment of the merits of the superdeduction in light of the AIA.
New clause 6—Review of the impact of this Act—
‘(1) The Government must publish a review of the measures in this Act within three months of its passing.
(2) The review in subsection (1) must consider how the measures in this Act will affect—
(a) the amount of tax working people will be paying in 2022/23;
(b) household finances in 2022/23;
(c) the rate at which the economy will be growing in 2022/23.’
This review would require the Government to review what impact measures in this Act are having in 2022/23 on the amount of tax working people will be paying, household finances, and economic growth.
New clause 7—Equality Impact Analyses of Provisions of this Act—
‘(1) The Chancellor of the Exchequer must review the equality impact of the provisions of this Act in accordance with this section and lay a report of that review before the House of Commons within six months of the passing of this Act.
(2) A review under this section must consider the impact of those provisions on—
(a) households at different levels of income,
(b) people with protected characteristics (within the meaning of the Equality Act 2010),
(c) the Government’s compliance with the public sector equality duty under section 149 of the Equality Act 2010, and
(d) equality in different parts of the United Kingdom and different regions of England.
(3) A review under this section must include a separate analysis of each separate measure in the Act, and must also consider the cumulative impact of the Act as a whole.’
New clause 8—Government review of operation of Economic crime (anti-money laundering) levy—
‘(1) The Treasury must conduct a review of the Economic crime (anti-money laundering) levy.
(2) The review must consider the impact on the effectiveness of the levy that would be made by the following measures—
(a) the establishment of a register of overseas entities as proposed in the draft Registration of Overseas Entities Bill that was laid before Parliament on 23 July 2018; and
(b) proposals for corporate transparency and reform of the companies register announced in a Ministerial Statement to Parliament on 21 September 2020.
(3) The review must be published and laid before Parliament within two years of the levy coming into operation.’
This new clause would require the Treasury to conduct a review of the economic crime (anti-money laundering levy). In particular, the review would need to consider how the introduction of corporate transparency measures previously announced by the Government would affect the levy’s operation.
New clause 9—Assessment of annual investment allowance—
(a) how much the changes to the annual investment allowance under section 12 of this Act will affect GDP in the event of the Finance Act coming into effect, and
(b) how the same changes would have affected GDP had the UK—
(i) remained in the European Union, and
(ii) left the European Union without a Future Trade and Investment Partnership.’
This new clause would require an assessment of the effects of the provisions in clause 12 on GDP in different scenarios.
New Clause 10—Review of temporary increase in annual investment allowance—
The Government must publish within 12 months of this Act coming into effect an assessment of—
(a) the size, number, and location of companies claiming the increased annual investment allowance,
(b) the impact of this relief upon levels of capital investment, and
(c) the percentage of total business investments that were covered by this relief in 2019, 2020 & 2021.’
This new clause would require an assessment of the take-up and impact of the temporary increase in the AIA.
New clause 11—Assessment of Economic crime (anti-money laundering) levy—
‘The Government must publish within 12 months of the Act coming into effect an assessment of the impact of Part 3 of this Act (Economic crime (anti-money laundering) levy) on the tax gap and how it has affected opportunities for tax evasion, tax avoidance, and other economic crimes.’
This new clause would require an assessment of the impact of the Economic crime (anti-money laundering) levy on the tax gap and on opportunities for tax avoidance, evasion and other economic crimes.
New clause 12—Review of avoidance provisions of sections 84 to 92 on the tax gap—
‘The Government must publish within 12 months of the Act coming into effect an assessment of the provisions in sections 84 to 92 of this Act on the tax gap in the UK.’
This new clause would require an assessment of the impact of the provisions on tax avoidance in clauses 84 to 92 on the tax gap.
New clause 13—Review of provisions of section 85 and publication of information on overseas property ownership—
‘(1) The Government must publish within 12 months of this Act coming into effect an assessment of the impact of the provisions of section 85 about the publication by HMRC of information about tax avoidance schemes.
(2) This assessment must include consideration of the impact of the publication of a register of overseas property ownership upon the promotion of tax avoidance in the UK.’
This new clause would require an assessment of the impact of the provisions of clause 85, and consideration of the impact of publishing a register of overseas property ownership.
New clause 14—Review of reliefs on investments—
‘The Government must publish within 12 months of this Act coming into force an assessment of the impact on the tax gap of the reliefs on investments contained in this Act, and of whether those reliefs have increased opportunities for tax evasion and avoidance.’
New clause 15—Effect on GDP of international matters in Act, and of whole Act—
‘(1) The Government must publish an assessment of the impact on GDP of—
(a) the provisions in sections 24 to 28 of this Act, and
(b) this Act as a whole.
(2) The assessment must also compare these impacts to the impacts had the UK—
(a) remained in the European Union, and
(b) left the European Union without a Future Trade and Investment Partnership.’
This new clause would require a Government assessment of the effect on GDP of the international provisions of the Act, and of the Act as a whole, in different scenarios.
New clause 16—Review of impact of Residential property developer tax on the tax gap—
‘The Government must publish within 12 months of this Act coming into effect an assessment of the impact of Part 2 of this Act (Residential property developer tax) on the tax gap, and of whether it has increased opportunities for tax evasion and avoidance.’
This new clause would require a Government assessment of the impact of the Residential Property Developer Tax introduced in this Bill, and of its effect on opportunities for tax evasion and avoidance.
New clause 17—Impact of Act on tackling climate change—
‘The Government must publish within 12 months of this Act coming into effect an impact assessment of the changes in the Act as a whole on the goal of tackling climate change and the UK‘s plans to reach net zero by 2050.’
New clause 18—Vehicle taxes: effect on climate change goals—
‘The Government must publish within 12 months of this Act coming into effect an assessment of the impact of sections 77 to 79 on the goal of tackling climate change and on the UK‘s plans to reach net zero by 2050.’
New clause 19—Review of impact of reliefs in Act on the tax gap—
‘The Government must publish within 12 months of the Act coming into effect an assessment of the impact of the tax reliefs in this Act on the tax gap, and of whether they have increased opportunities for tax evasion and avoidance.’
New clause 20—Uncertain tax treatment—
‘The Government must publish within 12 months of this Act coming into effect an assessment comparing the rates of uncertain tax in the UK to those of all other OECD countries.’
New clause 21—Emissions certificates—
‘The Government must publish within 12 months of this Act coming into effect an assessment of the impact of sections 99 and Schedule 16 of this Act on the goal of tackling climate change and the UK‘s plans to reach net zero by 2050.’
New clause 22—Composition of the Office of Tax Simplification—
‘The Government must publish within 12 months of this Act coming into effect an assessment of the composition of the Office of Tax Simplification membership with a view to ensuring it is diverse and representative.’
New clause 23—Capacity of the OTS—
‘The Government must publish within 12 months of this Act coming into effect a review of the membership and capacity of the OTS, including consideration of the capacity the membership would have to deal with an expansion of its remit to include fairness in the tax system.’
New clause 24—Gambling—
‘The Government must publish within 12 months of this Act coming into effect an assessment of the provisions of clause 80 on—
(a) the volume of gambling, and
(b) public health.’
New clause 25—Impact of Act on tax burden of hospitality sector—
‘The Government must publish within 12 months of this Act coming into effect an assessment of the impact of the Act as a whole on the tax burden on the hospitality sector.’
New clause 26—Review of the residential property developer tax—
‘(1) The Government must publish a review of the residential property developer tax within three months of the passing of this Act.
(2) The review under subsection (1) must assess how much money the RPDT would raise at a range of rates at 0.5 percentage point increments.’
This review would assess how the revenue the RPDT would raise at range of rates at 0.5 percentage point increments.
New clause 27—Review of Economic crime (anti-money laundering) levy—
‘(1) The Government must publish an impact assessment of the operation of the Economic crime (anti-money laundering) levy within six months of Royal Assent to this Act.
(2) The assessment carried out under subsection (1) must include an assessment of the contribution to the effectiveness of the levy that a register of beneficial owners of property would make.’
This new clause would require the Government to produce an impact assessment of the operation of the new Economic crime (anti-money laundering) levy, and assess how a register of beneficial owners of property would contribute to the effectiveness of the levy.
Amendment 35, page 2, line 30, leave out Clause 6.
This amendment deletes clause 6 which reduces the rate of the banking surcharge and the level of the surcharge allowance.
Amendment 36, page 10, line 44, at end insert—
“, and at the end of section 32(1) insert “, but eligibility for the increased maximum annual allowance from 1 January 2022 to 31 March 2023 is available only to businesses which can demonstrate that they have taken steps to reduce carbon emissions within their own business models and have set out further steps for how they plan to reduce carbon emissions towards a net zero goal”.”
This amendment would restrict access to the extended temporary increase in annual investment allowance to businesses that support transition to “net-zero”.
Amendment 37, page 10, line 44, at end insert—
“, and at the end of section 32(1) insert “, but eligibility for the increased maximum annual allowance from 1 January 2022 to 31 March 2023 is available only to businesses which do not have a history of tax avoidance”.”
This amendment would restrict access to the extended temporary increase in annual investment allowance to businesses that do not have a history of tax avoidance.
Amendment 38, page 11, line 10, at end insert—
‘(3) In paragraph 2(3) of Schedule 13 of that Act—
(a) after “second straddling period is” insert “the greater of (a)”; and
(b) after “of that sub-paragraph” add “and (b) the amount (if any) by which the maximum allowance under section 51A of CAA 2001 had there been no temporary increase in the allowance exceeds the annual investment allowance qualifying expenditure incurred before 1 April 2023.”’
This amendment would amend the transitional provisions for the reversion of the AIA to £200,000 on 1 April 2023, to ensure that smaller businesses with lower levels of qualifying capital expenditure are not disadvantaged by having their effective AIA limit restricted to significantly less than £200,000 for a period.
Amendment 34, page 19, line 41, at end insert—
‘(10A) The Secretary of State must consult trade unions representing UK seafarers before making any regulations pursuant to subsection (8).’
This amendment would require the Government to consult trade unions representing UK seafarers before making regulations pursuant to subsection (8) of this clause. This subsection extends to ships not registered in the UK the power of the Department to make regulations requiring proof from companies and groups within the tonnage tax regime that their ships comply with safety, environmental and working conditions.
Government amendments 1 to 13.
Government new schedule 1—Freeport tax site reliefs: provision about regulations.
Government new schedule 2—Public interest business protection tax.
Government amendments 14 to 33.
Lucy Frazer
I thank all Members who have taken part in the debates on the Finance Bill so far. Today we are focusing on a number of potential amendments to the Bill. Many of the amendments seek to ensure the proper functioning of the legislation in response to stakeholder scrutiny and feedback. Others take forward responses to substantive issues that have emerged during the Bill’s passage. I will address each amendment in turn.
Amendments 1 to 8 to clause 36 relate to the Bill’s measures to establish a residential property developer tax, or RPDT. These amendments ensure that those holding a specific type of build licence giving them effective control of the land are subject to RPDT. That will ensure that the legislation works as intended, and closes a potential loophole.
Amendments 9 and 10 to clause 58 relate to the Bill’s clauses on the economic crime (anti-money laundering) levy. These amendments seek simply to amend clause 58 by replacing two references to “entities that are” with “persons”, providing further clarity by using terms consistently throughout the legislation.
Amendments 11 to 13 form part of the extensive action that the Government are taking to address the current heavy goods vehicle driver shortage. As Members will remember, at the last autumn Budget, the Government temporarily extended cabotage rights for foreign operators of heavy goods vehicles until 30 April this year to ease supply-chain pressures. That change was made on a short-term basis to support essential supply chains. These amendments seek to introduce an enabling power through the Bill to make temporary changes to vehicle excise duty legislation should the Government decide to introduce a further temporary extension of road haulage cabotage flexibilities beyond April and up to 31 December 2022. These amendments do not, in themselves, extend those flexibilities. The Government have made no decision to extend the cabotage easement. Any such decision would be taken only after consulting with interested parties, and in consideration of wider pressure on supply chains at the time.
Amendments 14 to 17 are technical amendments to clauses 7 and 8, and to schedule 1, which seek to abolish the basis period rules for the self-employed and partners, and introduce the tax-year basis from April 2024. The amendments will ensure that eligible taxpayers are able to benefit from certain tax reliefs, including double taxation relief, that are given as a deduction against tax rather than against profits during the transition to the new tax-year basis. The amendments are required to avoid an unintentional outcome of the basis period reform transition rules.
Amendments 18 to 30 address a number of technical points in the new asset holding companies regime to better reflect the original policy intentions. These amendments follow engagement with industry. They will make the rules of the tax regime clearer for companies that will use it, and will ensure that it can be more effectively implemented.
Amendments 31 to 33 relate to accounting standards. They make minor technical changes to part 2 of schedule 5, which revokes the requirement for life insurance companies to spread their acquisition costs over seven years for tax purposes. These changes will simply ensure that the legislation functions as originally intended.
I turn now to the Government new clauses and new schedules. New clause 1 and new schedule 1 will deal with provisions about regulations regarding freeports. These new provisions seek to build on our existing powers that allow us to introduce, amend and remove conditions to enable businesses to qualify for freeport tax reliefs. The provisions do that by allowing the Government to use secondary legislation to remove and recover those reliefs from individual businesses, if necessary on a prospective basis. This power could be used to enforce compliance. For instance, it would allow the Government to introduce new reporting requirements if needed, and to respond if companies did not adhere to them by removing reliefs or taking other action.
These provisions support our critical freeports programme, which will help to create employment in left-behind areas, and allow them to prosper with additional and much-needed investment. We look forward to seeing them, and the businesses within them, prosper.
New clause 3 and new schedule 2 seek to legislate for a new public interest business protection tax. Energy groups will often enter into derivative contracts to hedge their exposure to fluctuations in wholesale energy prices, and help to ensure that they can supply energy to customers at the prices fixed and under the price cap set by Ofgem. They will typically use a forward purchase agreement to buy energy in the future at a price that is fixed at the time when the contract is entered into.
The Government have been monitoring the global rise in wholesale energy prices very closely. We have a serious concern about certain arrangements whereby energy suppliers do not own, control or have the economic rights to the key assets needed to run their businesses, including forward purchase contracts. It is currently possible for an energy business to derive value from such a valuable asset for its own benefit and the benefit of its shareholders, while leaving its energy supply business to fail, or increasing the costs of a failure. The costs of that failure would then be picked up by the taxpayer or consumers, because it would trigger a special administration regime or a supplier of last resort scheme. These are special Government-funded administration routes that help to ensure that UK customers continue to be supplied with energy.
Ofgem is now consulting on a range of regulatory actions that it proposes to take to ensure that the right protections are in place in these circumstances. That work will ensure the ongoing resilience of energy supply businesses. However, it will take months for these changes to come into effect. The Government recognise that it would be unacceptable for a Government to allow business owners to profit from engineering this kind of outcome in the interim period, at great and direct expense to the taxpayer.
Peter Grant (Glenrothes) (SNP)
I do not think that anyone would argue with the intention behind the new schedule, but it is not so much a new schedule as a Bill within a Bill. It is 25 pages long, and it introduces a tax that has not existed before. It was tabled less than 48 hours ago, and as far as I can see there has been no consultation with anyone. Given that this issue has been known about for so long, why has it taken until now for the Government to table such a large, complex and unwieldy amendment to their own legislation?
Lucy Frazer
I understand the hon. Gentleman’s concern. The Bill has been tabled at this time because Ofgem has identified a risk related to energy suppliers in the circumstances that I have described. If that eventuality came to pass, there would be a significant loss to taxpayers if we did not introduce the legislation to prevent it. I understand his concern, but it is necessary for the Government to introduce this tax and to introduce it now, to ensure that these risks do not materialise.
Mel Stride (Central Devon) (Con)
Am I right in assuming that the purpose of the new tax is to discourage certain types of behaviour rather than to raise revenue?
Lucy Frazer
My right hon. Friend is right. We are not seeking to raise revenue; we are seeking to prevent certain circumstances from coming about, and we hope that this deterrent will be sufficient. Of course, if it were not, we would be able to recoup the money by way of tax. He will have spotted that the legislation is only in force for a short period to allow Ofgem to take regulatory action to ensure that we deal with this issue in the appropriate way through regulation rather than by bringing preventive action by way of a tax.
As I was saying, this new tax will have effect where steps are taken to obtain value from assets that materially contribute to a licensed energy supply business entering into special measures or to the increased costs of the business where it is a subject of special measures on or after 28 January this year and before 28 January next year. The tax will apply to the value of the assets that are held in connection with a licensed energy supply business where the assets in scope of the tax exceed £100 million, including assets held by connected persons. This is to ensure that the tax would capture only the very largest energy businesses. The tax will apply at a rate of 75% so as to be an active and effective deterrent against actions that are not in the public interest, and to recoup a substantial proportion of the costs that would otherwise fall to the Government under special administration measures in the event that such action was taken, as my right hon. Friend the Member for Central Devon (Mel Stride) pointed out.
In order to ensure that the tax is robust against avoidance activity, and given the sums at stake, the Government consider it necessary for Her Majesty’s Revenue and Customs to be able to recover the tax from other persons if it cannot recover it from the relevant company. These joint and several liability provisions will apply only to companies under common ownership, as well as investors and persons connected with those investors in limited circumstances. Safeguards are also in place to permit certain affected persons to make a claim for relief to limit the amount of joint and several liability to the amount that they potentially benefit from such transactions. It is our hope and expectation that no business would pursue such action and that the tax will not be charged. The tax is a temporary and necessary safeguard that will protect the taxpayer and energy consumers in the interim period before the regulatory change takes effect.
The Government amendments will ensure that the legislation works as it should and protects the interests of the people of this country. I therefore commend to the House amendments 1 to 33, new clauses 1 and 3, and new schedules 1 and 2, and I urge Members to accept them.
James Murray (Ealing North) (Lab/Co-op)
Any member of the public hearing that the Government were today voting their Finance Bill through the House of Commons might expect such a Bill to do something to help with the cost of living crisis facing families up and down this country. Our new clause 6 makes this simple point. It asks the Government to set out how the measures in the Bill will affect household finances, the amount of tax working people are paying, and the rate of growth in the economy in the coming year.
I suspect that Ministers will want to avoid our new clause 6 because they know what the answers will be. The truth is that whether through this Bill or any other means, the Government are letting energy bills soar, refusing to cancel their national insurance hike, and failing to set out a plan for growth. The Conservatives’ failure to grow the economy over the last decade, and their inability to plan for growth in the future, has left them with no choice but to raise taxes. This low-growth, high-tax approach to the economy has become the hallmark of these Conservatives in power.
Let me make it clear why our new clause 6 might make such difficult reading for Conservative Members. People see their energy bills going up and about to soar, inflation at its highest rate in decades, and their wages falling in real terms—and what do the Tories do? They raise national insurance by £274 for a typical full-time worker. It is the worst possible tax rise at the worst possible time. We warned that it was wrong when the Government pushed it through Parliament last year. Our arguments have only got stronger since then, so instead of digging in, the Chancellor and the Prime Minister should do the right thing and scrap this tax hike on working people and their jobs. Despite calls on the Government from all sides, they are so far refusing to budge. In this Bill, they offer no relief to working people, who face soaring prices and tax bills. They have managed to find time, however, to put into law a tax cut for banks, as we see in clause 6.
Clause 6, which our amendment 35 seeks to delete, would see the rate of the banking corporation tax surcharge fall from 8% to 3%, with the allowance for the charge raised from £25 million to £100 million. That will cost the public finances £1 billion a year by the end of this Parliament. Throughout the passage of the Bill, the Financial Secretary to the Treasury has used smoke and mirrors desperately to pretend that the Government are not cutting taxes for banks. She has tried to hide this tax cut under a separate change to corporation tax that may never even come to pass.
Peter Grant
Thank you, Mr Deputy Speaker; I am pleased to be able to make a brief contribution to tonight’s debate. I commend the three previous speakers, the hon. Members for Streatham (Bell Ribeiro-Addy), for Easington (Grahame Morris) and for Oxford West and Abingdon (Layla Moran). It is unfortunate that the very inadequate time that the programme motion allowed did not give any of them the time they deserved, given the amount of work they put into their amendments.
I mentioned new clause 3 and new schedule 2 earlier, but “schedule” is a misnomer here. We are not talking about a schedule; we are in effect talking about the “Finance No. 3 Bill”, 25 pages long and intensely complicated. This is our one and only chance to get it right and none of us can feel comfortable that it was tabled on Monday, it is being debated on Wednesday and it comes into force on Friday—not next Friday, but the previous Friday. What on earth are the Government playing at?
I do not have an issue with any of the other important business that took up today’s time—nobody could have any issue with any of that. My issue is that when the Government knew they were going to table such a substantial, technical and complicated amendment at this stage, it was up to them to amend the programme motion to give a decent amount of time, because 90 minutes for this debate is ludicrous. Only the Government had the ability to put forward a change to the programme motion; and only the Government had the opportunity to consult with Opposition parties in advance of that amendment being tabled, or indeed to discuss it with outside stakeholders. Not doing so was a failure, unless the Minister can give a very good reason as to why secrecy was so important. Springing it on the House in this way was, I believe, an abuse of the Government’s powers and shows contempt for Parliament.
The aim of the new tax is laudable and nobody would argue against it, but we have been given no indication as to why the tax is the way to prevent the kind of behaviour that we are trying to deter. It appears that it is just because they can change the tax system immediately and make it retrospective, whereas other things would take a bit longer. I ask the Government this question outright: is the urgency because they have picked up intelligence that another major player in the energy market was about to cut and run—to cash in and bail out? If they cannot answer that in public today, I would appreciate it if they contacted me after, on a guarantee of confidentiality. To be honest, I can see no other reason why there was a need for such secrecy and last-minute panic.
The amendment is restricted to energy companies, but it can also be extended to apply to any other kind of company the Treasury chooses to designate. What is that for? Can the Minister explain what other companies might need to be brought in, and in what circumstances that might need to happen? The measure is only to be in place for a year, or for such other time as the Treasury decides it wants to extend it, and it can extend it as often as it wants, although only until 2025. However, given that the Minister has said that the amendment is essentially a stopgap until Ofgem is able to amend the regulatory environment to prevent these abuses in the market, just how lacking in confidence are they of Ofgem and its ability and willingness to fix this long-standing problem if they think it might need another three years before it is fully dealt with?
Paragraph 41 of new schedule 2 gives the Government the power to change the law retrospectively. No Parliament should ever lightly agree to such a power, but tonight we have been given no choice; we simply have not had sufficient time to look at the detail of that or to get the assurances we would usually want about what that power will and will not be used for.
My hon. Friend the Member for Glasgow Central (Alison Thewliss) referred to comments from the Chartered Institute of Taxation, and the Association of Tax Technicians told me yesterday:
“We have a brand-new tax without any prior announcement, no consultation, little debate, which will be enacted before the next Budget, and will be effective from 28 January 2022. OK, these are arguably special circumstances, but is this a good way to run a tax system?”
The short answer is no, it is not.
Lucy Frazer
I shall endeavour to answer all the points raised swiftly, Mr Deputy Speaker.
The hon. Member for Ealing North (James Murray) began by asking in new clause 6 for us to publish a review of the impact of the amount of tax working people will be paying. He will know that we have already published the “Impact on households” document in the October Budget of 2021 and the Office for Budget Responsibility already produces fiscal forecasts. However, he used the amendment to discuss the issue more broadly, suggesting that the Government were not doing enough to help working families. That simply is not correct, and he knows it.
We have cut tax for low-income families by introducing the universal credit taper rate, saving working families £1,000 a month. The hon. Gentleman will know that we increased the rate for the national living wage, and he will know about the half a billion pounds of household support for the hardest-hit families—not to mention the significant covid support that we have given the families who have needed it over the last 18 months to two years. However, the best way to help people to have appropriate incomes to support themselves is to get them into jobs, and that is why we have spent £2 billion to get young people into the kickstart scheme, and £2.9 billion to help the 1.4 million long-term unemployed to get into jobs, ensuring that we have a lower unemployment rate than comparable countries such as Canada, France, Italy and Spain.
The hon. Member for Oxford West and Abingdon (Layla Moran) talked about the need to put more money into people’s pockets, and to support services. That is exactly what we did in the spending review, with a cash increase of £150 billion a year by 2024, the largest real-terms increase provided by any Parliament in this century. Only yesterday, I was pleased to see an announcement about levelling up education funding across the country.
The hon. Member for Ealing North mentioned the NHS and social care levy. I am proud that this Government are willing to tackle the really difficult issues that face this country. My hon. Friend the Member for North Dorset (Simon Hoare) pointed out that if we secure sufficient funds, we shall be able to tackle waiting times and have more doctors. I should point out that it was a Labour Government who, in the same way, increased national insurance contribution rates by 1% in 2003, specifically to increase NHS funding. The hon. Member also mentioned the banking surcharge, but, as was mentioned by my hon. Friend the Member for South Cambridgeshire (Anthony Browne), tax rates for banks are going not down, but up—to 28%, when they would otherwise be at 27%.
A number of Members on both sides of the House mentioned the economic crime measures in the Bill, and the beneficial ownership register. I hope that those Members were present for Prime Minister’s Question Time this afternoon and heard what the Prime Minister said, showing that we are committed to introducing this legislation. However, we have already done a significant amount to tackle economic crime. Since 2010 the Government have introduced more than 150 new measures and invested more than £2 billion in HMRC to tackle fraud. We do not want in this country money that has been gained through criminality or corruption—it is not welcome in the UK—and the international Finance Action Task Force concluded in December 2018 that we have some of the strongest controls in the world. Since then, we have strengthened those powers even further.
I will spend a couple of seconds on the new clause relating to tonnage tax, referred to by the hon. Member for Ealing North, my hon. Friend the Member for Thurrock (Jackie Doyle-Price) and the hon. Members for Glasgow Central (Alison Thewliss) and for Easington (Grahame Morris). It is important to ensure a fair wage for our seafarers, who are recognised worldwide as some of the most highly skilled. That is why, in 2020, the Government extended the minimum wage entitlement to seafarers on domestic voyages.
The Department for Transport’s “Maritime 2050” strategy shows that we want a diverse and rewarded workforce, so we will continue to engage closely with industry and trade unions to support the training and employment of both British officers and ratings. I understand that the RMT has had recent meetings with the DFT and the Maritime Skills Commission on the training of ratings and has been invited to submit its analysis to inform further discussions. I wish I had more time to deal with that matter, but I will be happy to take it up further.
On the residential property tax, the hon. Member for Ealing North will know that the Secretary of State for Levelling Up, Housing and Communities is actively working on the matter.
Climate change goals were mentioned by the hon. Member for Glasgow Central, who said that there was not enough investment in businesses to incentivise them. However, in the last financial year, we issued £16 billion-worth of green bonds and set up the UK Infrastructure Bank to invest in net zero, backed with £12 billion of capital, which will also help to unlock more than £40 billion of overall investment in infrastructure.
For all those reasons, and many others, I urge hon. Members to accept the Government amendments, but not the others.
Lucy Frazer
I beg to move, That the Bill be now read the Third time.
In the autumn Budget, the Chancellor set out a vision to build a stronger economy that would allow this country to bounce back from the pandemic. This Finance Bill takes forward measures that will help to turn that vision into reality and drive growth for our country long into the future. Its measures will support business across the UK, including our banking, creative and shipping sectors. In addition, the Bill will protect businesses and the public by clamping down on tax evasion and economic crime, improving trust and building a fairer UK economy.
I turn first to the measures in the Bill designed to safeguard and strengthen industry and the wider economy. To help businesses invest and grow, we are extending the annual investment allowance at its highest-ever level of £1 million until 31 March 2023. The £1 million AIA level means that more than 99% of businesses will have their plant and machinery expenditure covered.
We are also extending the support offered to the creative industries by providing additional tax reliefs to theatres, orchestras, museums and galleries as the sector recovers. These rates of higher relief will provide a further incentive for new productions, exhibitions and concerts up to April 2024.
Finally, reforms to the UK tonnage tax regime will encourage more firms to base their headquarters in the UK to use our world-leading maritime services industry and to fly the flag of the UK. This will bring jobs and investment throughout the country, and especially to our coastal communities.
I now turn to how the Bill will deliver stronger public finances. The Bill sets the rate of the bank surcharge so that the combined rate on banks’ profits will increase to 28% from April 2023. It also increases the surcharge allowance to £100 million. These changes will ensure that the banks continue to make a fair contribution while encouraging growth and competition for smaller groups within the UK banking market.
The 1.25% increase on dividend income rates from 6 April 2022 will help fund the health and social care settlement, ensuring that contributions are made based on employed and self-employed earnings. The Government are also introducing the new 4% residential developer tax on the most profitable developers. This will raise at least £2 billion over the next decade to help pay for the removal of unsafe cladding, providing reassurance to home owners and boosting confidence in the UK housing market.
At the heart of this Finance Bill is the desire to safeguard taxpayers’ interests and deal with those who avoid paying their fair share. The economic crime levy will help deliver the Government’s objectives to combat economic crime and will raise an expected £100 million per year to fund anti-laundering measures. The levy is calculated by UK revenue and provides the fairest and simplest method for the anti-money laundering regulated sector to contribute further. That will cement the UK’s reputation as a secure country in which to conduct business and solidifies the Government’s ambition to permanently tackle economic crime.
As I mentioned earlier, the Bill’s measures will clamp down on tax avoidance and evasion. It will give HMRC more powers to tackle promoters of tax avoidance schemes by levying penalties on UK entities that enable them. The measures are accompanied by an increase in the duty charge on tobacco products by 2% and a rise in the minimum excise tax to 3% above RPI inflation, alongside new measures to tackle duty evasion. That will help reduce the long-term burden on the NHS and improve public health generally.
By targeting businesses that manipulate electronic records to evade tax, the Bill reinforces the Government’s efforts to tackle unscrupulous businesses that carry out electronic sales suppression. The measures are essential to Britain’s reputation as a global hub for businesses and as a secure and transparent place in which to conduct business.
I thank hon. and right hon. Members for their helpful and insightful contributions to the debates during the Bill’s passage.
To conclude, this Finance Bill supports our efforts to build a stronger economy. It tackles tax evasion and avoidance, and, ultimately, its measures will create a brighter and simpler future for industry, the economy and the UK as a whole. For those reasons, I commend it to the House.
Oral Answers to Questions
Lucy Frazer Excerpts(2 years, 2 months ago)
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Marco Longhi (Dudley North) (Con)
The Financial Secretary to the Treasury (Lucy Frazer)
The Chancellor has brought forward a number of measures to encourage business investment, and I shall mention just two. Under the super deduction, from April 2021 until the end of March 2023, companies can claim a 130% capital allowance on qualifying plant and machinery investments. That is the biggest two-year business tax cut in modern British history. We have also extended the temporary £1 million annual investment allowance level until the end of March 2023.
Steve Brine
That was an interesting answer. There is a business in my constituency, Cytronex, which has developed a green solution to increase cycling rates by converting existing bicycles into e-bikes—I recommend it. Last year, its product won the e-bike of the year award; as a result, international demand has far outstripped its ability to support it. Cytronex is passionate about manufacturing its product in Britain and even assembles its own lithium battery packs in Winchester. What more can we do to help small businesses such as Cytronex make the leap into mass production, and will one of the excellent Treasury Front-Bench team meet us to discuss how we can explore that?
Lucy Frazer
Cytronex sounds like a fantastic company, and it is great to see it in Winchester. It is precisely the type of company that we want to support. As I mentioned, it could benefit from the super deduction that we have brought in. Under the super deduction, for every £1 a company invests, its taxes are cut by up to 25p. That type of investment will help manufacturing and the manufacturing sector.
Marco Longhi
Jobs and job security clearly depend on economic growth. The International Monetary Fund’s forecast putting the UK at the top of the G7 is an endorsement of this Chancellor’s and this Prime Minister’s approach to economic policy throughout covid. Will the Minister assure me and my Dudley constituents that we will increasingly return to revenue from growth as soon as possible, and continue investing in skills for jobs for the future, building on, for example, the successful delivery of Dudley’s institute of technology?
Lucy Frazer
My hon. Friend is absolutely right to focus on skills, and that is exactly what the Chancellor did in the spending review, with an investment, over the Parliament, of £3.8 billion. My hon. Friend mentions the Marches institute of technology, and we are investing in a total of 21 of those innovative institutions across England. Employer-led training is key to growth, and that is why we are quadrupling the scale of skills boot camps in England, including digital skills boot camps, which are available in Dudley and funded by the Government.
Gareth Thomas (Harrow West) (Lab/Co-op)
Businesses in financial services are more likely to invest here as opposed to European markets if an agreement is reached with the EU on financial services regulation. Last March, the Economic Secretary to the Treasury, the hon. Member for Salisbury (John Glen), said that he expected such an agreement to be signed expeditiously. It still has not been. When does the Minister think the memorandum of understanding on financial services regulation will finally be signed?
Lucy Frazer
The hon. Member makes an important point. Financial services are very important to the UK. We are ready to make a deal and we look forward to hearing from the EU.
Emma Hardy (Kingston upon Hull West and Hessle) (Lab)
A local businessman in my constituency would love to be able to invest, but he is facing business ruin because he made an order to China for some fireplace tiles worth £15,000 and, because of anti-dumping duty, customs duty and various other taxes, he is going to be charged £43,000 of costs for a £15,000 order. He is a sole business person and he is facing bankruptcy. I have contacted HMRC about this, but I seem to be hitting a dead end, so will the Minister please look into this matter and see if anything can be done to help him?
Lucy Frazer
If the hon. Member wants to give me the details of her constituent’s case, I would be very happy to look into it.
Caroline Lucas (Brighton, Pavilion) (Green)
The Financial Secretary to the Treasury (Lucy Frazer)
I am pleased to have an opportunity to underline the Government’s commitment to reducing carbon emissions through taxation and the UK’s success in limiting global emissions at COP26. The Government have reduced carbon emissions through their carbon pricing policies, including through the UK emissions trading scheme. We are committed to delivering on our carbon targets, and our net zero strategy sets out a roadmap for reaching net zero by 2050.
Caroline Lucas
I thank the Minister for her answer, but she will know that the UK has one of the most lax tax regimes in the world for the oil and gas sector. In 2019, companies got away with paying 12.5 times less tax for a barrel of oil produced here compared with in Norway, for example. In 2020, Shell paid absolutely no tax in the UK, the only country in the world where it operates where that was the case. For 2021, HMRC expects that the industry will pocket £910 million-worth of tax reliefs for decommissioning. Given our commitments under the Glasgow climate pact, and given the fact that the oil and gas industry is currently making near-record profits while UK households are struggling with a real cost of living crisis, will the Minister address the imbalance and commit to a review of the tax regime?
Lucy Frazer
The hon. Member will know that the oil and gas sector does pay significant taxes. Indeed, it pays additional taxes, and to date it has paid more than £375 billion in production taxes.
Shabana Mahmood (Birmingham, Ladywood) (Lab)
The Financial Secretary to the Treasury (Lucy Frazer)
I am aware that the hon. Gentleman raised a similar question with the Chancellor when the Chancellor was a Local Government junior Minister. The hon. Gentleman will know that we announced in the middle of last month that we are closing a tax loophole that allowed owners of second homes who claimed that their often-empty properties were holiday lets to receive small business rates relief instead of paying council tax. We are also committed to ensuring that first-time buyers are able to get on and move up the housing ladder.
Tim Farron
Rural Britain’s housing crisis has become a catastrophe over the last two years of the pandemic. The Chancellor will know all about that, given the kind of constituency he represents. Some 80% of all house sales in the lakes and dales in Cumbria have been to the second home market, and in some rural communities there has been a reduction in the private-rented affordable market of 70%. Local families are being forced out of our communities. The need for drastic and immediate action is obvious, well over and above what has been said. Will the Minister agree—or will she agree to persuade her right hon. Friend the Chancellor—to meet me, as the Chancellor’s constituency neighbour, to sit down and look at seven steps for saving our rural communities, so that we can prevent our towns and villages being emptied of their full-time populations? That will surely include giving councils the freedom to double council tax on second homes.
Lucy Frazer
I am happy to meet the hon. Member to discuss the points he raises. We have taken a number of steps to ensure that people pay the full rate of council tax on second homes—96% of second home owners pay the full rate of council tax. He will know that the Government introduced the higher rate of stamp duty land tax for those purchasing additional properties, and only last year introduced a new SDLT surcharge of 2%, to ensure that houses are available for local people at reasonable prices. I am happy to discuss this further with him.
Tom Randall (Gedling) (Con)
James Murray (Ealing North) (Lab/Co-op)
Last month, the Government came out against Labour’s plan to help people on modest incomes pay their energy bills using a one-off £1.2 billion windfall tax on the profits of oil and gas producers. The Education Secretary complained that oil and gas companies are “already struggling”. The truth is that pensioners and people on modest incomes are the ones who are struggling. Oil and gas companies are expected to report near-record income this year. Will Ministers now admit that the Government have got it wrong and commit to looking again at our plan?
The Financial Secretary to the Treasury (Lucy Frazer)
The hon. Member will know that the oil and gas industry pays a significant amount in taxation—I mentioned the figure earlier. In terms of helping people who are struggling with their bills, he will know that we already have the energy price cap, the winter fuel payment, the warm home discount and the cold weather payment. We are looking out for and supporting those on the lowest income to enable them to get through this difficult period.
Simon Jupp (East Devon) (Con)
Lucy Frazer
My hon. Friend will know that we have already made a significant input to support those in the hospitality and tourism industries. He will know that we extended the 5% reduced rate of VAT for those sectors to the end of September. On 1 October, we reduced the rate to 12.5%. That relief has cost the Government and the taxpayer more than £8 billion. Although all taxes are kept under review, there are no plans to extend the 12.5% reduced VAT rate.
Afzal Khan (Manchester, Gorton) (Lab)
Local Government Finance Act 1988 (Non-domestic Rating Multipliers) (England) (No.2) Order 2021
Lucy Frazer Excerpts(2 years, 3 months ago)
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The Financial Secretary to the Treasury (Lucy Frazer)
I beg to move,
That the Committee has considered the Local Government Finance Act 1988 (Non-Domestic Rating Multipliers) (England) (No. 2) Order 2021.
It is a pleasure to serve under your chairmanship, Mrs Miller.
Businesses are at the heart of this country’s economy, and as the United Kingdom starts its recovery from coronavirus that is more the case than it has been before. That is why at the Budget the Chancellor announced a package of measures to benefit businesses large and small. It included key reforms to business rates to ease their burden and create stronger high streets. To help business in the short term, the Chancellor announced that we would cancel this year’s planned increase in the business rates multiplier. The statutory instrument before the Committee contains the legislation that will turn that change into reality. It freezes the business rates multiplier at its current rate for the coming year, instead of increasing it in line with the consumer prices index, as is usual.
I will remind the Committee of how the business rates multiplier works and some of the key reforms we have already made. The ‘multiplier’ is effectively a tax rate used to calculate business rates. There are two kinds of multipliers. The standard multiplier applies to businesses with a rateable value of more than £51,000. The small business multiplier applies to businesses with a rateable value of up to £51,000. Historically, those multipliers would rise in line with the preceding year’s retail prices index inflation figure. At the 2016 Budget, the Government announced they would switch to uprating the multiplier in line with the consumer prices index measure of inflation, instead of RPI.
Members will recall that the following year, the Government brought forward the implementation date from April 2020 to April 2018. The switch from RPI to CPI is worth around £15.3 billion to businesses over the next five years, and that benefit will grow with time. But we are not stopping here. As I outlined earlier, at the autumn Budget we announced a package of measures worth £7 billion over the next five years to support businesses large and small. It included a new temporary 50% business rates relief for retail, hospitality and leisure businesses next financial year, worth almost £1.7 billion. We are also providing £750 million-worth of investment incentives to businesses—for instance our new green investment relief. From next year, our business rates improvement relief will allow businesses to make property improvements and pay no extra business rates for 12 months.
In addition we have pledged to make the business rates system fairer and timelier with more frequent revaluations every three years. The new revaluation cycle will be delivered from 2023. However, while that support is wide-ranging, the Government also recognise that businesses need help even sooner. That is why we are introducing this SI, which will allow us to freeze the inflationary increase in business rates for next financial year to this year’s levels.
The freeze means that the small business multiplier next financial year will be 49.9p, rather than 51.4p, and the standard multiplier in 2022-23 will be 51.2p rather than 52.7p. This measure provides relief to millions of small businesses, by saving firms an estimated £4.6 billion over the next five years. The measures contained in this order apply to England, but the Government will provide the devolved Administrations with equitable funding. In addition, we will fully compensate local authorities for the income that they will lose because of this measure.
Our small businesses are the beating heart of our economy. It is only right that we do all we can to support them, particularly at a time like this. The SI is a significant element of the action the Government are taking to reduce the burden of business rates. The order reflects the Government’s commitment to businesses large and small. It will provide businesses with much needed certainty and security so they can continue to power the economy. And it will help them to flourish following these recent difficult times. For all those reasons I commend the order to the Committee.
Lucy Frazer
I thank the hon. Gentleman for saying that the Opposition will not oppose this sensible measure, which will support and protect businesses. As he rightly said, there was no need for an impact assessment for the reasons that he outlined. If we were to conduct one, of course it would show that the proposal is hugely beneficial to businesses, which will not be paying a significant amount of business rates that they would otherwise pay. They can therefore use that money in their own businesses, benefiting the economy.
The hon. Gentleman asked me to outline the support that we are giving to businesses. He will know that in the past 18 months, we have given significant support to businesses through the provision of loans and grants, and he will have seen the extensive measures contained in the Finance Bill that we had the pleasure to debate together. They include not only the multiplier that we are debating today, but the business rate relief, the investment allowance and a number of other measures.
On business rates, we did a review of those rates and as a result made changes that will benefit businesses to the tune of around £7 billion. But that is not all we have done. The hon. Gentleman will know that we announced our intention to review the online sales tax. That will be conducted shortly.
James Murray
To clarify, I asked about the detail of the review process of the SI. The explanatory memorandum says
“The operation of this instrument will be monitored and reviewed as part of the operation of the national non-domestic rates system as a whole.”
I am sure the Minister has a copy of the explanatory memorandum. Can she outline the detail of that review process?
Lucy Frazer
As the hon. Gentleman will know, we keep all our taxes under review. The SI will be reviewed in due course, and I would be happy to update him when any such reviews are undertaken.
I commend the order to the Committee.
Question put and agreed to.
Treasury
Lucy Frazer Excerpts(2 years, 3 months ago)
Ministerial CorrectionsRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Lucy Frazer
Legal interpretation tax losses arise when businesses take a different view from HMRC of how the law should be applied, resulting in a different tax outcome. This issue has proven stubborn and difficult to tackle. Disputes often arise late in the day and are not identified in time for formal compliance enquiries to be undertaken, resulting in irrecoverable losses to the Exchequer. The new notification requirement will tackle the legal interpretation tax gap in a well-targeted and proportionate way, raising £150 million over the next five years, while driving positive behavioural change.
[Official Report, Finance (No. 2) Public Bill Committee, 11 January 2022, Vol. 706, c. 106.]
Letter of correction from the Financial Secretary to the Treasury:
An error has been identified in my statement.
The correct information should have been:
Lucy Frazer
Legal interpretation tax losses arise when businesses take a different view from HMRC of how the law should be applied, resulting in a different tax outcome. This issue has proven stubborn and difficult to tackle. Disputes often arise late in the day and are not identified in time for formal compliance enquiries to be undertaken, resulting in irrecoverable losses to the Exchequer. The new notification requirement will tackle the legal interpretation tax gap in a well-targeted and proportionate way, raising £130 million over the next five years, while driving positive behavioural change.
Rebated Fuel Rules: Construction Industry
The following is an extract from the Westminster Hall debate on Rebated Fuel Rules: Construction Industry on 19 January 2022.
Helen Whately
Despite diesel being one of the most polluting fuels that vehicles and machinery can use, red diesel benefits from a significant duty discount—a duty rate of around 11p compared with almost 68p per litre on standard diesel. That really is significant. As a consequence, businesses using red diesel pay far less for the harmful emissions they produce than individual car owners. The tax changes that we are introducing in April mean most current users of red diesel in the UK will instead be required to use diesel taxed at the standard fuel duty rate like motorists, which more fairly reflects the harmful impact of the emissions that are produced.
[Official Report, 19 January 2022, Vol. 707, c. 165WH.]
Letter of correction from the Exchequer Secretary to the Treasury:
An error has been identified in the response I gave to the debate on Rebated Fuel Rules: Construction Industry.
The correct statement should have been:
VAT: Penalty Reform
Lucy Frazer Excerpts(2 years, 3 months ago)
Written StatementsRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Financial Secretary to the Treasury (Lucy Frazer)
In the Finance Act 2021, the Government legislated to reform penalties for late submission and late payment of tax, initially from 1 April 2022, and to align interest charges for VAT with other major taxes.
Today, I am announcing that these changes for VAT businesses will now be introduced nine months later, on 1 January 2023.
HMRC is committed to becoming one of the most digitally advanced tax authorities in the world. The ambition and pace of change needs to be balanced with well-tested systems and good customer service, particularly when businesses are facing additional challenges and uncertainty.
This extra time allows HMRC to ensure that the IT changes necessary for the new penalties and interest charges can be introduced as effectively as possible, ensuring a high standard of service to customers.
[HCWS537]
Finance (No. 2) Bill (Fifth sitting)
Lucy Frazer ExcerptsTuesday 11th January 2022
(2 years, 3 months ago)
Public Bill CommitteesRead Full debate Finance Act 2022 View all Finance Act 2022 Debates Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 11 January 2022 - (11 Jan 2022)
The Chair
With this it will be convenient to discuss the following:
Government amendments 7 to 10.
That schedule 15 be the Fifteenth schedule to the Bill.
New clause 7—Uncertain tax treatment—
“The Government must publish within 12 months of this Act coming into effect an assessment comparing the rates of uncertain tax in the UK to those of all other OECD countries.”
The Financial Secretary to the Treasury (Lucy Frazer)
Clause 94 introduces schedule 15, which covers a new requirement for large businesses to notify Her Majesty’s Revenue and Customs when they adopt an uncertain tax treatment. The clause seeks to reduce the legal interpretation tax gap, which stands at £5.8 billion—an issue that I am sure hon. Members agree is worth tackling. Through collaborative engagement with stakeholders and several formal consultations, the policy has been refined to minimise administrative burdens, while still achieving the policy objectives.
The requirement will apply only to the largest of UK businesses, companies or partnerships—those with a turnover of over £200 million per year, or a balance sheet total exceeding £2 billion. They will need to notify only those uncertainties that involve a tax difference of more than £5 million. The requirement will apply only to corporation tax, VAT, income tax and pay-as-you- earn returns, and will apply to returns due on or after 1 April 2022.
The Government are committed to ensuring that businesses pay the tax they owe. They have made significant inroads in reducing the tax gap, which fell from 7.5% of total theoretical liabilities in 2005-06 to 5.3% in 2019-20. However, there is further to go in protecting revenues in order to enable the Government to invest in our public services. Schedule 15 is designed to reduce the legal interpretation portion of the tax gap, the majority of which is attributable to large businesses.
Legal interpretation tax losses arise when businesses take a different view from HMRC of how the law should be applied, resulting in a different tax outcome. This issue has proven stubborn and difficult to tackle. Disputes often arise late in the day and are not identified in time for formal compliance enquiries to be undertaken, resulting in irrecoverable losses to the Exchequer. The new notification requirement will tackle the legal interpretation tax gap in a well-targeted and proportionate way, raising £150 million over the next five years, while driving positive behavioural change. The new notification regime breaks new ground by enabling earlier identification of potentially high-risk legal interpretation disputes that often are not apparent from tax returns. That will help to level the playing field for those large businesses that are already transparent with HMRC about their uncertain tax treatments.
The changes made by clause 94 will affect approximately 2,300 large businesses, which will need to consider whether they have taken an uncertain tax position in their returns. If they have, they will now be required to notify HMRC. They will not need to notify HMRC if they have already brought the uncertain position to its attention by other means, such as through discussions with their customer compliance manager, by contacting HMRC’s customer engagement and support scheme, through the non-statutory clearance process, or through other legislative disclosure requirements.
The Government have listened carefully and have developed the policy design to arrive at a regime that is objective and simple to understand. There are now only two conditions that trigger the notification requirement, which consultees agreed are objective and clear. The first is if the business has made a provision in their accounts to recognise the uncertainty. The second is if the tax treatment is contrary to HMRC’s known interpretation of the law or how the law applies to a certain set of facts. Business will be able to find HMRC’s known position in statements, in published guidance and in briefs, as well as through their dealings with HMRC. HMRC’s guidance on the regime will set out information on those sources, so that taxpayers are not required to extensively search HMRC’s current and historical positions in order to comply.
Richard Thomson (Gordon) (SNP)
It is a pleasure to serve under your chairmanship, Sir Christopher. I apologise for arriving slightly behind schedule this morning. It was good to see the ministerial team picking up exactly where we left off, getting their rebuttal in first, and telling us what was wrong with our new clauses before we had the chance to utter a syllable. I look forward to that continuing this morning—and this afternoon, if we get that far.
HMRC estimates that a potential £5.8 billion of the UK’s estimated £35 billion tax gap for the tax year 2019-20 is attributable to a difference in legal interpretation between HMRC and the businesses concerned. It is that situation that motivated us to draft new clause 7, which is in the name of my hon. Friend the Member for Glasgow Central. We support all and any reasonable and proportionate measures to try to narrow the gap. I would add, in passing, that it is disappointing that the third trigger has been dropped, which is that HMRC should be made aware by companies if there is a substantial possibility that either a court or tribunal might find that the taxpayer’s position was incorrect in certain material respects.
While there will always be a level of uncertainty around tax, it is useful to try to get a measure of the tax gap on its own terms—one that is as objective as possible. It is also very useful to compare, as far as possible, the estimated size and scale of our tax gap with the gap in other comparably advanced economies, so that we can see what we might learn from others.
I accept that direct comparisons might not be possible, but I do not accept the Minister’s argument that meaningful comparisons are impossible, because we can get an understanding of practices and of analysis; that is at the heart of the matter. This is about trying to get to grips with the scale, and developing an understanding of what will be a continually moving target, as entities seek to minimise their overall liability as legitimately as they can within the confines of the broader tax code. That backdrop of information would allow policy makers to reflect adequately on how the domestic tax code might be amended to ensure greater clarity and better compliance. It is on that basis that we tabled new clause 7.
Lucy Frazer
I am grateful for the contributions from Opposition Members. I was very pleased that the hon. Member for Ealing North recognised the importance of closing the tax gap and welcomed the provisions from that perspective. As I set out, the provisions will affect only the largest companies, which have the means of dealing with and communicating their issues to HMRC. He asked me about the practical advantages of the provisions, given that we have existing measures. Quite simply, some, though not all, companies are looking at all times to minimise the tax they pay, and are coming up with new ideas. They have the ideas first, and HMRC does not want to be slow in reacting. The best way to get on the front foot is for the companies to tell us what measures they are thinking about, so that we can engage at the first moment. That is what the provisions seek to do—to ensure that we can engage at the first moment, so that we can make sure that companies comply with their tax obligations.
The hon. Gentleman also asked about penalties. The Government originally proposed a flat £5,000 penalty for failure to notify under this regime. In response to stakeholder feedback, we revised the penalties, which now escalate for repeated failures to a maximum of £50,000. The Government considered carefully the penalties to ensure that they were proportionate and fair for a notification regime. Penalties are charged for failure to notify and are not charged by any determination of the amount of tax at stake—providing for a larger penalty in those circumstances would be disproportionate. If it was eventually found that a tax return contained a deliberate error, then a larger tax-geared penalty could still apply. As with all policies, the Government will of course keep this under review.
I was very pleased and interested to hear from the hon. Member for Gordon about his disappointment about the dropping of the third trigger. As I have said, we keep all measures under review and will keep looking at this area. If we do bring any further measures forward on uncertain tax treatment, I look forward to his support.
Lucy Frazer
Clauses 95 and 96 concern tax administration provisions. They provide certainty that HMRC may use discovery assessments to take action in certain cases in which taxpayers have not declared or returned tax that is due. For consistency, fairness and certainty, they also make minor changes to the rules requiring notification of liability.
I will briefly explain the context for introducing the clauses. The upper tribunal recently found that HMRC did not have powers to recover an individual’s high-income child benefit charge, which I will refer to as “the child benefit charge”, by issuing a discovery assessment where the taxpayer had neither notified HMRC of their liability nor submitted a tax return. The purpose of notifying tax liability is for HMRC to know to ask a taxpayer to complete a tax return. A discovery assessment is the mechanism HMRC uses to collect tax that it finds out should have been assessed but has not been—essentially, HMRC sends the taxpayer a bill for the tax that they ought to have self-assessed. HMRC uses discovery assessments frequently and routinely for taxpayers who ought to but have not notified tax liability and completed a tax return, whether because they are evading tax or they have made a genuine mistake.
HMRC can use discovery assessments in two scenarios: where it discovers that income tax in a tax return has been understated, and where a tax return has not been submitted at all. We are concerned here only with the latter scenario. The tribunal did not dispute the validity of the child benefit charge; in fact, it confirmed that the charge was still due. However, the tribunal found that HMRC could not use discovery assessments in that case. HMRC firmly disputes that ruling and has appealed to the Court of Appeal. The ruling prevents HMRC from using the usual discovery assessment mechanism to collect the correct tax payable where taxpayers liable to the child benefit charge and similar charges have not notified their liability, and so have not been sent a tax return.
There are three related clauses: 95, 96 and 97. The first and most significant is clause 95, which ensures that discovery assessments can be used to recover the child benefit charge, as well as similar charges relating to pensions and gift aid, where taxpayers have failed to notify HMRC and self-assess those charges. I stress that the legislation does not create any new liabilities or obligations for taxpayers; it simply puts taxpayers who do not declare and pay the child benefit charge on an equal footing with the majority who do.
Without clause 95, a taxpayer who did not declare and return their liability might not have to pay the child benefit charge at all, while others in otherwise identical circumstances who had rightly notified HMRC of their position would have to pay. Clearly, even if that is an honest mistake, which it is in many cases, it is not right.
The legislation introduced under clause 95 will apply retrospectively to child benefit, gift aid and pension charges. For those three types of charge, the legislation will be treated as having always been in force and will ensure that previously issued discovery assessments remain valid. The Government do not introduce retrospective legislation lightly; we do so only in exceptional circumstances, and we will do so, on occasion, when a court ruling upsets the widely accepted way in which the law is understood to work.
In this instance, retrospection is necessary for two reasons: first, to protect public services by ensuring that tax that is properly due and that has been charged and paid through discovery assessments over a number of years remains undisturbed; and secondly to provide fairness to the general body of taxpayers who have declared their liability, submitted their returns and paid their tax. The retrospective element applies only to the use of discovery assessments where taxpayers subject to such charges have neither notified HMRC of their liability nor submitted a tax return; it does not affect anyone’s tax liability. It is important to emphasise that although this is retrospective legislation, it is not retrospective taxation.
Some taxpayers will not be subject to the retrospective effects of clause 95. It would be unfair for it to apply to those taxpayers who were part of the original litigation and those who submitted appeals to HMRC on the same basis before the tribunal judgment was handed down. To include them would overturn the upper tribunal’s judgment and curtail the appeal rights of taxpayers who will already have spent time and money bringing an appeal on the same grounds, so the Government are excluding those taxpayers from the retrospective element of the legislation, ensuring that they can continue to pursue their appeals.
The prospective effect of clause 95 is somewhat wider. It is sensible to future-proof the legislation so that it applies to any income tax or capital gains tax that ought to have been, but has not been, assessed.
Clause 96 is introduced with prospective effect only. It will provide certainty that taxpayers who become liable to certain tax charges, including the pension and gift aid charges that I mentioned in reference to clause 95, must notify HMRC of their tax liability. Taxpayers are required to notify HMRC that they are chargeable to income tax or capital gains tax for any given year when that tax has not otherwise been accounted for.
Recent litigation has called into question whether certain tax charges are adequately covered by the obligation to notify chargeability; clause 96 provides certainty that they are so covered. That will achieve consistency of treatment across the types of tax charge, ensuring that taxpayers are always obliged to notify HMRC in circumstances where HMRC might not otherwise become aware of their tax liability.
It is right that taxpayers are required to report and self-assess their tax liabilities and that HMRC can take the necessary action to recover tax when they do not. Clauses 95 and 96 will enable HMRC to carry on doing so, shoring up the tax administration provisions in response to litigation that could otherwise create confusion, unfairness and inconsistency, as well as putting public revenues at risk. I commend the clauses to the Committee.
Abena Oppong-Asare (Erith and Thamesmead) (Lab)
It is a pleasure to serve under your chairship again, Sir Christopher. I thank the Minister for her explanation of clauses 95 and 96, particularly in respect of discovery assessments. As she says, clause 95 will amend the Taxes Management Act 1970 to provide certainty that HMRC can use discovery assessments to make good a loss of tax where it discovers that certain charges have not been accounted for; when the Bill gains Royal Assent, the clause will apply both retrospectively and prospectively.
The amendment to the 1970 Act has to be understood in the context of the legal challenge in HMRC v. Wilkes, in which the upper tribunal ruled that HMRC could not use discovery assessments to assess tax charges arising from sources that do not meet the definition of income within the relevant provision. Clause 95 will amend the law to enable HMRC to use discovery assessments in such circumstances. The background note in the explanatory notes states that the aim is to
“put the matter beyond doubt and confirm HMRC’s long-standing policy”.
Although there has clearly been historic doubt and an unsuccessful legal defence mounted by HMRC, and while this is being applied retrospectively, there is an exception for those who have appealed on the grounds that HMRC was inadequate at the time prior to the Wilkes case. However, as the Minister probably knows, the Low Incomes Tax Reform Group has raised the point that the retrospective application in the clause could be uneven and unfair.
While those who have appealed have been exempted, those who did not make the necessary appeal will face retrospective charges. Those who accepted the charge at face value and paid it will clearly not get their money back, despite the upper tribunal’s finding that HMRC’s use of discovery assessments in this way was outside the scope of its powers and, therefore, not legal. The Wilkes judgment will soon no longer be a legitimate basis for legal contest; I would be grateful if the Minister could make an assessment of the fairness of this uneven, retrospective application.
Under clause 96, there will be further amendments to the Taxes Management Act 1970. It will amend section 7 and extend the circumstances in which a person must make a notification under section 7 to the charges listed in section 30 of the Income Tax Act 2007. As the Minister mentioned, that requires the taxpayer to notify HMRC of any liability to income tax or capital gains tax charges per accounting year. The amendments to the fundamental piece of primary legislation have been extended to include liability, as set out in clause 95. For this reason, we will not be opposing the clause.
Lucy Frazer
Again, I thank hon. Members on the Opposition Benches for their contributions. The essence of the points made by the hon. Member for Erith and Thamesmead was one of fairness, and there are three points to make in response. The first is that, as I said, this is retrospective legislation but not retrospective taxation. The tax was due, has been due and is due, but it has not been paid. What was in question was the process by which it was recovered.
The second point is that, in terms of fairness, it is right that everyone pays the right amount of tax and does not manage to escape paying that tax because they do not declare it to HMRC. The essence of the issue is actually about fairness—that everyone is in the same position and that where tax is due, it is paid by everyone equally.
Thirdly, to build on the point I made earlier about the tax being due but the process being in error, the court found in HMRC v. Wilkes that the tax was due from the applicants but the discovery assessment process was not appropriate for recovering it. This legislative measure is fair because it ensures that people who have to pay tax do so and that everyone pays it equally.
I now respond to the points made by the hon. Member for Glasgow Central, who I am sure has completed her tax return successfully and correctly. I encourage everybody to do so, because the tax deadline is 31 January. Although HMRC has extended the deadline for a month and will not be charging penalties, people will still be paying interest on their tax if they have not filed their returns by the 31 January deadline. I am sure hon. Members present have all dutifully done so, but that is a little reminder.
The hon. Member for Glasgow Central mentioned the unfortunate circumstances of individuals. Having spoken to HMRC, I know that it looks carefully at individual circumstances where there is difficulty with paying. There is an essential procedure where people can have time to pay, and there is a vulnerable unit where we look very carefully at people’s vulnerabilities and treat them appropriately.
As I mentioned in my opening remarks, the provision will apply to gift aid, but I am very happy to answer any questions that the hon. Member for Glasgow Central has about that by following up in writing. For those reasons, I ask that the clauses stand part of the Bill.
Question put and agreed to.
Clause 95 accordingly ordered to stand part of the Bill.
Clause 96 ordered to stand part of the Bill.
Clause 97
Calculation of income tax liability for certain charges relating to pensions
Question proposed, That the clause stand part of the Bill.
Lucy Frazer
Clause 97 is the third of three clauses relating to HMRC’s tax administration provisions. The clause makes minor technical revisions to the provisions for the calculation of income tax in respect of certain pension charges.
Section 23 of the Income Tax Act 2007 sets out the steps to be followed when calculating income tax liability. At step 7, additional amounts of tax that have not been taken into account in the earlier steps are added to the calculation, and those are listed in section 30. The list in section 30 includes a number of freestanding tax charges relating to registered pension schemes.
The Committee will remember that clause 96 operated on those freestanding charges to provide certainty that taxpayers liable for them must notify their liability to HMRC. The Government have identified the fact that some of those freestanding charges—some of the unauthorised payment charges and surcharges, and the overseas transfer charge—have been omitted from the list in section 30, so we are taking this opportunity to correct that by adding them.
Clause 97 adds to the list in section 30 the overseas transfer charge and the missing unauthorised payments charge and surcharges. The charges ensure that the correct amount of tax due in respect of those charges is produced at the correct step of the tax calculation. The effect is to ensure that HMRC will be able consistently to calculate and assess tax liabilities in respect of those pension charges. In combination with clause 96, clause 97 requires taxpayers to notify HMRC of their liability for the charges, and HMRC will be able to charge penalties for failure to notify and will use discovery assessments to recover tax that has not been notified. Clause 97 is introduced with prospective effect only from the 2021-22 tax year.
Clause 97 makes minor technical revisions and, together with the changes in clauses 95 and 96, gives consistency and certainty of tax treatment in HMRC’s tax administration provisions relating to those freestanding tax charges. I commend the clause to the Committee.
Abena Oppong-Asare
I thank the Minister for her explanation. As she mentioned, clause 97 follows on from clauses 95 and 96, and is a chiefly technical clause to amend the list of other income tax charges in subsection 30(1) of the Income Tax Act 2007. The Labour party will not oppose the clause.
Lucy Frazer
I thank the hon. Lady.
Question put and agreed to.
Clause 97 accordingly ordered to stand part of the Bill.
Clause 98
Power to make temporary modifications of taxation of employment income
Question proposed, That the clause stand part of the Bill.
Lucy Frazer
Clause 98 introduces regulation-making powers to allow the Government to make temporary changes to provide income tax relief on certain benefits in kind or expenses in a disaster or emergency of national significance.
Covid has highlighted the limited scope to respond quickly to make changes to the current benefits-in-kind and expenses tax system to support people during the pandemic. The Government are determined to learn from that experience and ensure that we are prepared for future crises. It is expected that during any future disaster or emergency of national significance, it may be necessary to make similar changes on a temporary basis. The current legislation allows only for changes to be made through secondary legislation in limited circumstances. The clause introduces regulation-making powers that will allow the Government to respond quickly and effectively to various future emergency situations—including, but not limited to, pandemics—if deemed necessary.
The clause introduces regulation powers to allow employers to support their employees through the provision of a certain benefit in kind or expense in a disaster or emergency of national significance without creating an additional income tax charge. The powers can be exercised only in a way that provides support to taxpayers, as changes can be wholly relieving only and cannot create a tax charge. The Treasury can determine when it is appropriate to use the powers, but may make changes only to the income tax expenses and benefit-in-kind rules. Any changes made through the powers will have effect only for a limited time, up to a maximum of two complete tax years. The clause allows the Government to respond quickly and effectively to provide support to taxpayers in disasters or emergencies of national significance, and I commend it to the Committee.
James Murray
As we have heard, clause 98 relates to the power to make temporary modifications of taxation of employment income. The clause will grant the Treasury the power to make regulations to modify temporarily parts 3, 4 and 5 of the Income Tax (Earnings and Pensions) Act 2003 under ministerial direction, in the event of a disaster or emergency of national significance. The regulations must set out which disaster or emergency they are made in respect of, and the powers can be exercised only in a way that is wholly relieving to the taxpayer and cannot be used to create a tax charge.
This measure has been introduced in the context of the covid-19 pandemic, and indeed covid has highlighted the limited scope to make changes to the current benefits in kind and expenses rules to respond quickly to the pandemic. We understand that the aim of clause 98 is to enable changes to primary legislation to be made rapidly in response to significant national events. In that respect, we do not oppose this clause, provided that it is applied in strictly exceptional circumstances of national importance.
The clause uses the terms “emergency” and “disaster”, but a specific description of these criteria is missing. I would be grateful if the Minister set out what the Treasury would consider to be an emergency or disaster. Without a doubt, the onset of the covid-19 pandemic was a good example, but without a robust and transparent framework to guide the Treasury—given that the use of the power seems to be at its sole discretion—it is important that we are clear about the circumstances in which income tax liability can effectively be waived. Moreover, clause 98 notes that such measures would be temporary and would not apply longer than necessary. Again, guidance and a framework are conspicuously lacking, as the Government has provided no definition of “temporary”.
Early in the covid pandemic, emergency measures were needed, but as the pandemic has gone on the need for emergency measures has lessened. I would be grateful if the Minister assured us that a clear and transparent framework for establishing what constitutes “emergency”, “disaster” and “temporary” will be published, and when. If not, why not?
I am sure that we agree that this is a matter of effective policy rather than politics. As I have said, the context in which the clause has been introduced is uncontroversial, but I would be grateful if the Minister addressed this ambiguity and assessed whether the measure could be applied in a manner that deviates from its stated intention.
Alison Thewliss
I agree very much with what the Labour Front-Bench spokesman has said. Clause 98 is very wide-ranging, and vague in a lot of ways. It is important to understand its scope, because one person’s definition of a disaster or emergency might be quite different from another’s. It is important that we define that slightly more than is the case in the clause, which states that the regulations
“may only specify a disaster or emergency which the Treasury considers to be of national significance.”
That could be a lot of things, depending on how the Treasury considers it.
I wonder whether the Minister, in looking at the clause, has taken into account the findings of the Public Accounts Committee and the National Audit Office on the Government’s lack of financial preparedness, specifically coming into the pandemic. There was a lot of talk about medical preparedness, stockpiling and things like that, but both the National Audit Office and the Public Accounts Committee found that there was no preparedness in the Treasury for a pandemic or national emergency of this type.
It would be useful to know what further work, in addition to clause 98, Treasury officials are putting in place to ensure that, should something like this occur in future, the box of learning from this pandemic can be taken off the shelf and easily applied, without having to make a load of new provisions and regulations, so that things are ready to go, and we do not have to scratch around, trying to figure out what happened last time. Another pandemic may occur in five years or 50 years—we do not know. Certainly, our hope in the SNP is that we will not be here in 50 years, if not five, but it would be useful to know what provisions are being considered in the Treasury to ensure that the learning from this pandemic sits very tightly with this clause and can be applied very easily.
Lucy Frazer
I thank hon. Members for their contributions. Both the hon. Member for Ealing North and the hon. Member for Glasgow Central asked us to be more prescriptive in the legislation—to define the circumstances in which there would be a disaster or emergency—but we are bringing in this legislation precisely because we did not have the flexibility that we needed when we went into this pandemic. Therefore we do not want to tightly define the circumstances. We are bringing in this legislation to ensure that we have the tools at our disposal to exercise the necessary powers should an event like the one we have been through and hopefully are at the end of occur.
Alison Thewliss
My point was not about the reaction to the pandemic but preparedness. All the systems had to be put in place suddenly and with little planning. There has been significant fraud in many of the schemes as a result of the lack of tight planning. They were reactive emergency measures. Does the Minister agree that it would have been much better for all those things to have been set out clearly, so they could be taken off the shelf should they be needed? Instead, they were reactive measures that had not been planned ahead of time.
Lucy Frazer
The hon. Lady is right to say that a number of measures were reactive, but they were brought it at extremely quick pace and were effective pretty much immediately. She makes a valid point about learning; I know the Treasury is learning and has learned throughout the pandemic. The schemes we put in place at the outset have been refined, including the self-employment income support scheme, the furlough schemes and the coronavirus job retention scheme.
The hon. Lady mentioned the level of fraud; as the pandemic went on and the measures were refined, fraud reduced. She makes a valuable point about learning, and I am sure all Departments are learning. We do not want to be in this position again, which is precisely why we are bringing forward this legislation, to ensure that we are ready for any other emergency that should come our way.
James Murray
For the avoidance of doubt, I would like to clarify the point I raised with the Minister earlier. I was not seeking to ask the Government to be entirely prescriptive about what an emergency or disaster is; I merely asked them to publish a clear and transparent framework for establishing what constitutes “emergency”, “disaster” and “temporary”. If the Minister is saying that the Government will refuse to publish a clear and transparent framework for establishing the meaning of those words, will she confirm that it will remain at the sole discretion of the Treasury, based on unpublished guidance or frameworks, as to what constitutes “emergency”, “disaster” and “temporary”?
Lucy Frazer
The hon. Member is being a little unfair in his categorisation of what would happen and what we are seeking. That has not been defined in legislation because it is very hard to predict, and we do not want to limit severely the opportunities to exercise that power. The hon. Member has seen how the Treasury would react by the way it has reacted. That should give him some comfort.
Question put and agreed to.
Clause 98 accordingly ordered to stand part of the Bill.
Clause 99
Vehicle CO2 emissions certificates
Question proposed, That the clause stand part of the Bill.
The Chair
With this it will be convenient to discuss the following:
That schedule 16 be the Sixteenth schedule to the Bill.
New clause 8—Emissions certificates—
“The Government must publish within 12 months of this Act coming into effect an assessment of the impact of sections 99 and Schedule 16 of this Act on the goal of tackling climate change and the UK‘s plans to reach net zero by 2050.”—(Alison Thewliss.)
I think we might try to see whether we can let SNP Members speak to new clause 8 before the retaliation from the Government Benches, because I think that will make it easier to follow the debate.
The Chair
With this it will be convenient to discuss the following:
New clause 9—Composition of the Office of Tax Simplification—
“The Government must publish within 12 months of this Act coming into effect an assessment of the composition of the Office of Tax Simplification membership with a view to ensuring it is diverse and representative.”
New clause 10—Capacity of the OTS—
“The Government must publish within 12 months of this Act coming into effect a review of the membership and capacity of the OTS, including consideration of the capacity the membership would have to deal with an expansion of its remit to include fairness in the tax system.”
Lucy Frazer
Clause 100 increases the maximum independent representation on the board of the Office of Tax Simplification by two members, giving a total membership of 10. The OTS is the independent adviser to the Government on simplifying the UK tax system. The clause provides the ability to add two additional members to the board of the OTS following the publication of Her Majesty’s Treasury’s five-year review of the effectiveness of the OTS, which was required by the Finance Act 2016. Allowing for the appointment of two additional members will ensure that the board comprises the fullest appropriate breadth of skillsets to support the work of the OTS.
Sir Christopher, I very much look forward to the submissions from the SNP on new clauses 9 and 10.
Richard Thomson
New clause 9 ought to speak for itself. On 23 November, in a written response to the hon. Member for Liverpool, Walton (Dan Carden), the Financial Secretary to the Treasury said:
“The Government has an ambition that by 2022 half of all new appointees should be women and 14 per cent of appointments should be made to those from ethnic minorities.”
Clearly, we are interested in ensuring diversity going forwards, but we should also be interested in diversity in the here and now, and in ensuring that all our public institutions are as representative as they can be of the country that we seek to govern and administer.
In looking at that diversity, both present and future, it is important that we have it in the board, in the team and in employment within the OTS more generally. We must not only have an understanding of where we are in the present, but ensure that the pipeline of talent for future appointments to senior positions is flowing as it needs to, so that we benefit from the widest and deepest possible pool of talent as the body carries out its functions.
Moving on to new clause 10, we spoke earlier about the estimated tax gap of £35 billion. An important aspect of tax fairness is being sure that we apply the tax code equally and consistently, and we need to understand the impact of it’s being applied equally and consistently and how fair the outcomes are. There are still many inconsistencies and perverse incentives across the entirety of our tax code, not least in how it interacts with the benefits system.
If we are serious about ensuring fairness, the Office of Tax Simplification would be an excellent starting point. Our view is that the OTS should have the remit and capacity to look at fairness, and new clause 10 would provide evidence on the OTS’s current capacity to achieve that.
James Murray
As we heard from the Minister, clause 100 relates to an increase of two members in the maximum independent representation on the board of the Office of Tax Simplification, bringing the overall membership to 10. The OTS was brought in by the coalition Government in 2010 and put on a statutory footing by the Finance Act 2016. It is an independent body that sits alongside the Treasury to advise the Chancellor on the simplification of the tax system and suggest ways to increase system efficiency. We recognise the value in adding further expertise to the board, although we also recognise the important principle in the SNP’s new clause 9, which would require the Government to report on the diversity of the OTS board.
We note the wider concerns of the Chartered Institute of Taxation, which questions whether the broader changes suggested by the OTS will be implemented. Between 2010 and 2015, only 166 of the OTS’s 403 recommendations to Government were wholly accepted. It is therefore surprising that there is so much enthusiasm for increasing the size of the OTS board, given that the Government do not always seem to listen.
We note a suggestion from the Chartered Institute of Taxation that the Government formally respond to every OTS recommendation within a prescribed timeframe. I would be grateful if the Minister set out whether she is willing to commit to doing so.
Lucy Frazer
I thank the hon. Members for Gordon and for Ealing North for their contributions. I was very interested to hear about the new clauses from the hon. Member for Gordon. New clause 9, which was tabled by the hon. Member for Glasgow Central, would require the Government to publish
“an assessment of the composition of the Office of Tax Simplification”
to ensure that it is diverse. I assure hon. Members that the OTS is an independent office of HMT, so all appointments are made in line with the principles of the Office of the Commissioner for Public Appointments. Public appointments to the OTS should therefore reflect the diversity of the society in which we live and increase in diversity. The Government have an ambition that, by 2022, half of all new appointees should be women and 14% of appointments should be made to those from ethnic minorities.
I know that the Government are very committed to this issue, as my first appointment to Government was as a Parliamentary Private Secretary in the Cabinet Office. I dealt with and saw the work of the Cabinet Office on this issue, and it is doing a broad amount of work across Government to ensure diversity.
New clause 10, which was also tabled by the hon. Member for Glasgow Central, would require the Government to publish
“a review of the membership and capacity of the OTS”.
The Government remain committed to supporting the OTS to provide advice on the simplification of the tax system, and published their first five-year review of the OTS’s effectiveness this autumn. The review makes a number of recommendations on the resourcing and governance of the OTS and recognises the value of a mix of skillsets and expertise on the OTS board. It recommends that HMT build on that further and, following the nomination by the chair, appoint additional independent members to bring in expertise in areas not currently represented. Given the recent examination of the OTS’s resourcing and governance, the Government do not believe that a review of the membership and capacity of the OTS is necessary.
To respond to the point the hon. Member for Ealing North made about the value of the work of the OTS, as he will know, the OTS will be looking into how it produces its reports and carries out its reviews. The fact that the Government do not always fully accept the recommendations of the OTS is not a sign that the OTS is not performing an important function: it is performing an important function in making recommendations that the Government can look at. The OTS also has a power to make suggestions on proposals that the Government themselves are thinking about, and it works with officials to make suggestions as to how we can change and improve the legislation and proposals that we are putting forward.
For those reasons, I encourage Members to reject the new clauses.
James Murray
The Minister may have missed my question in my earlier comments, which was whether she would commit to responding formally to every OTS recommendation within a prescribed timeframe.
Lucy Frazer
I understand why the hon. Member has made that suggestion, but the OTS is independent and can look at what it wishes to look at. That might not necessarily be what the Government are focusing on at any particular moment, so for those reasons and others, I will not be accepting that proposal today.
Question put and agreed to.
Clause 100 accordingly ordered to stand part of the Bill.
Clause 101
Interpretation
Question proposed, That the clause stand part of the Bill.
Lucy Frazer
This might be the shortest speech in this sitting. Clauses 101 and 102 simply set out the Bill’s legal interpretation and short title in the usual manner for such legislation. I therefore commend them to the Committee.
James Murray
Clauses 101 and 102 are entirely reasonable, and we do not oppose them. I take this opportunity, however, on behalf of myself and my hon. Friend the Member for Erith and Thamesmead to thank other members of the Committee, including of course our Whip, my hon. Friend the Member for Blaydon. I also thank you, Sir Christopher, and all the House of Commons staff who have supported us through this Committee, in particular Chris Stanton, whom I thank for all his help and advice.
Lucy Frazer
If you wish me to thank everybody before the new clauses are considered, Sir Christopher, I am very happy to do so.
The Chair
No, no.
Question put and agreed to.
Clause 101 accordingly ordered to stand part of the Bill.
Clause 102 ordered to stand part of the Bill.
New Clause 1
Review of reliefs on investments
“The Government must publish within 12 months of this Act coming into force an assessment of the impact on the tax gap of the reliefs on investments contained in this Act, and of whether those reliefs have increased opportunities for tax evasion and avoidance.”—(Richard Thomson.)
Brought up, and read the First time.
Richard Thomson
I echo everything that everyone has said so far about the smooth running of the Committee. I congratulate and give grateful thanks to the Clerks and everyone who has supported each of us in what we have tried to achieve here.
I will try to be as brief as possible. New clause 1 is self-explanatory. If we had a simple tax code, we probably would not need an Office of Tax Simplification or have a tax gap as large as £35 billion. The new clause simply asks the Government to assess this, because they cannot possibly hope to address problems that they do not know about or understand.
At the risk of sounding like a broken record, my comments about new clause 1 are relevant to new clause 6 as well. With that, I draw my remarks about the new clauses to a close.
Lucy Frazer
I would like to address the points made by the hon. Member for Glasgow Central about the process, which she made earlier in the Committee’s proceedings too. There is a clear process for how we make legislation and taxation. There is a large amount of consultation. The process is that we announce a consultation, there is a consultation, we reflect on the consultation, and then we bring in legislation. So long as I am in this position, I am happy to hear points made by the Opposition in the course of that consultation process, to ensure that we have the right and appropriate legislation on our statute book.
New clauses 1 and 6 would require the Government to publish an assessment of the impact of the tax reliefs in the Bill, including the reliefs on investments, on the tax gap, and to look at whether they have increased opportunities for tax evasion and avoidance. There are a number of new measures already in the Bill to ensure that we reduce the tax gap as far as possible. There are also measures in the Bill that deal with tax avoidance more broadly.
We have had significant success in bringing down the tax gap since 2010, as a result of the measures we have taken. I reassure the hon. Member for Gordon that we produce estimates of error and fraud, where we deem those appropriate. For example, estimates on corporation tax research and development reliefs were included in the annual reports and accounts, and we will continue to do that.
For those reasons, I believe that a separate reliefs impact assessment is not appropriate, and I ask the Committee to reject the new clauses.
Richard Thomson
I think I have said all that needs to be said on this subject; I am happy to let my remarks stand. I beg to ask leave to withdraw the clause.
Clause, by leave, withdrawn.
New Clause 2
Effect on GDP of international matters in Act, and of whole Act
“(1) The Government must publish an assessment of the impact on GDP of—
(a) the provisions in sections 24 to 28 of this Act, and
(b) this Act as a whole.
(2) The assessment must also compare these impacts to the impacts had the UK—
(a) remained in the European Union, and
(b) left the European Union without a Future Trade and Investment Partnership.”—(Richard Thomson.)
This new clause would require a Government assessment of the effect on GDP of the international provisions of the Act, and of the Act as a whole, in different scenarios.
Brought up, and read the First time.
Richard Thomson
I beg to move, That the clause be read a Second time.
In Committee of the whole House, I referred to a new clause as the Jim Bowen from “Bullseye” clause. I am sure that we all remember that programme with great affection and especially recall what he said at the end if someone had not got 101 with six darts—“Let’s have a look at what you could have won.” This is the “let’s have a look at what we could have won had we remained in closer alignment with the European Union” clause.
It is fair to say that there have been significant trade losses to date since Brexit. It is important not only that the Government should have a solid evidential basis of what those losses are and make conclusions about how they came about, but that others should have that information too. That is the basis of this new clause.
Lucy Frazer
The new clause would require the Government to publish a review of the impact of the international tax policy changes in the Bill, and of the overall tax changes in the Bill, on GDP. It also asks us to compare the impacts on GDP under two scenarios—one where the UK remained in the EU, and one where the UK left the EU without a future trade and investment partnership.
The hon. Member for Gordon will know that the Office for Budget Responsibility provides economic and fiscal forecasts and is required to provide an assessment of the impact of Government policy. The OBR published the impact on GDP at the autumn Budget 2021, ahead of its inclusion in the October 2021 economic and fiscal outlook, and the OBR will continue to monitor the impact of these measures in future forecasts. Since the independent OBR provides precisely such a forecast, it would be wholly unnecessary and unhelpful to public debate to induce the Government to produce a rival one.
Richard Thomson
I beg to move, That the clause be read a Second time.
I have made the argument numerous times in various guises that for every action, every policy choice and every pound spent, we should understand the contribution, positive or negative, that that makes to achieving net zero and tackling climate change. That is why we tabled new clause 4.
Lucy Frazer
New clause 4, tabled by the hon. Member for Glasgow Central, asks the Government to
“publish within 12 months of this Act coming into effect an impact assessment of the changes in the Act as a whole on the goal of tackling climate change and the UK’s plans to reach net zero”.
I want to emphasise that we have just had COP26, which the Government led. Of course the Government are committed to ensuring that we reach the legislative target of being net zero by 2050, which we were the first country to set, and I reiterate that the Government have put in a significant fund of £30 billion to achieve that objective.
The hon. Member for Gordon asks us to consider that at each stage of the legislative process. I can give him some comfort that we are of course embedding those processes in Government. The “Net Zero in Government” chapter of the net zero strategy sets out how the Government will monitor progress to ensure that we stay on track to meet our target emissions.
At fiscal events, including the recent spending review, all Departments are required to prepare their spending proposals in line with the Green Book, which already mandates the consideration of climate and environmental impacts on spending. The investment decisions in spending review 2021 were informed by data and evidence on the expected contribution of proposals to meet net zero. In addition, the relevant tax information and impact notes that are prepared for all Budget measures carefully consider climate change and environmental impacts of relevant tax measures as they go through the process.
For those reasons, new clause 4 is unnecessary. We already consider the impact on the environment as we bring forward legislation, so I urge the Committee to reject the new clause.
Richard Thomson
I listened carefully to what the Minister said. I look forward to seeing how those governance measures operate in practice—how they are introduced and how effective they turn out to be. On that basis, I beg to ask leave to withdraw the clause.
Clause, by leave, withdrawn.
New Clause 12
Impact of Act on tax burden of hospitality sector
“The Government must publish within 12 months of this Act coming into effect an assessment of the impact of the Act as a whole on the tax burden on the hospitality sector.”—(Richard Thomson.)
Brought up, and read the First time.
Lucy Frazer
As the hon. Gentleman says, the new clause asks the Government to
“publish within 12 months of the Act coming in effect an assessment of the impact of the Act as a whole on the tax burden on the hospitality sector.”
He is right to highlight the importance of that sector to the British economy and the British people. He will be aware of the significant support that the Chancellor has given to the hospitality sector over the course of the pandemic, reducing the burden of business rates by over £7 billion over the next five years, including by providing almost £1.7 billion in further business rates relief in 2022-23, which will benefit the hospitality sector. I hope that shows not only that we have supported the hospitality sector during the pandemic, but that we are supporting it in different ways as we come out of the pandemic.
Of course, we already carefully consider and monitor the impact of all tax changes, including on different sectors, such as hospitality, as part of our decision-making process. The Government also publish TIINs—the tax information and impact notes I mentioned—to accompany tax legislation. Those include the impact of tax changes on businesses. The new clause would introduce unnecessary additional bureaucratic requirements and complexity, and I therefore urge the Committee to reject it.
Richard Thomson
I beg to ask leave the withdraw the clause.
Clause, by leave, withdrawn.
Question proposed, That the Chair do report the Bill, as amended, to the House.
Lucy Frazer
I thank you, Sir Christopher, and your co-Chair, Hansard, the Doorkeepers, our Whips, our Parliamentary Private Secretaries and our officials at Her Majesty’s Treasury and Her Majesty’s Revenue and Customs, who have supported us through the Committee. I thank all Committee members for their diligence, their contributions and their support, or constructive criticism, throughout the Committee, and for making this a productive session. I very much look forward to Report. I also thank my co-Minister, the Exchequer Secretary to the Treasury, for the work that she has done.
The Chair
It has been a pleasure to co-chair the Committee and I much appreciate the work that my co-Chairs have done, including the one who stepped in at the very beginning. On behalf of the Committee, I thank all the people who have made it work so smoothly: the Clerks, the Hansard Reporters, the Badge Messengers, the police and everybody else involved. I offer them my sincere thanks. We have finished sooner than we expected, and it is obviously the wish of the Minister that people should use the time made available to ensure that they get their tax returns in on time.
Question put and agreed to.
Bill, as amended, accordingly to be reported.
Finance (No. 2) Bill (Third sitting)
Lucy Frazer ExcerptsWednesday 5th January 2022
(2 years, 3 months ago)
Public Bill CommitteesRead Full debate Finance Act 2022 View all Finance Act 2022 Debates Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 5 January 2022 - (5 Jan 2022)
The Chair
With this it will be convenient to discuss the following:
Clause 33 stand part.
Clause 52 stand part.
New clause 3—Review of impact of Residential property developer tax on the tax gap—
“The Government must publish within 12 months of this Act coming into effect an assessment of the impact of Part 2 of this Act (Residential property developer tax) on the tax gap, and of whether it has increased opportunities for tax evasion and avoidance.”
This new clause would require a Government assessment of the impact of the Residential Property Developer Tax introduced in this Bill, and of its effect on opportunities for tax evasion and avoidance.
New clause 18—Review of the residential property developer tax—
“(1) The Government must publish a review of the residential property developer tax within three months of the end of the first year of it applying.
(2) The review under subsection (1) must be updated annually, within three months of the end of each subsequent year that the residential property developer tax applies.
(3) The review under subsection (1), updated as set out in subsection (2), must assess—
(a) how much the RPDT has raised in each year of its operation so far;
(b) how much it is estimated that RPDT would have raised at a level of—
(i) 6%,
(ii) 8%, and
(iii) 10%; and
(c) any wider effects of setting the RPDT at the levels set out in subsection (3)(b).”
This new clause would require the Government to review the RPDT each year in order to assess the revenue it has raised and also what revenue it would raise, and the other wider effects it would have, at certain higher levels.
The Financial Secretary to the Treasury (Lucy Frazer)
It is a pleasure to serve under your chairmanship, Dame Angela. Like you, I wish all members of the Committee a happy new year. As the Committee will know, the Government are determined to bring an end to unsafe cladding, to reassure homeowners and to support confidence in the housing market. As part of the building safety package announced in February 2021, we are introducing a new residential property developer tax, which will raise at least £2 billion over the next decade to help to pay for building safety remediation.
As announced on 10 February 2021 by the previous Secretary of State for Housing, Communities and Local Government, my right hon. Friend the Member for Newark (Robert Jenrick), the RPDT is one of two new revenue-raising measures that will ensure that developers make a fair contribution to the costs of remediation. Clauses 32 and 33 introduce a new residential property developer tax to be charged at a rate of 4% on the profits of businesses carrying out residential property development activity that exceed its allowance for an accounting period. The clauses confirm that the RPDT is charged as if it were an amount of UK corporation tax.
Clause 52 is an anti-avoidance provision, which prevents taxpayers from adjusting their profits arising in an accounting period in order to obtain a tax advantage. The clause will apply where trading profits derived from residential property development activities arise in the accounting period ending before the commencement of RPDT, and arose only because of arrangements made on or after 29 April 2021.
New clause 3, tabled by the hon. Member for Glasgow Central, seeks to require the Government to publish an assessment of the impact of RPDT on the tax gap, and of whether it has increased opportunities for tax evasion and avoidance. As the RPDT has been designed to be aligned with UK corporation tax, the existing corporation tax compliance mechanisms, such as inquiries, information powers and penalties, will apply to RPDT, as well as anti-avoidance rules including transfer pricing and the general anti-abuse rule.
Her Majesty’s Revenue and Customs regularly reports on the taxes that it is responsible for collecting, and the RPDT will be no exception. HMRC will assess the impact of RPDT on the tax gap in its annual “Measuring tax gaps” reports, and will monitor RPDT revenue in its annual tax receipts statistical publications. The Government also carefully assessed the impacts of RPDT throughout the consultation period and published a detailed impact assessment of RPDT at the autumn Budget. For those reasons, I believe that a further impact assessment is not appropriate, and I therefore ask the Committee to reject the new clause.
New clause 18, tabled by the hon. Members for Ealing North, for Erith and Thamesmead and for Blaydon, seeks to require the publication of an annual review of the tax, including the revenue raised, the estimated yield that would have been raised had the tax been set at various differential rates—6%, 8% and 10%—and the wider effects of the higher rates. HMRC regularly reports on the taxes that it is responsible for collecting, and the RPDT will be no exception. The revenue raised from RPDT will be published in HMRC’s annual tax receipts statistics publications.
The RPDT rate was carefully considered in the context of the upcoming increase in the main rate of corporation tax in 2023, other taxes and forthcoming regulatory changes, as well as the wider macroeconomic environment. The 4% rate of RPDT balances the need to raise £2 billion over a decade—at the same time as seeking a fair contribution from the residential property development sector—against the need to ensure that the tax does not have a significant impact on housing supply. The Government monitor the tax system continuously and will keep the tax under review. For those reasons, I believe that a further annual review of RPDT is not appropriate, and I therefore ask the Committee to reject new clause 18.
In conclusion, the clauses in this group form the first part of the legislation needed to introduce RPDT in April 2022 and the necessary anti-avoidance provisions. I therefore recommend that the clauses stand part of the Bill.
James Murray (Ealing North) (Lab/Co-op)
It is a pleasure to serve on a second Finance Bill Committee under your chairship, Dame Angela.
I will address the clauses that the Minister set out in her remarks, starting with clause 32, which notes that the new residential property developer tax will be applicable from 1 April 2022, as announced at the spring Budget of 2021. As we have heard, this is a new, time-limited tax on the profits of residential property development companies’ property development activity, with a rate of 4% over a £25 million allowance. The Government estimate that it will generate £2 billion over the course of a decade, and they said that the funds are earmarked to help with cladding remediation costs, according to the former Secretary of State for Housing, the right hon. Member for Newark (Robert Jenrick), who spoke to the Building Safety Bill in February 2021. The explanatory note for the clause states that the tax is to
“ensure that the largest developers make a fair contribution to help fund the Government’s cladding remediation costs.”
We support the principle behind the new tax, but I intend to use this Committee sitting to question the Ministers on the detail of its design and to probe their views on its place in the Government’s wider response to the cladding scandal. We know that the Bill has been consulted on, but we also note stakeholders’ disappointment that the consultation process was truncated, as stage 1 —setting out objectives and identifying options—was cancelled. Although we recognise the importance of moving quickly to raise revenue in order to help meet the costs of remediating unsafe cladding on buildings, it is disappointing that the Government were not able to conduct a thorough consultation.
Clause 33 sets the rate of the RPDT charge at 4% on profits that exceed the allowance of £25 million. The tax is charged as if it were an amount of corporation tax chargeable on the developer. As I mentioned earlier, the Government expect that £2 billion of revenue will be generated while the tax is in effect, so I will ask the Minister several questions in order to try to clarify the reasoning behind some of the Government’s decisions on the detail of the tax. First, we note that the tax does not come with a sunset clause, and therefore active legislation will be required to repeal it when it comes to an end. Will the Minister explain the reasoning behind that decision? If the tax is intended to be time-limited, why have the Government have chosen to leave it in need of active repeal, rather than simply adding a sunset clause?
Secondly, I mentioned that the expected revenue from the tax is £2 billion. We know, however, that that is just a fraction of the total cost of remediating unsafe cladding, which was estimated by the then Housing, Communities and Local Government Committee in April 2021 to be about £15 billion. What is more, labour and material shortages have significantly driven up the cost of construction. That is thought to add £1.2 billion to the overall cost of remediation, wiping out most of any gain from this tax. With the cost of cladding remediation already thought to be so much greater than the amount that the tax is expected to raise, and with that gap likely only to increase, will the Minister try to explain further why the rate was set at 4%? Will she confirm whether, if the amount raised should fall short of £2 billion or if costs should increase substantially, the Government would be open to considering raising the level of the tax?
It was in pursuit of an answer to that question that we tabled new clause 18, which would require the Government to publish a review of the residential property developer tax within three months of the end of the first year of it applying, and thereafter annually, within three months of the end of each subsequent year that the tax applies. The review, as updated, must assess how much the RPDT has raised in each year of its operation so far and how much it is estimated that it would have raised at levels of 6%, 8% and 10%.
As I mentioned, the cost of remediating unsafe cladding was estimated last year to be about £15 billion, and the cost of labour and materials has increased due to supply chain crises. Industry experts have estimated an 8% increase in the cost of cladding jobs, compared with last year. As I mentioned, that could increase the total cost by £1.2 billion. As I said, this tax aims to raise £2 billion, which is just a fraction of the total cost and much of which, it seems, will be wiped out by rising costs.
We have therefore tabled this new clause to ask the Government to assess how much they could raise through the tax and how much they could raise with different rates. Given the significant discrepancy between the estimated revenue raised by the RPDT and the estimated cost of remediation, will the Minister set out in further detail, when she responds, exactly how the rate of 4% was reached and what specific consideration was given to alternatives? It was with that in mind that we tabled the new clause. We will not seek to put it to a vote, but we hope that it will help us to debate and probe the important and central issue of the rate at which the RPDT has been set.
In summary, I will be grateful if, in her reply, the Minister could set out exactly how the figure of 4% was arrived at and, furthermore, how she expects the rest of the cost of cladding remediation to be met. I would be grateful if she could set out, either in her reply now or in writing, what other sources of funding she anticipates being used to meet the total cost of cladding remediation.
Finally in relation to this group, I will briefly mention clause 52, which is an anti-avoidance provision preventing taxpayers from adjusting their profits arising in an accounting period in order to obtain a tax advantage for the purposes of this tax. We welcome the intent behind that clause and will not oppose it.
Lucy Frazer
I very much welcome the initial comments of the hon. Member for Ealing North, and that he welcomes the points in principle. That is important, given that we are trying to help those people who have suffered a terrible tragedy and ensure that we have the necessary funds to remedy the situation. He asked several questions, the first of which related to consultation. I reassure him that the Government undertook extensive stakeholder engagement as part of the 12-week consultation —holding 40 consultative meetings—to help ensure that the issues raised in the consultation about the design and impact were considered fully.
The hon. Gentleman also mentioned a sunset clause. We have been clear that this is a measure to raise £2 billion-worth of revenue by way of tax, and that it will be time limited and will be repealed once sufficient revenue has been raised. As with all other taxes, the Government will keep this tax under review.
The hon. Gentleman asked whether the 4% rate was sufficient. However, at the same time, he also mentioned the supply chain issues that might mean that the cost of construction has gone up. It is, of course, important to ensure that what we ask from developers is fair, in order to ensure that their businesses remain viable and sustainable at the same time as contributing to this issue. The rate was carefully considered in the context of the upcoming increase in corporation tax, other taxes, the regulatory changes and the wider macroeconomic environment. We feel that 4% represents the right balance, raising the £2 billion over a decade while being fair and not having an impact on housing supply. The hon. Gentleman asked how we came to this rate; we considered it very carefully and decided on 4%.
James Murray
For the sake of clarity, I would be grateful if the Minister could help my understanding. She said that the tax was intended to raise £2 billion over 10 years, but she may have implied that if it has not raised £2 billion over 10 years, it would keep applying until £2 billion was raised. Is it for 10 years, or is it for £2 billion? The Government will not necessarily raise £2 billion over exactly 10 years; one has to come before the other. Is it going to be for 10 years and then finish—no matter what it has raised—or will it keep going until it has raised £2 billion?
Lucy Frazer
The Government have made clear that they propose to raise £2 billion from this tax. They have done extensive analysis as to what the appropriate rate is to recover that amount. At a rate of 4%, we anticipate that we will raise that £2 billion—in fact, slightly more than that—in 10 years, and that is when the tax will come to an end.
I will address the points made by the hon. Member for Gordon, because he rightly raised an important point about tax avoidance. It is HMRC’s duty to ensure that we do not have tax avoidance and evasion. However, I reassure him that the existing corporation tax compliance mechanisms that currently exist—which include inquiries, information powers and penalties—will apply to this tax, as well as anti-avoidance rules, including transfer pricing and the general anti-abuse rule. He did not specifically raise any particular measures that he thought would be anti-avoidance or abuse—if there are any, I would be very interested to hear them in due course and discuss that with him.
For those reasons, we ask the Committee to reject the two new clauses and to agree that clauses 32 and 33 stand part.
Question put and agreed to.
Clause 32 accordingly ordered to stand part of the Bill.
Clause 33 ordered to stand part of the Bill.
The Chair
With this it will be convenient to discuss the following:
Clauses 35 to 38 and 47 to 49 stand part.
That schedule 9 be the Ninth schedule to the Bill.
Clauses 50 and 51 stand part.
Lucy Frazer
Clauses 34 to 38 set out key definitions for the residential property developer tax, which collectively set out the conditions that need to be satisfied for a business to be in scope of the tax. Clauses 47 to 51 and schedule 9 address a mix of aims within the tax, including the definition of a group, excluding a deduction for the tax when calculating profits or losses for other tax purposes, and the application of transfer pricing principles for the purpose of the residential property developer tax.
Clause 34 defines a residential property developer, and confirms that to be in scope of the RPDT, a business must be a company that undertakes residential property development activities as further defined in clause 35. Clause 34 provides an exclusion for non-profit housing companies and their wholly owned subsidiary companies from being treated as residential property developers for the purposes of the RPDT. The clause defines a non-profit housing company by reference to existing legislation, and a power has been taken that allows the definition to be updated in future in line with any changes to regulatory frameworks.
Clause 35 provides a non-exhaustive list of what amounts to residential property development activities, and confirms that profits from these activities undertaken by the developer on or in connection with UK land in which it has an interest will form the tax base.
Clause 36 explains that a residential property developer or a related company will have an interest in the land for the purposes of the tax where it has an interest in or over the land that forms part of its trading stock used in its development trade. It explains the tax’s application to related companies and joint venture companies.
Clause 37 provides a definition of residential property and sets out the types of properties that will not be regarded as residential property. The clause excludes certain types of buildings from the definition of residential property, so that any profits or losses from their development are not taken into account when computing profits that are subject to the tax. These include, typically, specialised institutions that provide temporary or longer-term accommodation for a specific class of residents, and buildings that are occupied purely under licence to occupants who do not hold any lasting rights over the property. Finally, the clause sets out the criteria to be met in relation to buildings that are excluded from the definition of residential property as student accommodation. Clause 38 sets out the formula used to calculate the residential profits or losses from residential property development activity by a developer for an accounting period.
Clause 47 introduces an exit charge that applies when a non-profit housing company ceases to meet the conditions to be exempt from the RPDT, and sets out the operation of the exit charge. This rule has been welcomed by the non-profit sector.
Clause 48 provides the definition of a group of companies for the purposes of the RPDT, other than for the group relief rules in schedule 7. Since a group of companies is entitled to a single £25 million allowance, it is important to set out clearly what constitutes a group for that purpose.
Clause 49 introduces schedule 9, which introduces a rule preventing a residential property developer from obtaining any deduction for the tax when calculating any profits or losses for income tax or corporation tax purposes. Clause 50 sets out where the meaning of various terms used in the RPDT legislation can be found.
Clause 51 confirms that the RPDT will apply for an accounting period for UK corporation tax purposes of a developer that ends on or after 1 April 2022. It sets out the treatment of accounting periods that straddle the commencement date of 1 April 2022. The RPDT will be chargeable only in respect of profits calculated from 1 April 2022 to the end of the accounting period, with an apportionment being made of the profits for the whole accounting period on a time basis.
In summary, this group of clauses defines key terms needed for the RPDT to work and provides the essential framework for the administration of the tax. The clauses will be supported by guidance to provide further clarity for taxpayers.
James Murray
As we have heard, clauses 34 to 38 concern the key concepts contained in the RPDT legislation. Clause 34 sets the basic conditions that, when satisfied, mean that a company is to be designated as a residential property developer, potentially within the charge of the RPDT. Subsection (1) defines an RP developer as either a company that undertakes residential property development activities or one that holds
“a substantial interest in a relevant joint venture company.”
The company’s interest in such a joint venture is aggregated with those of other members of the same group to determine whether that is a substantial interest.
Subsection (3) clarifies that a non-profit housing association or organisation is not treated as an RP developer for the purposes of the tax. That is a very important distinction that we support. My colleagues in the shadow housing team pressed the Government on that point during Committee stage of the Building Safety Bill, and I welcome that being reflected in this Bill.
Subsection (4) is a logical extension of subsection (3), determining that wholly owned subsidiary companies of non-profit housing companies are also excluded from being treated as RP developers for the purposes of the tax. It makes sense to exclude non-profit housing associations from RPDT, particularly given that they have already made a much more substantial contribution to cladding remediation than private developers. Research by the National Housing Federation in October 2021 found that private developers and cladding manufacturers had allocated £643 million of future profits to remediate unsafe cladding, while non-profit housing associations have estimated that their remediations will cost in excess of £10 billion.
Subsection (5) allows the Treasury to amend the definition of a non-profit housing company by regulation, and to make any consequential changes to this part of the legislation. As we have heard, that allows the definition to be updated, in line with any changes to the regulatory framework for registered social housing providers. It may be understandable that the Government want to be able to adjust definitions to match any changes in the way that social housing providers operate, as well as to recognise the impact of any changes to the regulatory framework. However, so that we can better understand the Government’s concerns, I would be grateful if the Minister could indicate why it may be necessary to amend the definition of a non-profit housing company.
Clause 35 sets out the criteria and definitions of residential property development activities for the purposes of the tax, as well as setting the territorial scope of the legislation. Subsection (1) brings within scope anything that is done by an RP developer or in connection with land in the United Kingdom for the purposes of the development of a residential property. A developer must have an interest in the land at some point for the activity there to be RP developer activity for the purposes of the tax. Land in that respect is taken to include buildings or structures on a piece of land. The requirement for an interest in land means that profits from similar activities undertaken by companies acting purely as third-party contractors, who are not RP developers, do not come within the charge of the tax.
Clause 36 raises an important question about who the RPDT applies to. Subsection (1) sets out the definition of an interest in land for the purposes of the tax. Broadly, it sets out that, when an RP developer has an interest in land, it must have
“an estate, interest, right or power in or over the land”.
That estate, interest, right or power must form
“part of the RP developer’s, or the related company’s, trading stock”.
Subsection (4) elaborates what “trading stock” refers to and makes clear the importance of an estate, interest, right or power in or over land being disposed of. It is the point about disposal that I would like to probe further. Discussions with Clerks about whether new clause 19 was selectable drew out the fact that the residential property developer tax is aimed at developers that do development work in order to trade property once the work has been done. It seems clear to me that the RPDT would apply in the case of a developer who builds homes and sells their freehold interest once the development is complete, but what happens when the developer retains some sort of interest for a specific period of time, or indefinitely?
Lucy Frazer
There are quite a lot of points to address. I will deal with those that are easy to deal with orally, and I will get back to the hon. Member for Ealing North in writing on some of the more detailed points he raised. I am very grateful to him and to the hon. Member for Glasgow Central for welcoming our decision on affordable housing and the not-for-profit sector. We had obviously thought about that very carefully. I think it is the right decision, and I am pleased that it has cross-party support. I welcome, as does the hon. Member for Ealing North, the work that has already been done to reduce cladding by that sector.
The hon. Member for Ealing North asked why we will not extend the definition beyond that to not-for-profit providers. It is because this measure relates to a charge when people have made a significant profit of more than £25 million. He also asked why we need flexibility to come back, by way of regulation, and change the definitions. The definitions are based on legislation from the devolved Administrations, and if those definitions change, we need the flexibility to change them here as well.
The hon. Gentleman also asked about different scenarios for disposals of land. He will know that, when coming up with this policy, we thought carefully about what should and should not fall within it, and what was right to fall within it. We excluded build-to-rent because it is a very different sector in which profits are earned in a different manner at a different time. It was not comparable to the build-to-sell sector. He posited a number of scenarios in which commercial entities might change their activities in order not to pay this charge over the period of time but may ultimately sell properties in due course. We of course considered the possibility that people might change arrangements in order not to pay the tax, but we took the view, having discussed the issue, that significant change in commercial behaviour or business models in order simply to avoid the tax would be unlikely. I will get back to him on some of his specific points.
The hon. Gentleman also made a point about student accommodation, which I will answer from a broad perspective. Those who build properties and are able to pay the levy, because they have an income of more than £25 million, are subject to the tax. It is on house sales of a particular kind, where the purpose of the sale is essentially a sale of a property but it so happens that some other services are provided at the same time. It is essentially competing with the build-to-sell sector, which is why it is included in the legislation.
The hon. Member for Glasgow Central asked whether we would keep in touch with the Scottish Government, which we of course will and are very happy to. She asked what happens when people provide good services, for example in the affordable housing sector, but are profit making. I want to reiterate that the levy will catch significant property developers earning in excess of £25 million—it is that type of company that will be caught by the levy. We will of course keep everything under review, and the same point relates to the point that the hon. Member for Glasgow Central made about student accommodation. This is about big providers that are selling property to individuals, rather than renting the accommodation in short order.
I am really pleased that the hon. Member for Glasgow Central recognised the successful work that HMRC has done over the course of the pandemic in pretty short order. The furlough scheme and all the grants have largely been administered by HMRC, and it has done a tremendous job, delivering at pace. She is right to point out that HMRC has been stretched at times and that there is a significant amount of work coming its way in due course with the social care levy, but I want to reassure her that it is fully aware that this legislation is coming down the path and that it will be ready to deliver. For those reasons, I commend the clauses to the Committee.
Question put and agreed to.
Clause 34 accordingly ordered to stand part of the Bill.
Clauses 35 to 38 ordered to stand part of the Bill.
The Chair
The decisions on clauses 47 to 49, schedule 9 and clauses 50 and 51 will be dealt with later in our proceedings.
Clause 39
Adjusted trading profits and losses
Question proposed, That the clause stand part of the Bill.
The Chair
With this it will be convenient to consider the following:
Clauses 40 and 41 stand part.
That schedule 7 be the Seventh schedule to the Bill.
Clause 42 stand part.
Lucy Frazer
Clauses 39 to 42 set out how to calculate the tax base for the purposes of RPDT for an accounting period. Clause 39 sets out what adjustments are made to the UK corporation tax trading profits or losses to arrive at the adjusted trading profits or losses of a residential property developer for the purposes of RPDT. The clause provides that any apportionment of in-scope activity and other activities are to be made on a just and reasonable basis. The clause also provides for an exclusion for any trading profits from residential property development activities that are carried out by a company for charitable purposes.
Clause 40 sets out how any joint venture profits or losses attributable to a developer are determined for the purposes of calculating RPDT profits or losses. The clause confirms the criteria for a relevant joint venture company to fall within the charge to RPDT and how the joint venture profits or losses will be attributed to the developer.
Clause 41 introduces parts 1 to 4 of schedule 7, which make provisions for loss relief and group relief for the purposes of RPDT. As they largely replicate the rules that apply generally for corporation tax, I do not propose to spend long taking the Committee through them. Part 1 of schedule 7 allows any unrelieved RPDT loss to be carried forward against RPDT profits in the next accounting period. Parts 2 to 4 of schedule 7 apply equivalent rules for UK corporation tax group relief for the purposes of RPDT.
Clause 42 restricts the amount of a carried forward loss that can be set against profits of a later period for the purposes of RPDT. This ensures that carried forward losses do not reduce profits above the annual allowance that are chargeable to RPDT by more than 50%, in line with the treatment of carried forward losses under UK corporation tax.
In summary, these clauses and the schedule set out important mechanics for the calculation of the base of the tax, and I therefore recommend that they stand part of the Bill.
James Murray
As we have heard, clause 39 concerns adjusted trading profits and losses relating to the calculation of the RPDT charge. Subsection (2) lists the circumstances in which trading profit and loss can be ignored in the calculation of the charge. These are those profits, losses, and any allowances or charges under the Capital Allowances Act 2001 that do not relate to residential property development activity, corporation tax loss relief, and group relief, and any amounts that are taken into account in calculating trading income by the operation of the loan relationship and the derivative contracts rules.
Also, any trading profits from residential property development activities that are carried out by a charitable company and apply for the purposes of the charitable company are ignored. Furthermore, we can see that in subsection (3) there is provision whereby corporation tax profits, losses or capital allowances and charges that relate to both the company’s residential property development activity and any other activities may be apportioned between the RP developer activities and other activities on a just and reasonable basis.
Clause 40 focuses on attributable joint venture profits and losses. The clause sets out how an amount a joint venture profits or losses attributable to a developer is determined for the purposes of calculating RP developer profits or losses under clause 38 for the purposes of this tax. The clause confirms the criteria for a relevant joint venture company to fall within the charge of this tax. Notably, we see that where there are five or fewer persons who between them own at least 75% shareholding, the holdings of members of the group are to be aggregated and treated as one holding.
Clause 41 introduces schedule 7 and relates to RPDT reliefs where provision is made for loss relief and group relief for the purposes of RPDT. Part 1 of schedule 7 clarifies that an unrelieved RPDT loss is to be carried forward against RPDT profits in the next accounting period, but its use is subject to the restriction to setting off against 50% of the profits of any future accounting period, as provided for by clause 42, which I shall refer to shortly. Part 2 concerns RPDT group relief, which is comparable to corporate tax group relief that has been set out specifically for the purposes of the tax under discussion today. Part 3 is similar, in that it applies the principles of carried-forward group relief from corporation tax to the RPDT.
Relatedly, we see clause 42 impose a restriction on the use of carried-forward losses for the purposes of the RPDT. That ensures that carried-forward losses do not reduce profits above the annual allowance that are chargeable to RPDT by more than 50%. That corresponds to the treatment of carried-forward losses for the purposes of corporation tax on trading profits. We will not be opposing the clauses or the schedule.
Lucy Frazer
I am grateful for the indication that there will be no opposition, so I ask that the clauses stand part of the Bill.
Question put and agreed to.
Clause 39 accordingly ordered to stand part of the Bill.
Clauses 40 and 41 ordered to stand part of the Bill.
Schedule 7 agreed to.
Clause 42 ordered to stand part of the Bill.
Clause 43
Allowance
Question proposed, That the clause stand part of the Bill.
Lucy Frazer
Clauses 43 and 44 provide for the operation of the annual allowance. The RPDT will be charged on the profits that exceed a residential property developer’s £25 million annual allowance. Clause 43 provides for the operation of the £25 million annual allowance that is available to each group of companies before profits become chargeable to RPDT. A power is included that allows HMRC to set the process for a group of companies to allocate its allowance in secondary legislation.
Clause 44 provides for the calculation of the annual allowance for the RPDT where the profits of a member of a joint venture company are not chargeable to UK corporation tax. It provides for the allowance of a JV company to be reduced and for the exempt member to instead have an annual allowance that can be allocated to its joint venture interests. Although the rule may seem complicated at first glance, it will ensure that where a non-taxable investor, such as a pension fund, has interests in several joint ventures, those joint venture companies do not benefit from multiple allowances. In summary, clauses 43 and 44 ensure that RPDT is proportionate, administrable and targeted at the largest developers.
James Murray
As the Minister has described, clause 43 relates to allowances and provides for the operation of the allowance that is deducted from profits chargeable under the RPDT. Under clause 43, the £25 million allowance is adjusted pro rata when an accounting period is less than a year. Within a group of developers, the allowance can also be allocated between member companies at the direction of an allocating member. In the absence of an allocating member, the allowance is to be evenly split between the total number of members.
Clause 44 applies a similar principle to joint venture companies and sets out the terms of allowance within the RPDT. Critically, where a member of a joint venture company is outside the scope of corporation tax because it is an offshore entity, a sovereign immune entity or an institutional investor, the allowance afforded to the joint venture company is reduced in proportion to the percentage competition of members that are outside its scope. We support the principle of removing unfair tax advantages and maintaining fair competition in the market, and therefore we will not oppose the clauses.
Lucy Frazer
Again, I am very grateful for that indication. I commend the clauses to the Committee.
Question put and agreed to.
Clause 43 accordingly ordered to stand part of the Bill.
Clause 44 ordered to stand part of the Bill.
Clause 45
Application of corporation tax provisions and management of RPDT
Question proposed, That the clause stand part of the Bill.
The Chair
With this it will be convenient to consider that schedule 8 be the Eighth schedule to the Bill.
Lucy Frazer
Clause 45 and schedule 8 provide for RPDT to be treated for administrative purposes as an amount of UK corporation tax. Clause 45 outlines the framework within which RPDT will operate and makes necessary amendments to existing administrative legislation to accommodate RPDT. It also introduces schedule 8, which makes further provisions about the management of RPDT, including setting out the circumstances in which a company will not be required to report its RPDT profits, which will reduce any administrative burden for groups with profits that are unlikely to exceed the annual allowance.
In summary, the clause and schedule set out important mechanics for the collection, management and payment of RPDT.
James Murray
As the Minister has described, clause 45 and schedule 8 concern the application of corporation tax provisions and management. The clause applies general corporation tax principles to the RPDT and provides that RPDT be treated for administrative purposes as an amount of corporation tax. The clause and schedule outline the framework within which RPDT will operate and make necessary amendments to administrative legislation to accommodate RPDT.
As pointed out by the Chartered Institute of Taxation, the alignment with corporation tax and other existing mechanisms should reduce some administrative burdens for both developers and HMRC, which we welcome. However, we note that the turnaround on this novel tax, as mentioned earlier in this Committee sitting, is rapid. Given the truncated consultation period, I seek reassurances from the Minister that HMRC’s systems will be ready for the collection, management and payment of RPDT. I would be grateful if the Minister could also confirm whether any additional budget allocation has been offered to HMRC to support the roll-out of RPDT and, if so, what the value of the allocation is.
Lucy Frazer
I assure the hon. Gentleman, as I assured the hon. Member for Glasgow Central some moments ago, that HMRC will be ready to bring in the tax that we are legislating for. As he will know, we have just gone through a spending review. HMRC will have sufficient funds to ensure that it can comply with its duties and obligations.
Question put and agreed to.
Clause 45 accordingly ordered to stand part of the Bill.
Schedule 8 agreed to.
Clause 46
Requirement to provide information about payments
Question proposed, That the clause stand part of the Bill.
Lucy Frazer
Clause 46 provides for RPDT receipts to be monitored. It introduces a requirement for residential property developers making an RPDT payment to state the amount of the payment to HMRC in writing in order to ensure that RPDT receipts can be monitored. It also provides for a penalty if there is a failure to comply with that requirement. In summary, the clause sets out an important requirement to enable HMRC to monitor RPDT revenue.
James Murray
As we have heard, clause 46 introduces a requirement for companies making a payment of RPDT to provide information about a payment to HMRC so that receipts for the tax can be monitored. The clause sets out the definition of the responsible company—the company making payment on behalf of the RP developer under relevant group payment arrangements or, in any other case, the RP developer itself.
The clause further requires that the responsible company must notify an officer of HMRC in writing, on or before the date when the payment is made, of the amount of the payment due under RPDT. In addition, the clause refers to penalties for failing to inform HMRC about payments owed. Penalties are aligned with previous legislation on corporation tax notices. We will not oppose the clause.
Question put and agreed to.
Clause 46 accordingly ordered to stand part of the Bill.
Clauses 47 to 49 ordered to stand part of the Bill.
Schedule 9 agreed to.
Clauses 50 to 52 ordered to stand part of the Bill.
Clause 67
Securitisation companies and qualifying transformer vehicles
Question proposed, That the clause stand part of the Bill.
Lucy Frazer
Clause 67 introduces a power enabling changes to be made by secondary legislation to stamp duty and stamp duty reserve tax in relation to securitisation and insurance-linked security arrangements. The Government are keen to ensure that the UK’s stamp duty and SDRT rules contribute to maintaining the UK’s position as a leading financial services sector.
On 30 November, the Government published a response document and a draft statutory instrument following consultation on reform of the tax rules for securitisation companies. The consultation explored issues including the application of the stamp duty loan capital exemption to securitisation and ILS arrangements. The consultation sought views on whether uncertainty as to how the existing stamp duty loan capital exemption applies increases the costs and complexity of UK securitisation and ILS arrangements, and whether that is a factor in arrangements being set up outside the UK.
Clause 67 will allow Her Majesty’s Treasury to make regulations to provide that no stamp duty or stamp duty reserve tax charge will arise in relation to the transfer of securities issued by a securitisation company or a qualifying transformer vehicle. A qualifying transformer vehicle is the note-issuing entity in an ILS arrangement. The power will also allow HMT to make regulations to provide that stamp duty or SDRT is not chargeable on transfers of securities to or by a securitisation company. The power allows the Government to make changes to allow UK securitisation and ILS arrangements to operate more effectively, and reduce cost and complexity. There is currently no power to make changes through secondary legislation to the stamp duty and SDRT rules in relation to securitisation and ILS arrangements.
In summary, clause 67 will support the Government to respond flexibly to the evolving commercial practices of the securitisation and ILS markets, and ensure that the UK’s securitisation and ILS regimes remain competitive. I therefore commend the clause to the Committee.
Abena Oppong-Asare (Erith and Thamesmead) (Lab)
I am delighted to serve under your chairship, Dame Angela. Happy new year, everyone.
As we heard from the Minister, clause 67 relates to stamp duty on securities and related instruments. We do not oppose efforts to increase the efficiency and flexibility of this sector, but we wish to see appropriate safeguards to ensure that these changes do not increase the risk of stamp duty evasion and, as the Minister mentioned, to make sure that they meet the UK’s position as a leading financial sector.
Securitisation can be a useful source of finance for UK businesses and can aid capital liquidity and risk management. I note that the Treasury has consulted on the impact of stamp duty on securitisation and insurance-linked securities. Clause 67 gives the Treasury powers to make changes through secondary legislation to stamp duty as it relates to securitisation. Can the Minister explain why the Government feel that it is necessary to make those changes through secondary legislation, rather than using the Finance Bill or other primary legislation?
Can the Minister also give us some detail on the exact changes that the Government intend to make through this secondary legislation? For example, in what circumstances will the trading of securities be exempt from stamp duty? How will she ensure that this does not increase the scope for tax avoidance? Can she also provide reassurance that Parliament will still be able to scrutinise these changes? The clause really needs to be scrutinised.
Lucy Frazer
I thank the hon. Lady very much for those points. I welcome the fact that she, too, thinks it important that this country remains competitive and flexible, and supports growth in this very important sector.
The hon. Lady asked why we need these changes to be made by secondary legislation. The answer is that technical changes of the type consulted on are more often and more appropriately made through secondary legislation than by primary legislation. Making the changes through secondary legislation gives Government flexibility to ensure that technical changes respond to the evolving nature of the securitisation and ILS markets.
However, it is of course important that we have scrutiny and review. We had a consultation on this issue, from which these provisions follow; of course, anything that comes through secondary legislation will be scrutinised. We will keep this under review, as we do all taxes.
Abena Oppong-Asare
I thank the Minister for taking the time to explain that. It would be helpful if she could also explain what measures were put in place to allow Parliament to scrutinise these changes. I am sure that she would agree that it is important that Parliament should be able to scrutinise these changes properly; if she could list what steps have been put in place, that would be extremely helpful.
On my other question, it is really important that there is no increase in tax avoidance. Can the Minister set out what the Government have put in place to ensure that it does not increase?
Lucy Frazer
Like me, the hon. Lady will be aware that when things go through the secondary legislation procedure they are subject to scrutiny by this House, through those Committees. She will also know that this Government are absolutely committed to ensuring that we tackle tax avoidance; there are a large number of measures in this Bill that tackle tax avoidance and evasion, through cracking down on promoters and other mechanisms. It is something that we are alive to and acting upon, and for those reasons I ask that clause 67 stand part of the Bill.
Question put and agreed to.
Clause 67 accordingly ordered to stand part of the Bill.
Clause 72
Identifying where the risk is situated
Question proposed, That the clause stand part of the Bill.
Lucy Frazer
Clause 72 relocates into IPT legislation the criteria to determine the location of an insured risk for the purpose of insurance premium tax. IPT is charged on most general insurance, where it provides cover for risks located within the UK.
Insurance for risks located outside the UK is exempt from UK IPT. That exemption prevents double taxation across different tax jurisdictions and puts UK-based insurers on a level playing field with overseas insurers. Legislation sets out how to determine the location of a risk in order to establish whether the IPT exemption applies. Regulations previously used to determine the location of an insured risk were replaced in 2009, and the new regulations did not include an equivalent provision. Instead, reliance was placed on directly effective European Union legislation. To ensure clarity for the insurance industry, this measure relocates the criteria into primary legislation. This is a technical change and does not reflect a change in IPT policy.
The changes made by clause 72 will remove references to inoperative regulations in the Finance Act 1994, introducing criteria to the same effect directly into the IPT legislation. The measure ensures that insurance for risks located outside the UK remains exempt from IPT, providing clarity and continuity for the insurance industry and supporting the maintenance of an effective and fair tax system.
Abena Oppong-Asare
I thank the Minister for her explanation of clause 72; it does seem like a straightforward clause that simply moves the criteria for determining where the risk is located into primary legislation. The Chartered Institute of Taxation has stated that the legislation does meet its stated objectives. For that reason, we do not oppose the clause.
I note that there has been wider consultation on the insurance premium tax, including on how to address the avoidance of the tax and how to reduce the administrative burden on HMRC and the industry. That is particularly important as HMRC has been under a lot of pressure—particularly during the pandemic. In the Government’s response to the consultation on the issue of IPT avoidance, they said that, on reviewing the responses,
“neither of the proposed options provide a proportionate solution to the issue this chapter sought to address. As such, neither option will be taken forward at this time.”
That seems like the Government have given up at the first hurdle. Why, if the proposed measures are not appropriate, are the Government not considering other measures to prevent avoidance in this sector?
Alison Thewliss
I do not have any major objections to what is being proposed, but I would be doing the Association of British Insurers a disservice if I let the clause go through without mentioning its concern, which I share, that insurance premium tax is quite a regressive tax. We are about to discuss tobacco duty; the ABI points out, through some research by the Social Market Foundation, that insurance premium tax now raises more revenue than beer and cider duty, wine duty, spirits duty, or betting and gaming duties.
Since 1994, the standard rate of IPT has increased more rapidly than tobacco duty. Those are all things that we want people not to do; we would prefer it if people did not drink as much, smoke as much or gamble as much, so we tax those things. It seems ludicrous to tax people on insurance, which we would like people to have and which benefits them and society, so I ask the Minister to consider further whether insurance premium tax is something sensible that we want to keep doing.
Lucy Frazer
I am grateful to the hon. Member for Glasgow Central for her broader points about the subject matter. I do not think she raised a particular point in relation to the clause under consideration, but this is an area that, like others, we will keep under review. I undertake to get back to the hon. Member for Erith and Thamesmead in writing on the specific point that she raised in relation to the consultation.
Question put and agreed to.
Clause 72 accordingly ordered to stand part of the Bill.
Clause 73
Transitioned trade remedies: decisions by Secretary of State
Question proposed, That the clause stand part of the Bill.
Lucy Frazer
The clause gives the Secretary of State for International Trade the power to call in and take control of reviews of trade remedies measures transitioned from the EU. This ensures that the Government can effectively take steps to prevent harm to UK industry where there is evidence of unfair competition.
Trade remedies are additional tariffs or tariff-rate quotas temporarily imposed to protect domestic industries from dumped or subsidised imports or unforeseen surges in imports. At the end of the transition period, the Government transitioned 43 of the EU’s trade remedy measures. The Trade Remedies Authority is now reviewing the transitioned measures to assess whether their continuation is suitable for the UK economy. The TRA is responsible for collecting and analysing evidence relating to trade remedies cases, and it currently makes recommendations to the Secretary of State for International Trade on whether particular measures should be revoked or varied or, in certain cases, retained or replaced. The Secretary of State can only accept or reject a TRA recommendation in its entirety.
The current framework was introduced in 2018. Since then, it has become clear that in some circumstances, greater ministerial involvement in decision making is required. The call-in power is designed to address that. It will allow the Secretary of State to call in a case if she considers it necessary. For example, she will be able to take a closer look at an individual case if needed in the wider public interest. The intention is that the Secretary of State will continue to rely on the expertise of the TRA to collect and analyse evidence, but that it will do so under her direction.
Whether a case is called in or not, the process will continue to be robust, transparent and evidence based, but the power will allow the Secretary of State greater flexibility in decision making than our legislation currently allows. The call-in power will apply only to transition reviews, and where the TRA is reconsidering its previous conclusions from a transition review. In parallel, the Government are considering wider changes to the trade remedies framework to ensure that it can consistently defend UK industry. That is separate from the limited scope of this clause, and the International Trade Secretary will report on the findings of that review in due course.
The changes made by clause 73 will amend the trade remedies regime to allow the Secretary of State for International Trade to call in transition reviews and reconsiderations of transition reviews conducted by the TRA. After calling in a case, the Secretary of State will be responsible for determining the outcome of that review or reconsideration. That will ensure that the Secretary of State can have greater oversight and involvement in a particular transition review or reconsideration of a transition review as appropriate, and therefore the ability to decide on appropriate measures, such as varying the tariffs that apply to particular products under the UK’s trade remedies framework.
Where this power is exercised, the Secretary of State need not necessarily base their decision on a prior recommendation or decision of the TRA. The Secretary of State will be required to publish the notice of a decision made under this clause. The Government will make secondary legislation to set out in more detail how the call-in power is to be exercised.
In summary, clause 73 will help to prevent injury to UK industry by empowering the Secretary of State to call in transitional reviews where appropriate, and give her control to determine the outcome of a particular transition review or reconsideration of a transition review. Such a determination may include retaining, varying, revoking or replacing the trade remedies already in place on the goods subject to the review.
Abena Oppong-Asare
This important clause relates to trade remedies. As we have heard, it allows Ministers to override the powers of the Trade Remedies Authority in order to maintain safeguard tariffs on cheap imports that unfairly undermine UK industry.
The clause’s introduction was prompted by the row over the TRA’s proposals to get rid of tariffs on cheap steel imports. In June last year, the TRA recommended the removal of limits inherited from the EU on about half of the UK’s steel imports. Slashing those safeguards and opening the floodgates to cheap steel imports would have been devastating for steel plants across our country and damaging for our wider economy. At the time, the director general of UK Steel said:
“On their first major test in a post-Brexit trading environment, the UK’s new system has failed our domestic steel sector.”
The Government U-turned on that decision after pressure from Labour and the industry, and belatedly maintained protections for the steel industry. Obviously, however, there are concerns about future TRA decisions, so we support the clause. Indeed, Labour campaigned for the Government to take more action to support our vital steel industry.
I ask the Minister to expand on subsection (5), which allows the Secretary of State to make regulations regarding how to make decisions on transitioned trade remedies. Will she set out what sort of regulations she envisages that the Secretary of State will make and how those decisions will be made? It is important that there is a transparent process for making these important decisions on trade remedies.
Finally, although we welcome this measure and hope that it ensures that vital British industries are better protected in the future, we remain concerned about the Government’s wider failure to support British industry. Industries such as steel are of vital strategic importance for our economic prosperity and national security, but the Government’s lack of an industrial strategy means that the steel industry is lurching from crisis to crisis. We need a proper plan to decarbonise the sector, to boost business competitiveness and to use British steel in UK infrastructure projects, in order to safeguard the future of the steel industry, as Labour’s plans to buy, make and sell in Britain would do.
Labour would also invest up to £3 billion over the coming decade in greening the steel industry. We would work with steelmakers to secure a proud future for the industry to match the proud past and present of British steel communities. I urge the Government to do the same.
Lucy Frazer
I did not want to interrupt the hon. Lady, but I think she has gone outside the remit of the measures in the Bill. However, I would like to correct her on a point—[Interruption.] She was talking about the steel industry as a whole, when we are dealing with a provision that relates in particular to the power of the Secretary of State to call in trade remedies.
The Chair
Order. I will allow some leeway for reasonable debate, and if anyone goes out of order, I will stop them. The Minister should feel free to make some general comments, so long as they are not too long and do not stray too far.
Lucy Frazer
That is very kind, Dame Angela. I want to correct a general point that the hon. Lady made in relation to steel and the decision that was made by the then Secretary of State for International Trade. The hon. Lady suggested that there was a U-turn and that pressure was put on by the Labour party. In fact, there was no decision by the Government; the decision was made by the Trade Remedies Authority. I just wanted to clarify that point.
Lucy Frazer
The clause simplifies the way that technical updates are made to the UK’s tariff schedule. This measure inserts a new provision into the Taxation (Cross-border Trade) Act 2018 so that changes to the UK’s tariff schedule that do not alter the tariff duty rates applied to imported goods can be made by public notice rather than by secondary legislation, as is currently the case.
The clause will ensure that routine technical changes to tariff legislation, such as changing the codes used to classify goods or removing redundant codes, can be implemented more easily and quickly for those who refer to the legislation. Importantly, this measure also reduces the burden on parliamentary time in considering routine technical changes, while maintaining Parliament’s current levels of scrutiny of tariff duty rate changes.
In summary, the clause amends the Taxation (Cross-border Trade) Act 2018 so that technical changes can be made by public notice, thus ensuring simpler and quicker implementation of those changes to the UK’s tariff schedule.
Abena Oppong-Asare
This relatively minor change allows technical updates to the tariff schedule to be made by public notice rather than secondary legislation. Given that there are safeguards to ensure that substantive changes, such as varying the rate of import duty, continue to be made by regulation and are therefore subject to parliamentary oversight, we do not oppose the clause.
Question put and agreed to.
Clause 74 accordingly ordered to stand part of the Bill.
Clause 75
Restriction of use of rebated diesel and biofuels
Question proposed, That the clause stand part of the Bill.