Oral Answers to Questions
Debate between Lucy Frazer and Alison Thewliss(10 months, 2 weeks ago)
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Lucy Frazer
I thank my hon. Friend for his question. He will know that the Department is considering all possible future funding options to ensure the BBC’s long-term sustainability, because the digital world is indeed changing.
Alison Thewliss (Glasgow Central) (SNP)
The amount of money that companies spend on formula milk advertising seems to increase every year, but every penny they spend on advertising goes on to the price of a tub of formula at the till. What conversations has the Secretary of State had on that advertising spend, which is having an impact on public health?
Lucy Frazer
I am very happy to meet the hon. Lady to discuss that issue further.
Finance (No. 2) Bill (Fifth sitting)
Debate between Lucy Frazer and Alison ThewlissTuesday 11th January 2022
(2 years, 3 months ago)
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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.
Finance (No. 2) Bill (Third sitting)
Debate between Lucy Frazer and Alison ThewlissWednesday 5th January 2022
(2 years, 3 months ago)
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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.
Finance (No. 2) Bill (First sitting)
Debate between Lucy Frazer and Alison Thewliss(2 years, 4 months ago)
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James Murray
As we have heard, clause 10 relates to the increase of the normal pension age to 57 from 6 April 2028. The stated intention of the clause is to protect members of the registered pension schemes who, before 4 November 2021, had a right to take their entitlement to benefit under those schemes at or before the existing normal minimum pension age. It exempts members of certain uniformed service pension schemes from the increase, and it introduces new block and individual transfer rules specific to the new protection framework in order to reduce the restrictions on retaining a protected pension age following a transfer. The UK has a long tradition of protecting and rewarding those who have served their country. It is therefore right that we support clause 10, as it provides that protection by safeguarding recipients’ right to retain entitlement to benefits when transferring schemes.
We note, however, that the Low Incomes Tax Reform Group has concerns about the transitional arrangements relating to the clause. Paragraph 28 of the Government’s explanatory note regarding this clause states:
“There may be some transitional issues. For example, an individual who does not have a protected pension age and at 5 April 2028 will have reached age 55 and has started but not completed the process of taking pension savings before the change in normal minimum pension age. The government will provide further advice on the proposed transitional arrangements and provisions in due course.”
That raises concerns about when further advice on the proposed transitional arrangements will be made available, as well as questions about the extent to which that advice will be effectively communicated to the people concerned.
It is vital that people have full detail of any transitional provisions well before the increase to age 57 comes into effect; otherwise, there is a risk that people reaching age 55 in the run-up to 6 April 2028 will make decisions without knowing all they need to know. For example, an individual could cash in a pension in full and put the money in the bank so as to crystallise access to those funds, which may well leave them worse off in the long term, having likely incurred a large tax liability on the encashment and potentially affected their means-tested benefit entitlement. They might also have triggered the money purchase annual allowance, therefore restricting—perhaps unwittingly—their ability to make further contributions. In light of this, will the Minister clarify precisely when “due course” is, in relation to the Government’s further advice regarding the proposed transitional arrangement for the provisions? Will she also confirm what measures the Government will take to make sure that people are aware of the advice when it is finalised?
Alison Thewliss (Glasgow Central) (SNP)
This issue speaks to what I and my colleagues have often asked for in Finance Bills—that is, to be able to take evidence. We have received some very good written evidence from different organisations—I thank Scottish Widows, the Low Incomes Tax Reform Group and the Chartered Institute of Taxation for sending evidence to the Committee—but some of the detail requires a bit more interrogation. It would be useful if Finance Bill Committees were able to take evidence on the detail.
I agree with much of what the hon. Member for Ealing North said. Saying that something will happen in due course is not a great reassurance to many people. We have seen the terrible mess that the Government left for the WASPI women—the Women Against State Pension Inequality—who did not receive enough notice of state pension age changes. As a result, many have lost out on what they expected to happen when they reached retirement.
In its evidence, Scottish Widows makes the point well:
“Simplicity is a key driver of engagement with pensions… The average person has 11 jobs in their lifetime—with auto enrolment that could mean them having at least 11 pension pots. Some of these will now be accessible at age 55, others at 57.”
It also notes that
“some customers may have different pension ages within the same pension pot.”
That is not the simplicity that people really need when it comes to planning for their retirement.
There is a range of views. Scottish Widows appears to welcome the changes. The Chartered Institute of Taxation is not convinced that a change to the normal minimum pension age is necessary or desirable. What ought to be at the centre of this discussion is the people who will claim that pension. They need the clearest possible advice and the longest possible amount of notice in order to plan. I ask for clarity from the Government. It is just not acceptable to come before the Committee today without a date and say, “in due course”. People need to be able to plan for one of the most important events in their lives.
Lucy Frazer
The hon. Members for Glasgow Central and for Ealing North both mentioned the transitional arrangements and notice. They are right to identify that the Government have acknowledged the importance of establishing a clear position on the transitional arrangements and that we have said that we will provide further advice on the proposed transitional arrangements and provisions in due course. That remains the position, but I am very happy to keep both Members updated as we progress.
The hon. Member for Glasgow Central made a point about evidence. I know she is interested in the taking of oral evidence—she has made that point before. There is, of course, a standard process on the measures in the Finance Bill. That process involves a huge amount of consultation, with particular milestones, including engagement with industry and stakeholders, often a consultation, and sometimes draft legislation that then comes forward into the Finance Bill. That is the way the Finance Bill operates.
The hon. Member mentioned the WASPI women, which I know many hon. Members from all parties feel strongly about. As she will know, it was decided 25 years ago to make the state pension age the same for men and women in what was then a long overdue reform.
Question put and agreed to.
Clause 10 accordingly ordered to stand part of the Bill.
Clause 11
Public service pension schemes: rectification of unlawful discrimination
Question proposed, That the clause stand part of the Bill.
James Murray
As we have heard, the clause concerns qualifying asset holding companies, and sits alongside schedule 2. The aim of the clause, we understand, is to recognise certain circumstances where intermediate holding companies are used only to facilitate the flow of capital, income and gains between investors and underlying investments to tax investors, broadly as if they had invested in the underlying assets, and to enable the intermediate holding companies to pay tax that is proportionate to the activities they perform.
At Budget 2020, the Government announced that they would carry out a review of the UK funds regime, covering tax and relevant areas of regulation. The review started with a consultation on the tax treatment of asset holding companies in alternative fund structures, also published at Budget 2020. The Government responded to that consultation in December 2020, launching a second-stage consultation on the detailed design features of a new regime for asset holding companies. The Government’s response to that consultation was published on 20 July 2021.
The clause and schedule 2 introduce the new regime. We understand that the purpose of the measures is to deliver a proportionate and internationally competitive tax regime for qualifying asset holding companies that will remove barriers to the establishment of such companies in the UK. The Government have said that the new regime will include the following key features: eligibility criteria to limit access to the intended users; tax rules to limit the qualifying asset holding company’s tax liability to an amount that is commensurate with its role; and rules for UK investors to ensure that they are taxed so far as possible as if they had invested in the underlying assets directly.
We understand that the eligibility criteria will ensure that the asset holding companies may only be used as part of investment structures where funds are managed for the benefit of a broad pool of investors or beneficiaries. An asset holding company cannot carry out other activities, including trading, to any substantial extent. The tax benefits arising from asset holding company status apply only in relation to qualifying investment activity. The tax treatment of any limited trading activity or any non-qualifying investment activity that is carried on by an asset holding company will not be affected by the company’s status as an asset holding company.
We note that the Government have tabled six amendments to schedule 2, which accompanies the clause. Amendments 1 and 2 seek to pin down the definition of investment management profit-sharing arrangements. According to the explanatory statement, that is to ensure that the legislation is capable of encompassing arrangements in which an entitlement to profits arising in connection with the provision of investment management services by an investment manager arises to another person, such as a company or a trust.
Amendments 3 and 6 provide that a fund that is 70% controlled by category A investors meets the diversity of ownership condition. Amendment 4 seeks to allow existing funds marketed before the commencement of the qualifying asset holding company regime to be treated as meeting regulation 75(2) of the Offshore Funds (Tax) Regulations 2009 if certain information has been produced by the fund and has been made available to Her Majesty’s Revenue and Customs. Amendment 5 modifies the way in which the interests of creditors are accounted for in determining whether a fund is closed. We will not be opposing clause 14 or the Government’s amendments to it.
Alison Thewliss
I am a wee bit concerned that the Government have brought these amendments so late in the day. I appreciate that they have brought them now, rather than seeking to come back and amend legislation further down the road. That is something, I suppose. Does the Minister intend to review this legislation, and on what timescale? I am a wee bit worried about the letter we received yesterday, which said that, as originally drafted, the legislation includes some inconsistencies with wider tax rules and within the regime’s eligibility criteria. Given those worries and these amendments, I would like some reassurance from the Minister that the Government are going to keep an eye on this legislation to make sure that it is not exploited or used in the way that it is not intended to be. We need to make sure that people are paying the tax that they ought to be and that the legislation is not used as some kind of dodge.
Lucy Frazer
I welcome the lack of opposition to these clauses, which will support UK growth, by the hon. Member for Ealing North. The hon. Member for Glasgow Central made a point about the fact that the Government have made amendments late in the day. I reassure her that they are technical changes. Following engagement with the industry since the introduction of the Finance Bill, the errors were pointed out to us mand, therefore, it is important that we include the amendments in the Bill. We keep all legislation under review. We are very concerned, as the hon. Member will have seen from other measures in the Bill, about tackling tax avoidance, so we will keep an eye out for any misuse of the measures. I commend the amendments and clause 14 to the Committee.
Question put and agreed to.
Clause 14 accordingly ordered to stand part of the Bill.
Amendments made: 1, in schedule 2, page 97, line 24, leave out “performing investment management services”.
This amendment is one of a pair of amendments designed to secure that the definition of investment management profit-sharing arrangements is capable of encompassing arrangements where an entitlement to profits arising in connection with the provision of investment management services by an investment manager arises to another person (such as a company or a trust).
Amendment 2, in schedule 2, page 97, line 25, leave out from “profits of” to end of line 26 and insert
“investments in connection with the provision of investment management services in relation to those investments.”
This amendment is one of a pair of amendments designed to secure that the definition of investment management profit-sharing arrangements is capable of encompassing arrangements where an entitlement to profits arising in connection with the provision of investment management services by an investment manager arises to another person (such as a company or a trust).
Amendment 3, in schedule 2, page 99, line 36, leave out paragraph (c) and insert—
“(c) the fund is 70% controlled by category A investors.”
This amendment is one of a pair of amendments that provide that a fund that is 70% controlled by category A investors meets the diversity of ownership condition.
Amendment 4, in schedule 2, page 99, line 42, leave out “6 April 2020” and insert “1 April 2022”.
This amendment will allow existing funds marketed before the commencement of the QAHC regime to be treated as meeting regulation 75(2) of the Offshore Funds (Tax) Regulations 2009 if certain information has been produced by the fund and has been made available to HMRC.
Amendment 5, in schedule 2, page 100, line 19, at end insert ‘—
(i) as if in subsection (4) of section 450 of that Act, the reference to a loan creditor were to a creditor of the fund in respect of a normal commercial loan (within the meaning it has in paragraph 3),
(ii) as if in that subsection, at the end there were inserted “and for the purposes of subsection (3)(d)”, and
(iii)’
This amendment modifies the way in which the interests of creditors are accounted for in determining whether a fund is “close”.
Amendment 6, in schedule 2, page 100, line 30, leave out sub-paragraph (6) and insert—
“(6) A fund is 70% controlled by category A investors if a category A investor, or more than one category A investor between them, directly or indirectly possesses—
(a) 70% or more of the voting power in the fund or, in the case of a fund that is not a body corporate, an equivalent ability to control the fund,
(b) so much of the fund as would, on the assumption that the whole of the income of the fund were distributed among persons with interests in the fund, entitle that investor or those investors to receive 70% or more of the amount so distributed, and
(c) such rights as would entitle that investor or those investors, in the event of the winding up of the fund or in any other circumstances, to receive 70% or more of the assets of the fund which would then be available for distribution among persons with interests in it.
(6A) For the purposes of sub-paragraph (6)—
(a) a category A investor indirectly possesses something if the investor possesses it through a body corporate or a series of bodies corporate;
(b) the interests of the participants in a category A investor that is a collective investment scheme that is transparent (within the meaning given by paragraph 6(7)) are to be treated as interests of the investor (instead of its participants) if that investor meets the diversity of ownership condition as a result of sub-paragraph (2)(a);
(c) in determining, for the purposes of sub-paragraph (6)(b) or (c), proportions of income or assets persons with an interest in the fund would be entitled to, ignore any interest any person has as a creditor of the fund in respect of a normal commercial loan (within the meaning it has in paragraph 3);
(d) paragraphs 5(5) and 6(5) and (6) apply for the purposes of determining the interests of persons in a fund as they apply for the purposes of determining relevant interests in a QAHC.
(6B) For the purposes of sub-paragraphs (5)(a)(i) and (6A)(c), references to a creditor of a fund are to be treated, in the case of a fund that is a partnership, as not including any creditor who is a partner of that fund.” —(Lucy Frazer.)
This amendment is one of a pair of amendments that provide that a fund that is 70% controlled by category A investors meets the diversity of ownership condition.
Schedule 2, as amended, agreed to.
Clause 15
Real Estate Investment Trusts
Question proposed, That the clause stand part of the Bill.
James Murray
As we have heard, clause 15 and schedule 3 concern real estate investment trusts. The clause and schedule amend the REIT rules and, as the Government have said, seek to remove superfluous restraints and administrative burdens. That includes the removal of the requirement for REIT shares to be admitted to trading in certain circumstances; the amendment of the definition of an overseas equivalent of a UK REIT; the amendment of the “holder of excessive rights” charge to corporation tax; and changes to the rules which ensure that a REIT’s business is primarily focused on its property rental business. The changes take effect from 1 April 2022.
A REIT is a company through which investors can invest in real estate directly. Specific tax rules for UK REITs were introduced in the Finance Act 2006. The regime has proved popular, and the number of UK REITs steadily increased to 92, as of June 2021. Subject to meeting certain relevant conditions, the company may notify Her Majesty’s Revenue and Customs that it is to be treated as a UK REIT. Its property rental profits and gains are then, in broad terms, treated as exempt from corporation tax, subject to ongoing conditions such as the requirement to distribute 90% of its exempt profits as property income distributions, which are in turn treated as property rental income in investors’ hands.
At Budget 2020, the Treasury launched a consultation on the tax treatment of asset holding companies, which included questions about investments in real estate. Responses to the consultation led to the inclusion of proposals for changes to the REIT regime in a second consultation on asset holding companies, which was launched in December 2020. The schedule introduces those changes, which are intended to remove restrictions and administrative burdens where they are no longer necessary. For that reason, we do not oppose the clause or schedule.
Alison Thewliss
I have a question about transparency and how the regime will interact with the Government’s draft Registration of Overseas Entities Bill. I remember some discussion about people moving ownership to trusts and other things, but I am not quite clear how this interacts with that work on transparency.
Lucy Frazer
I am grateful to the hon. Member for Ealing North for indicating that he will not oppose this aspect of the Bill. As he has said, the regime is very popular. I am very happy to get back to the hon. Member for Glasgow Central on her particular question.
Question put and agreed to.
Clause 15 accordingly ordered to stand part of the Bill.
Schedule 3 agreed to.
Clause 16
Film tax relief: films produced to be television programmes
Question proposed, That the clause stand part of the Bill.
James Murray
As we have heard, clause 16 allows films to remain eligible for film tax relief even if those films are no longer intended for theatrical release, provided they are intended for broadcast and meet the four conditions required for high-end television tax relief. The clause is effective for accounting periods ending on or after 1 April 2022. We do not oppose measures that support the entertainment and hospitality industry, particularly given the ongoing challenges brought about by the covid-19 pandemic. Indeed, the measures contained in clause 16 are, in themselves, sensible and appropriate.
More widely, though, we are aware that film tax relief was introduced by the Finance Act 2006, and applied only to films intended to receive theatrical release. That intention must be met at the end of every accounting period. Similarly, high-end television tax relief was introduced by the Finance Act 2013, and allows companies to claim relief on television programmes so long as they meet certain conditions.
The intention to broadcast must be met at the outset of production activities, and is then treated as being met for the remainder of production activities, regardless of the intention for the programme. That raises the possibility that a film that was initially intended for theatrical release may miss out on either relief if the intention changes part-way through production, and it is instead planned to have a television release. This is the case even when such a film would have been eligible for television tax relief if the decision had been made at the very start of production activities. Clause 16 ensures that where a film would have been eligible for high-end television tax relief if not for the date that the broadcast intention was decided on, it will not miss out on that relief, but will be eligible to claim it.
I am sure that the measures in this clause will provide welcome relief to those in the film industry. However, we would like to take this opportunity to ask the Minister about the operation of the film tax relief more widely, which is a debate that our new clause 14 seeks to encourage. Looking back briefly to 2014, the Public Accounts Committee reported on the misuse of tax relief, including the film tax relief, to which it made explicit reference. The report found:
“There is a lack of transparency and accountability for tax reliefs and no adequate system of control, following their introduction….Tax expenditures are often alternatives to spending programmes, but are not managed or evaluated as closely…The Departments do not keep Parliament adequately informed of changes in the costs of reliefs…The Departments are unable to cope with the demands of an increasingly complex tax system, including tax reliefs…The Departments do not respond promptly to unexpected increases in the costs of tax reliefs. Data on movements in the cost of reliefs is not available until tax returns are received, and HMRC takes time to react when it notices a cost increase, as it wants to ensure its response is appropriate. However, a longer elapsed time in reacting to an increase in the cost of a tax relief raises the total amount of public money at risk. In the case of film tax relief, it took ten years to resolve the problems and cost over £2 billion.”
I am aware that the operation of the film tax relief has been changed in recent years, but it is important to ensure that the tax relief continues to be effective. We need the Government to reassure us that they are taking adequate action against the possible misuse of tax reliefs. With that in mind, we tabled new clause 14, which would require the Government to include an assessment of the extent of, and potential for, misuse of the relief provided in clause 16. That assessment must also include an evaluation of the misuse of existing film tax relief more widely.
In relation to that wider potential misuse of existing film tax relief, our new clause requires the Government to set out, first, the number of total and successful enforcement actions taken against companies suspected of misusing film tax relief; secondly, a report of what action has been taken against the promoters of schemes designed to enable to misuse of film tax relief; and thirdly, what plans the Government have for further action against the misuse of film tax relief in the future.
The Minister has set out that she will not accept our new clause, but I ask her to commit to a firm timetable for a review of existing film tax relief that would have a similar effect. There are already reports suggesting that the use of film tax relief is increasing. I remind her that the 2014 Public Accounts Committee report said that
“Departments do not respond promptly to unexpected increases in the costs of tax reliefs.”
If the Minister will not commission a review along the lines that we have suggested, I would be grateful if first she could reassure us on the record that she does not believe that there are significant levels of misuse of film tax relief. Following the point that she made earlier, I would be grateful if she could also explain what the timetable is for the publication of the evaluation of film tax relief. If she does not have that to hand, could she write to me before the recess?
Alison Thewliss
I am more than happy to support what the Government are proposing here. Consistency in these tax reliefs is really important to allow businesses to plan. My constituency particularly has a booming TV and film production sector, with the recent announcement of the BBC Studioworks development at Kelvin Hall in my constituency, and an £11.9 million investment, £7.9 million of which is coming from the Scottish Government to invest in the high quality TV and film production in Glasgow.
It is important to acknowledge the wider picture. This is not just about one tax relief; it is about the wider ecosystem. We have lots of independent production companies in Glasgow Central, and more widely in Glasgow, working away and producing high quality stuff. We have post production as well in companies such as Blazing Griffin, which does high-end stuff for the likes of Netflix. However, I would be doing them all a wee bit of a disservice if I did not mention the significance of Channel 4, and the importance of keeping it in its current model and standing away from the plans to privatise it. That model is what supports the wider ecosystem in the city of Glasgow—the model where independent production companies are able to keep their intellectual property and products, and sell them. That allows all the certainty within the sector to continue.
As I said, the issue is not just about this one tax relief; it is about the Government looking at and acknowledging the wider ecosystem that supports independent production within Glasgow. Companies such as Blazing Griffin have pointed out to me that, were it not for Channel 4, we would not have Netflix. One thing in the ecosystem depends on another, and I urge the Government to look at that in the round when it considers such tax reliefs. Where tax reliefs have been withdrawn or changed in the United States, all that happens is that production companies lift and shift, and go elsewhere. We do not want to risk doing that with such changes as those that the Government propose for Channel 4.
Lucy Frazer
I will briefly respond to the points made by the hon. Member for Ealing North. There are four short points: first, I hope the hon. Member has taken some reassurance from the fact that I mentioned that the current regime is not subject to the same abuse as the historic regime. Secondly, I mentioned that we were doing an independent review of reliefs. Thirdly, he asked me for the timing of that project. It started in May 2021, and we expect the project to be finished and to have written a report before the end of March 2022, for publication later in the year.
The hon. Member also mentioned avoidance quite a lot; we are also interested in tackling avoidance, and we will be coming to, later on in this Committee, a whole raft of measures tackling promoters. I am sure that he will welcome those.
James Murray
Clause 17 will temporarily increase the rate of theatre tax credit for theatrical productions that commence production on or after 27 October 2021. From 27 October 2021 to 31 March 2023, companies will benefit from relief at a rate of 50% or 45% for touring and non-touring productions. From 1 April 2024, the rates of relief will return to the existing levels of 25% and 20% respectively.
Companies qualifying for theatre tax relief can surrender losses in exchange for a payable tax credit. The amount of loss able to be surrendered in a period is dependent on several factors, but will ultimately depend on the amount of core production expenditure that has been incurred in the UK or European Economic Area. A higher rate of relief is also available to theatrical productions that take place at more than one premise and are considered touring productions. I would be grateful if the Minister could clarify how the definition of touring will be applied.
Section 1217K(6) of the Corporation Tax Act 2009 defines touring thus:
“A theatrical production is a ‘touring production’ only if the company intends at the beginning of the production phase—
(a) that it will present performances of the production in 6 or more separate premises, or
(b) that it will present performances of the production in at least two separate premises and that the number of performances will be at least 14.”
Paragraph (b) indicates that if a theatre company puts on 14 performances that were split between two venues—perhaps in the same town, just round the corner from one another—it would be eligible for 5% more tax credits than if it kept all 14 performances in the same venue. Perhaps the Minister could confirm whether that is the case.
As we have heard, clause 18 concerns theatrical production tax relief. It amends part 15C of the Corporation Tax Act 2009 to clarify several areas of legislative ambiguity relating to eligibility for theatre tax relief in relation to theatrical productions where the production phase will begin on or after 1 April 2022. We understand that the amendments are made to narrow the focus of the legislation and, according to the background of its explanatory note, to
“reinforce the original policy intent”.
Subsection (2) requires the intended audience to number at least five people for a production to be considered a “dramatic production”. It also stipulates that for a dramatic piece to qualify as a dramatic production, it must tell
“a story or a number of related or unrelated stories.”
Subsection (3) adds productions made for training purposes to the list of productions that are not regarded as theatrical and do not qualify for relief.
Subsection (4) amends the commercial purpose condition in section 1217GA of the 2009 Act so that a performance will not meet the condition unless it is separately ticketed and such ticketing is expected to make up a significant proportion of the performance’s earnings. A ticket may cover things besides admission to the performance, so long as such things are incidental to the performance and it is possible to apportion the ticket price between the performance and anything else included in the price. The subsection additionally clarifies that for a performance to meet the commercial purpose condition by being educational, it must be provided mainly to educate the audience.
As we have heard, clause 19 provides a temporary increase to orchestra tax credit. It temporarily increases the rate of orchestra tax relief for concerts or concert series that commence production on or after 27 October 2021. From 27 October 2021 to 31 March 2023, companies will benefit from relief at a rate of 50%. From 1 April 2023 to 31 March 2024, the rate of relief will be set at 35%. From 1 April 2024, the rate of relief will return to its existing level of 25%.
Companies qualifying for orchestra tax relief can surrender losses in exchange for a payable tax credit. The amount of loss that can be surrendered in a period is dependent on several factors, but ultimately it depends on the amount of core production expenditure that has been incurred in the UK and the European Economic Area. This temporary rate rise is also being introduced to theatre tax relief, in clause 17, and museums and galleries exhibition tax relief in clause 21. It allows companies to claim a larger tax credit and is designed to support the industries as they recover from the adverse economic impact of the covid-19 pandemic.
Orchestral productions are a tremendously important cultural asset in this country, and we are pleased to support the clause, which provides additional support to a cultural industry that has been hit hard by the pandemic. However, will the Minister outline what measures are in place to support musicians of other genres, or who perform in non-orchestral configurations? This is a welcome relief for orchestras, but other musical groups could be left out.
As we have heard, clause 20 pertains to tax relief for orchestras. This clause amends part 15D of the Corporation Tax Act 2009 to clarify several areas of legislative ambiguity within orchestra tax relief. These changes have effect in relation to concerts or concert series where the production process begins on or after 1 April 2022, and they are comparable to the changes concerning theatre productions in clause 18, in so far as the Bill clarifies that relief is not applicable to orchestral productions that take place for training purposes. It amends the Corporation Tax Act so that a concert will not meet the definition unless it is separately ticketed and such ticketing is expected to make up a significant proportion of the performance’s earnings.
Those are uncontroversial provisions that we do not oppose, because they reduce the risk of the tax relief being misused and maintain the spirit in which the legislation was originally developed. However, we note the Chartered Institute of Taxation’s concern that orchestras that made a series election before the Budget—for example, an orchestra that made a series election in September for its whole annual season—would appear to lose out on the higher rate of relief for their entire season. That is perceived to be unfair, and we would welcome clarity over whether that is the Government’s intention.
Clause 21 provides a temporary increase to the rate of relief afforded to museums and gallery exhibitions that commence production on or after 27 October 2021. From 27 October 2021 to 31 March 2023, companies will benefit from relief at a rate of 50% or 45% for touring and non-touring exhibitions respectively. From 1 April 2023 to 31 March 2024, the rates of relief will be set at 35% and 30%. From 1 April 2024, the rates of relief will return to their existing levels of 25% and 20%.
Companies qualifying for this relief can surrender losses in exchange for a payable tax credit. The amount of loss that can be surrendered in a period is dependent on several factors, but it ultimately depends on the amount of core production expenditure that has been incurred in the UK and European Economic Area. We do not oppose the measure, because it relates to another sector that has been hurt by the pandemic and that we want to see back on its feet, providing the best educational and cultural enrichment that it can to the British people.
However, will the Minister clarify where world heritage sites fit into the legislation, and whether they could be considered museums or gallery exhibitions? According to UNESCO, the UK and Northern Ireland have 33 world heritage sites: 28 cultural, four natural and one mixed.
Finally, clause 22 concerns the aforementioned tax relief to museums and gallery exhibitions, clarifying some legislative ambiguities and amending criteria for primary production companies. Those amendments have effect in relation to exhibitions where the production stage begins on or after 1 April 2022. The relief was introduced with a sunset clause and was due to expire from 1 April next year, but this clause extends the relief for a further two years. Any expenditure incurred after 1 April 2024 will not qualify for relief unless there is a further extension.
As we can see, subsection (1) amends the definition of an exhibition so that a public display of an object is not an exhibition if it is subordinate to the use of that object for another purpose. For example, if a historic passenger train offers rides between two towns, although the train may have historical or cultural significance, its main purpose is to provide passenger transport. This does not preclude the possibility of there being an exhibition on board the train.
Finally, and more broadly, we are aware of concerns from within the industry regarding productions that straddle the commencement dates of these reliefs. For each relief, the increased rate applies only to productions where the production stage for the exhibition began on or after the Budget on 27 October 2021, when the change was announced. So, a production that received the green light on 26 October, or earlier, would not gain the benefit of the increased rate, however long it ran for after the commencement date for the increased rate. We understand there are those in the sector who perceive that as harsh and arbitrary, and we welcome the Minister’s thoughts on the matter.
Alison Thewliss
Of course, I support the proposed tax credits. They will be a useful part of the picture of support for theatres, museums and orchestras, of which there are many in my constituency of Glasgow Central—which is, of course, the best constituency in the country, as I am sure everyone would agree. We have the Royal Scottish National Orchestra, the BBC Scottish Symphony Orchestra and Scottish Ballet, as well as Tron Theatre company and the Citizens Theatre company. These proposals may be of assistance to them, so I ask the Minister what communication has been put out to the sector to ensure that it is aware of the relief and taking it up as required.
I share the concerns expressed by the hon. Member for Ealing North, and I, too, seek answers from the Minister to the questions that the hon. Gentleman asked. It strikes me that many of these proposals provide assistance for productions of some kind, but that misses the other side of the equation. It is good to support companies, but if the venues and theatres in which they wish to perform go bust because they do not have the support that they need, that will not solve the problems that the companies have faced for the past year as a result of the pandemic. I urge the Minister to look at support for the sector more widely.
Many who work in the sector—in orchestras and in theatres, behind the scenes and on the stage—are freelancers, and many have received no support whatsoever from the Government during the pandemic. They have faced a very difficult time, and the Government need to resolve that part of the equation. They could perhaps do so by looking at extending the VAT relief that they introduced, as the SNP has called for.
We were very glad that the Government brought in the reduction in the rate of VAT, but it would be useful to see that continued beyond the cut-off in April next year. That would give a sector that has faced such a difficult time a bit of extra support into next year. It does not make much sense to me to cut that off, and not to incentivise people to go out and make use of the theatres and music venues we all have in our constituencies.
The sector has had a very difficult time. The proposed tax credits are useful, but we need to look at the wider picture. If there is no venue in which to perform or to showcase an orchestra, ballet, theatre production or pantomime, because those venues have gone bust and no longer exist, the Government are missing a trick. It is important that we support the venues and those who work in the sector, wherever that is, and that we look at the wider picture, rather than at a narrow bracket of tax reliefs.
Lucy Frazer
The hon. Member for Ealing North asked about world heritage sites. The answer to his question is that a world heritage site would be considered to be a site of cultural significance. It would be considered as an exhibition and would qualify, so long as it is maintained by a charity or local authority.
The hon. Gentleman recognised that those who had commenced productions before 27 October would not qualify for the relief. He is right about that, although we have doubled relief until 2023 and increased it until 2024. Productions that started before the announcement have been able to benefit from the normal rates of relief and the comprehensive package of support provided for the cultural sector over the pandemic. They will continue to benefit from relief at the 2020-21 rates. It is important, and we have made it clear, that these proposals relate to new activity, because it is new activity that we want to support through this particular relief.
The hon. Gentleman also asked about touring and musicians. HMRC has recently issued further guidance where industry has asked for it, in relation to the interpretation of the legislation. I will get back to him about those two points.
The hon. Member for Glasgow Central made a few points; I am afraid I must challenge her on her statement that Glasgow Central is the best constituency in the country. The best constituency is, of course, South East Cambridgeshire—fortunately, no one will have an opportunity to respond to that. She made an important point about communication. The Chancellor mentioned these reliefs in the Budget statement and they were included in all the communications about it at the time, which were highly publicised. The hon. Lady makes an important point, however, and I will continue to ensure that when we make reliefs, those who qualify for them are aware that they do. We are doing quite a lot of work on how to spread the message more broadly to enable companies to take up the reliefs that the Government offer.
Alison Thewliss
The point is that large production companies will have accountants who will know what those companies are eligible for, but smaller companies might not even be aware of what is available because they are too small to fill in the paperwork. They may need extra support to do so. Anything the Government could offer in that regard would be useful.
Lucy Frazer
That is a valuable point. I know in my constituency that small organisations got a variety of grants from the Arts Council and were able to access those reliefs, but I will discuss that point further with my officials. I thought the hon. Lady might want to intervene on the question of which constituency is the best in the country.
Lucy Frazer
I commend the clauses to the Committee.
Question put and agreed to.
Clause 17 accordingly ordered to stand part of the Bill.
Clauses 18 to 22 ordered to stand part of the Bill.
Ordered, That further consideration be now adjourned. —(Alan Mak.)
Finance (No. 2) Bill (First sitting)
Debate between Lucy Frazer and Alison ThewlissTuesday 14th December 2021
(2 years, 4 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 14 December 2021 - (14 Dec 2021)
James Murray
As we have heard, the clause concerns qualifying asset holding companies, and sits alongside schedule 2. The aim of the clause, we understand, is to recognise certain circumstances where intermediate holding companies are used only to facilitate the flow of capital, income and gains between investors and underlying investments to tax investors, broadly as if they had invested in the underlying assets, and to enable the intermediate holding companies to pay tax that is proportionate to the activities they perform.
At Budget 2020, the Government announced that they would carry out a review of the UK funds regime, covering tax and relevant areas of regulation. The review started with a consultation on the tax treatment of asset holding companies in alternative fund structures, also published at Budget 2020. The Government responded to that consultation in December 2020, launching a second-stage consultation on the detailed design features of a new regime for asset holding companies. The Government’s response to that consultation was published on 20 July 2021.
The clause and schedule 2 introduce the new regime. We understand that the purpose of the measures is to deliver a proportionate and internationally competitive tax regime for qualifying asset holding companies that will remove barriers to the establishment of such companies in the UK. The Government have said that the new regime will include the following key features: eligibility criteria to limit access to the intended users; tax rules to limit the qualifying asset holding company’s tax liability to an amount that is commensurate with its role; and rules for UK investors to ensure that they are taxed so far as possible as if they had invested in the underlying assets directly.
We understand that the eligibility criteria will ensure that the asset holding companies may only be used as part of investment structures where funds are managed for the benefit of a broad pool of investors or beneficiaries. An asset holding company cannot carry out other activities, including trading, to any substantial extent. The tax benefits arising from asset holding company status apply only in relation to qualifying investment activity. The tax treatment of any limited trading activity or any non-qualifying investment activity that is carried on by an asset holding company will not be affected by the company’s status as an asset holding company.
We note that the Government have tabled six amendments to schedule 2, which accompanies the clause. Amendments 1 and 2 seek to pin down the definition of investment management profit-sharing arrangements. According to the explanatory statement, that is to ensure that the legislation is capable of encompassing arrangements in which an entitlement to profits arising in connection with the provision of investment management services by an investment manager arises to another person, such as a company or a trust.
Amendments 3 and 6 provide that a fund that is 70% controlled by category A investors meets the diversity of ownership condition. Amendment 4 seeks to allow existing funds marketed before the commencement of the qualifying asset holding company regime to be treated as meeting regulation 75(2) of the Offshore Funds (Tax) Regulations 2009 if certain information has been produced by the fund and has been made available to Her Majesty’s Revenue and Customs. Amendment 5 modifies the way in which the interests of creditors are accounted for in determining whether a fund is closed. We will not be opposing clause 14 or the Government’s amendments to it.
Alison Thewliss
I am a wee bit concerned that the Government have brought these amendments so late in the day. I appreciate that they have brought them now, rather than seeking to come back and amend legislation further down the road. That is something, I suppose. Does the Minister intend to review this legislation, and on what timescale? I am a wee bit worried about the letter we received yesterday, which said that, as originally drafted, the legislation includes some inconsistencies with wider tax rules and within the regime’s eligibility criteria. Given those worries and these amendments, I would like some reassurance from the Minister that the Government are going to keep an eye on this legislation to make sure that it is not exploited or used in the way that it is not intended to be. We need to make sure that people are paying the tax that they ought to be and that the legislation is not used as some kind of dodge.
Lucy Frazer
I welcome the lack of opposition to these clauses, which will support UK growth, by the hon. Member for Ealing North. The hon. Member for Glasgow Central made a point about the fact that the Government have made amendments late in the day. I reassure her that they are technical changes. Following engagement with the industry since the introduction of the Finance Bill, the amendments required were pointed out to us and, therefore, it is important that we include the amendments in the Bill. We keep all legislation under review. We are very concerned, as the hon. Member will have seen from other measures in the Bill, about tackling tax avoidance, so we will keep an eye out for any misuse of the measures. I commend the amendments and clause 14 to the Committee.
Question put and agreed to.
Clause 14 accordingly ordered to stand part of the Bill.
Amendments made: 1, in schedule 2, page 97, line 24, leave out “performing investment management services”.
This amendment is one of a pair of amendments designed to secure that the definition of investment management profit-sharing arrangements is capable of encompassing arrangements where an entitlement to profits arising in connection with the provision of investment management services by an investment manager arises to another person (such as a company or a trust).
Amendment 2, in schedule 2, page 97, line 25, leave out from “profits of” to end of line 26 and insert
“investments in connection with the provision of investment management services in relation to those investments.”
This amendment is one of a pair of amendments designed to secure that the definition of investment management profit-sharing arrangements is capable of encompassing arrangements where an entitlement to profits arising in connection with the provision of investment management services by an investment manager arises to another person (such as a company or a trust).
Amendment 3, in schedule 2, page 99, line 36, leave out paragraph (c) and insert—
“(c) the fund is 70% controlled by category A investors.”
This amendment is one of a pair of amendments that provide that a fund that is 70% controlled by category A investors meets the diversity of ownership condition.
Amendment 4, in schedule 2, page 99, line 42, leave out “6 April 2020” and insert “1 April 2022”.
This amendment will allow existing funds marketed before the commencement of the QAHC regime to be treated as meeting regulation 75(2) of the Offshore Funds (Tax) Regulations 2009 if certain information has been produced by the fund and has been made available to HMRC.
Amendment 5, in schedule 2, page 100, line 19, at end insert ‘—
(i) as if in subsection (4) of section 450 of that Act, the reference to a loan creditor were to a creditor of the fund in respect of a normal commercial loan (within the meaning it has in paragraph 3),
(ii) as if in that subsection, at the end there were inserted “and for the purposes of subsection (3)(d)”, and
(iii)’
This amendment modifies the way in which the interests of creditors are accounted for in determining whether a fund is “close”.
Amendment 6, in schedule 2, page 100, line 30, leave out sub-paragraph (6) and insert—
“(6) A fund is 70% controlled by category A investors if a category A investor, or more than one category A investor between them, directly or indirectly possesses—
(a) 70% or more of the voting power in the fund or, in the case of a fund that is not a body corporate, an equivalent ability to control the fund,
(b) so much of the fund as would, on the assumption that the whole of the income of the fund were distributed among persons with interests in the fund, entitle that investor or those investors to receive 70% or more of the amount so distributed, and
(c) such rights as would entitle that investor or those investors, in the event of the winding up of the fund or in any other circumstances, to receive 70% or more of the assets of the fund which would then be available for distribution among persons with interests in it.
(6A) For the purposes of sub-paragraph (6)—
(a) a category A investor indirectly possesses something if the investor possesses it through a body corporate or a series of bodies corporate;
(b) the interests of the participants in a category A investor that is a collective investment scheme that is transparent (within the meaning given by paragraph 6(7)) are to be treated as interests of the investor (instead of its participants) if that investor meets the diversity of ownership condition as a result of sub-paragraph (2)(a);
(c) in determining, for the purposes of sub-paragraph (6)(b) or (c), proportions of income or assets persons with an interest in the fund would be entitled to, ignore any interest any person has as a creditor of the fund in respect of a normal commercial loan (within the meaning it has in paragraph 3);
(d) paragraphs 5(5) and 6(5) and (6) apply for the purposes of determining the interests of persons in a fund as they apply for the purposes of determining relevant interests in a QAHC.
(6B) For the purposes of sub-paragraphs (5)(a)(i) and (6A)(c), references to a creditor of a fund are to be treated, in the case of a fund that is a partnership, as not including any creditor who is a partner of that fund.” —(Lucy Frazer.)
This amendment is one of a pair of amendments that provide that a fund that is 70% controlled by category A investors meets the diversity of ownership condition.
Schedule 2, as amended, agreed to.
Clause 15
Real Estate Investment Trusts
Question proposed, That the clause stand part of the Bill.
Alison Thewliss
I have a question about transparency and how the regime will interact with the Government’s draft Registration of Overseas Entities Bill. I remember some discussion about people moving ownership to trusts and other things, but I am not quite clear how this interacts with that work on transparency.
Lucy Frazer
I am grateful to the hon. Member for Ealing North for indicating that he will not oppose this aspect of the Bill. As he has said, the regime is very popular. I am very happy to get back to the hon. Member for Glasgow Central on her particular question.
Question put and agreed to.
Clause 15 accordingly ordered to stand part of the Bill.
Schedule 3 agreed to.
Clause 16
Film tax relief: films produced to be television programmes
Question proposed, That the clause stand part of the Bill.
James Murray
As we have heard, clause 16 allows films to remain eligible for film tax relief even if those films are no longer intended for theatrical release, provided they are intended for broadcast and meet the four conditions required for high-end television tax relief. The clause is effective for accounting periods ending on or after 1 April 2022. We do not oppose measures that support the entertainment and hospitality industry, particularly given the ongoing challenges brought about by the covid-19 pandemic. Indeed, the measures contained in clause 16 are, in themselves, sensible and appropriate.
More widely, though, we are aware that film tax relief was introduced by the Finance Act 2006, and applied only to films intended to receive theatrical release. That intention must be met at the end of every accounting period. Similarly, high-end television tax relief was introduced by the Finance Act 2013, and allows companies to claim relief on television programmes so long as they meet certain conditions.
The intention to broadcast must be met at the outset of production activities, and is then treated as being met for the remainder of production activities, regardless of the intention for the programme. That raises the possibility that a film that was initially intended for theatrical release may miss out on either relief if the intention changes part-way through production, and it is instead planned to have a television release. This is the case even when such a film would have been eligible for television tax relief if the decision had been made at the very start of production activities. Clause 16 ensures that where a film would have been eligible for high-end television tax relief if not for the date that the broadcast intention was decided on, it will not miss out on that relief, but will be eligible to claim it.
I am sure that the measures in this clause will provide welcome relief to those in the film industry. However, we would like to take this opportunity to ask the Minister about the operation of the film tax relief more widely, which is a debate that our new clause 14 seeks to encourage. Looking back briefly to 2014, the Public Accounts Committee reported on the misuse of tax relief, including the film tax relief, to which it made explicit reference. The report found:
“There is a lack of transparency and accountability for tax reliefs and no adequate system of control, following their introduction….Tax expenditures are often alternatives to spending programmes, but are not managed or evaluated as closely…The Departments do not keep Parliament adequately informed of changes in the costs of reliefs…The Departments are unable to cope with the demands of an increasingly complex tax system, including tax reliefs…The Departments do not respond promptly to unexpected increases in the costs of tax reliefs. Data on movements in the cost of reliefs is not available until tax returns are received, and HMRC takes time to react when it notices a cost increase, as it wants to ensure its response is appropriate. However, a longer elapsed time in reacting to an increase in the cost of a tax relief raises the total amount of public money at risk. In the case of film tax relief, it took ten years to resolve the problems and cost over £2 billion.”
I am aware that the operation of the film tax relief has been changed in recent years, but it is important to ensure that the tax relief continues to be effective. We need the Government to reassure us that they are taking adequate action against the possible misuse of tax reliefs. With that in mind, we tabled new clause 14, which would require the Government to include an assessment of the extent of, and potential for, misuse of the relief provided in clause 16. That assessment must also include an evaluation of the misuse of existing film tax relief more widely.
In relation to that wider potential misuse of existing film tax relief, our new clause requires the Government to set out, first, the number of total and successful enforcement actions taken against companies suspected of misusing film tax relief; secondly, a report of what action has been taken against the promoters of schemes designed to enable to misuse of film tax relief; and thirdly, what plans the Government have for further action against the misuse of film tax relief in the future.
The Minister has set out that she will not accept our new clause, but I ask her to commit to a firm timetable for a review of existing film tax relief that would have a similar effect. There are already reports suggesting that the use of film tax relief is increasing. I remind her that the 2014 Public Accounts Committee report said that
“Departments do not respond promptly to unexpected increases in the costs of tax reliefs.”
If the Minister will not commission a review along the lines that we have suggested, I would be grateful if first she could reassure us on the record that she does not believe that there are significant levels of misuse of film tax relief. Following the point that she made earlier, I would be grateful if she could also explain what the timetable is for the publication of the evaluation of film tax relief. If she does not have that to hand, could she write to me before the recess?
Alison Thewliss
I am more than happy to support what the Government are proposing here. Consistency in these tax reliefs is really important to allow businesses to plan. My constituency particularly has a booming TV and film production sector, with the recent announcement of the BBC Studioworks development at Kelvin Hall in my constituency, and an £11.9 million investment, £7.9 million of which is coming from the Scottish Government to invest in the high quality TV and film production in Glasgow.
It is important to acknowledge the wider picture. This is not just about one tax relief; it is about the wider ecosystem. We have lots of independent production companies in Glasgow Central, and more widely in Glasgow, working away and producing high quality stuff. We have post production as well in companies such as Blazing Griffin, which does high-end stuff for the likes of Netflix. However, I would be doing them all a wee bit of a disservice if I did not mention the significance of Channel 4, and the importance of keeping it in its current model and standing away from the plans to privatise it. That model is what supports the wider ecosystem in the city of Glasgow—the model where independent production companies are able to keep their intellectual property and products, and sell them. That allows all the certainty within the sector to continue.
As I said, the issue is not just about this one tax relief; it is about the Government looking at and acknowledging the wider ecosystem that supports independent production within Glasgow. Companies such as Blazing Griffin have pointed out to me that, were it not for Channel 4, we would not have Netflix. One thing in the ecosystem depends on another, and I urge the Government to look at that in the round when it considers such tax reliefs. Where tax reliefs have been withdrawn or changed in the United States, all that happens is that production companies lift and shift, and go elsewhere. We do not want to risk doing that with such changes as those that the Government propose for Channel 4.
Lucy Frazer
I will briefly respond to the points made by the hon. Member for Ealing North. There are four short points: first, I hope the hon. Member has taken some reassurance from the fact that I mentioned that the current regime is not subject to the same abuse as the historic regime. Secondly, I mentioned that we were doing an independent review of reliefs. Thirdly, he asked me for the timing of that project. It started in May 2021, and we expect the project to be finished and to have written a report before the end of March 2022, for publication later in the year.
The hon. Member also mentioned avoidance quite a lot; we are also interested in tackling avoidance, and we will be coming to, later on in this Committee, a whole raft of measures tackling promoters. I am sure that he will welcome those.
Alison Thewliss
Of course, I support the proposed tax credits. They will be a useful part of the picture of support for theatres, museums and orchestras, of which there are many in my constituency of Glasgow Central—which is, of course, the best constituency in the country, as I am sure everyone would agree. We have the Royal Scottish National Orchestra, the BBC Scottish Symphony Orchestra and Scottish Ballet, as well as Tron Theatre company and the Citizens Theatre company. These proposals may be of assistance to them, so I ask the Minister what communication has been put out to the sector to ensure that it is aware of the relief and taking it up as required.
I share the concerns expressed by the hon. Member for Ealing North, and I, too, seek answers from the Minister to the questions that the hon. Gentleman asked. It strikes me that many of these proposals provide assistance for productions of some kind, but that misses the other side of the equation. It is good to support companies, but if the venues and theatres in which they wish to perform go bust because they do not have the support that they need, that will not solve the problems that the companies have faced for the past year as a result of the pandemic. I urge the Minister to look at support for the sector more widely.
Many who work in the sector—in orchestras and in theatres, behind the scenes and on the stage—are freelancers, and many have received no support whatsoever from the Government during the pandemic. They have faced a very difficult time, and the Government need to resolve that part of the equation. They could perhaps do so by looking at extending the VAT relief that they introduced, as the SNP has called for.
We were very glad that the Government brought in the reduction in the rate of VAT, but it would be useful to see that continued beyond the cut-off in April next year. That would give a sector that has faced such a difficult time a bit of extra support into next year. It does not make much sense to me to cut that off, and not to incentivise people to go out and make use of the theatres and music venues we all have in our constituencies.
The sector has had a very difficult time. The proposed tax credits are useful, but we need to look at the wider picture. If there is no venue in which to perform or to showcase an orchestra, ballet, theatre production or pantomime, because those venues have gone bust and no longer exist, the Government are missing a trick. It is important that we support the venues and those who work in the sector, wherever that is, and that we look at the wider picture, rather than at a narrow bracket of tax reliefs.
Lucy Frazer
The hon. Member for Ealing North asked about world heritage sites. The answer to his question is that a world heritage site would be considered to be a site of cultural significance. It would be considered as an exhibition and would qualify, so long as it is maintained by a charity or local authority.
The hon. Gentleman recognised that those who had commenced productions before 27 October would not qualify for the relief. He is right about that, although we have doubled relief until 2023 and increased it until 2024. Productions that started before the announcement have been able to benefit from the normal rates of relief and the comprehensive package of support provided for the cultural sector over the pandemic. They will continue to benefit from relief at the 2020-21 rates. It is important, and we have made it clear, that these proposals relate to new activity, because it is new activity that we want to support through this particular relief.
The hon. Gentleman also asked about touring and musicians. HMRC has recently issued further guidance where industry has asked for it, in relation to the interpretation of the legislation. I will get back to him about those two points.
The hon. Member for Glasgow Central made a few points; I am afraid I must challenge her on her statement that Glasgow Central is the best constituency in the country. The best constituency is, of course, South East Cambridgeshire—fortunately, no one will have an opportunity to respond to that. She made an important point about communication. The Chancellor mentioned these reliefs in the Budget statement and they were included in all the communications about it at the time, which were highly publicised. The hon. Lady makes an important point, however, and I will continue to ensure that when we make reliefs, those who qualify for them are aware that they do. We are doing quite a lot of work on how to spread the message more broadly to enable companies to take up the reliefs that the Government offer.
Alison Thewliss
The point is that large production companies will have accountants who will know what those companies are eligible for, but smaller companies might not even be aware of what is available because they are too small to fill in the paperwork. They may need extra support to do so. Anything the Government could offer in that regard would be useful.
Lucy Frazer
That is a valuable point. I know in my constituency that small organisations got a variety of grants from the Arts Council and were able to access those reliefs, but I will discuss that point further with my officials. I thought the hon. Lady might want to intervene on the question of which constituency is the best in the country.
Lucy Frazer
I commend the clauses to the Committee.
Question put and agreed to.
Clause 17 accordingly ordered to stand part of the Bill.
Clauses 18 to 22 ordered to stand part of the Bill.
Ordered, That further consideration be now adjourned. —(Alan Mak.)
Oral Answers to Questions
Debate between Lucy Frazer and Alison Thewliss(2 years, 5 months ago)
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Alison Thewliss (Glasgow Central) (SNP)
COP26 is under way in my constituency, and the Scottish Government have set an ambitious target to reach net zero by 2045. In contrast, the Minister has completely failed to justify the cut to air passenger duty on internal flights while allowing the already eye-watering price of train tickets to rise again at the turn of the year. This is no pro-Union policy, as the Government like to pretend, because 62% of Scots think that cutting APD is entirely the wrong priority. So, in this week of COP, will the Minister do her bit for the planet and scrap this climate-damaging policy once and for all?
Lucy Frazer
I am grateful to have this opportunity to address the issue of air passenger duty. The hon. Member will know that, as well as cutting the duty on domestic flights, we have increased taxation on long-haul flights. She will also know that domestic flights are contributing less than 1% of the UK’s carbon emissions.
Income Tax (Charge)
Debate between Lucy Frazer and Alison Thewliss(2 years, 6 months ago)
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Alison Thewliss
Does the Minister accept that she is talking about not a real living wage but a minimum wage? The real living wage will be set by the Living Wage Foundation on 15 November. Will she match that?
Lucy Frazer
As the hon. Lady knows, we are on a trajectory to get the national living wage to a higher rate. We need to increase the national living wage, as we have by 6.6% this time round, and it will go up again in time. She will have heard Conservative Members asking how it will work for the businesses that are paying it, so there is a balance to be struck. This Government are progressing on that trajectory to the right path.
We are also reducing the universal credit taper rate from 63% to 55%, which, combined with a £500 increase in the work allowance, means an effective tax cut worth more than £2 billion a year. The hon. Member for Glasgow Central said that that would not help families, so let me give an example: a single mum living in Darlington who works full time on the national living wage would see a £1,200 increase in her pay by December, and that would be £1,900 in April when the new national living wage comes in. My hon. Friend the Member for Harrogate and Knaresborough (Andrew Jones) acknowledged the transformative effect that the increases to the national living wage and the universal credit taper will have for many of his constituents. I am grateful for the constructive comments made by the hon. Member for Ceredigion (Ben Lake) in welcoming the national living wage and public sector pay increases.
With fuel prices at their highest level in eight years, we are not prepared to add to the squeeze on families and small businesses, which is why the Budget freezes fuel duty for the 12th year in a row. The hon. Member for Newport East (Jessica Morden) is wrong to say that we are not supporting people with their gas bills: in addition to the fuel-duty freeze, we have the warm homes discount, which supports 2.2 million people, who receive a £140 rebate on their bills. Like the hon. Member for Cardiff North (Anna McMorrin), the hon. Member for Newport East called for a cut to VAT on fuel bills—something the Labour party calls for—but what would that do? What would happen if we cut VAT on fuel? Such a cut would apply for everyone, across the board, so who would it help as well as the low-paid? It would help the wealthy. I am quite surprised to hear Opposition Members suggest that.
Legislation against Female Genital Mutilation
Debate between Lucy Frazer and Alison Thewliss(5 years, 2 months ago)
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Urgent Questions are proposed each morning by backbench MPs, and up to two may be selected each day by the Speaker. Chosen Urgent Questions are announced 30 minutes before Parliament sits each day.
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Lucy Frazer
As my hon. Friend identifies, this is an important matter. It will come before the House in Government time; as the Chief Whip has indicated, this is a matter that he would like to proceed with, as would the Government.
Alison Thewliss (Glasgow Central) (SNP)
FGM is a violation of human rights. Data released over the weekend showed that in the past two years medics in Scotland’s cities have treated victims of FGM on more than 230 occasions, which is horrific and quite chilling to think of, but we still know very little about the extent to which it is practised despite women being treated who have already suffered FGM.
In Scotland, we have laws in place to tackle this illegal practice and are looking at introducing protection orders also for women and girls at risk, which would give judges the power to prevent a woman or girl believed to be at risk of FGM from being taken out of the country. I know from some of my own constituency cases that that is a very real concern, and some of my constituents have raised it with me. We also have a national action plan to prevent and eradicate FGM.
The more crucial point about this today, however, is that it is disgraceful that this Bill has been blocked. It is becoming increasingly frustrating in this House to have the will of the House circumvented by one male Member, whom such issues will not affect, standing in the way of progress when we want to get on and do good things that would prevent women and girls from being harmed. So what will the Minister do, and will she speak to her colleague the Leader of the House and others to ask for measures to be put in place to prevent this abuse of the House from happening again? The private Member’s Bill system has already been said by the Procedure Committee, on which I serve, to be broken and discredited, and we cannot have faith that Bills will progress if somebody can object to them as easily as we saw last week.
Lastly, the Minister has not given a date for when this Bill will return to the House. I understand that the Leader of the House will make a statement tomorrow in the House after the Prime Minister’s statement; will there be any update on when this will happen then?
Lucy Frazer
I am very pleased to hear of the measures being taken in Scotland, because of course this is not a domestic problem that affects any region in particular but is an international problem. The Home Office is working with all regions to deal with this issue, and I am very pleased that when we brought in the legislation in 2015, we extended the reach of extraterritorial offences to ensure we could help prosecute in relation to cases affecting the UK that were carried out elsewhere.
Upskirting
Debate between Lucy Frazer and Alison Thewliss(5 years, 10 months ago)
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Urgent Questions are proposed each morning by backbench MPs, and up to two may be selected each day by the Speaker. Chosen Urgent Questions are announced 30 minutes before Parliament sits each day.
Each Urgent Question requires a Government Minister to give a response on the debate topic.
This information is provided by Parallel Parliament and does not comprise part of the offical record
Lucy Frazer
As I have mentioned, we will introduce the legislation on Thursday, and Second Reading will take place before the summer recess. The allocation of time will be dealt with in the usual way.
Alison Thewliss (Glasgow Central) (SNP)
I welcome the Government’s response to this issue because it has caused an outcry among people throughout the United Kingdom, and many of my constituents have written asking me to support the Bill. However, notwithstanding the actions of one Member—and others who have acted similarly—the fact that private Members’ Bills are stymied by means of objection is not a new issue. Does the Minister agree that we need to review the procedures of the House, so that the will of the majority of the House, who support good legislation and measures to stop the abuse of women, is recognised and they can see their legislation passed, against the wishes of some people who wish to stop that?
Lucy Frazer
What I am pleased about is that the Government have ensured that this legislation can be brought forward in Government time so that it can be passed and upskirting becomes a criminal offence.
Education (Student Support) (Amendment) Regulations 2015
Debate between Lucy Frazer and Alison Thewliss(8 years, 3 months ago)
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Alison Thewliss
I absolutely agree. Debt and disadvantage are being compounded by the actions of this Government.
Lucy Frazer
I should have declared an interest in that my husband works in the sector. Opposition Members are saying that the measures will disadvantage people and put them off studying as a result. Of course we must encourage all people, particularly the disadvantaged, to go into higher education, but the figures show that disadvantaged people have not been put off going to university by the fees. State school applications have increased from 88% to 89%, and applications from lower socioeconomic groups have increased from 30.6% to 32.6% in recent years, showing that people have not been put off.
Alison Thewliss
We cannot tell exactly what will happen as a result of these further changes and what impact they will have. I speak from my own experience: I graduated from university in 2004, and only since taking this job have I been able to make any impact on paying back the loan that I took out then. That loan was relatively small compared with the loans that we are discussing. How long will people be saddled with debt, and what impact will it have on their life chances and their ability to make progress in their lives? It is an absolutely appalling circumstance, and it is creating an even more indebted generation than the one before it. It is ridiculous. The impact in Scotland will be greater, because we have four-year degrees rather than three-year degrees as in England.
I will quote from the figures sent to me by the NUS in Scotland, which notes that in the academic year 2013-14, a total of £1.59 billion was awarded to applicants in all cohorts. In 2014-15, for post-2012 students, a provisional total of £1.5 billion was awarded. Assuming that that averages out over the three years, it implies an annual reduction of £500 million, contributing to a £50 million reduction in the cash DEL—departmental expenditure limit—available to Scotland per year. For comparison, Student Awards Agency for Scotland figures for 2014 show that the social grant and bursary awards made to Scotland for Scottish-domiciled students totalled £63.6 million. That is a significant impact.
On the impact on Scotland since the introduction of tuition fees in England, when direct cash DEL teaching grants provided by the Higher Education Funding Council in England to English universities were cut by more than £3 billion, assuming a straight consequential, the result is a £300 million reduction in cash DEL available to Scotland. The spending review proposes a further £120 million reduction in the teaching grant by 2019-20, which will result in a consequential to Scotland on top of the impact of these measures, including for nursing students.
The impact on us in Scotland is unfair. Decisions here by a Government we did not vote for and who have one MP in Scotland are resulting in decisions that John Swinney will have to make in our budget, which is decreasing. We have no impact on those decisions, and our Government cannot change them. The decisions taken by this Conservative Government and the previous coalition Government have had the effect of skewing the Scottish budget in further education. The departmental expenditure limit, which includes the teaching and research budget and the grant and bursary budget, has been reduced, and the annually managed expenditure budget, which goes on loans, has increased. We do not want an increase in loans; we want the DEL, but we cannot have that, because decisions here have reduced it. Those decisions affect the Scottish budget, and we must find the money that we want to spend on grants and bursaries from somewhere else within it. That is unfair. We want to support our students. Our students in Scotland deserve support, particularly where, due to demographic differences, they have not yet had the chance to go to university because they are put off by loans.
The point made by a Labour Member about minorities is true as well. It will particularly affect constituencies such as mine in Glasgow, Central, which is probably one of the most ethnically diverse constituencies in Scotland and contains Strathclyde University and Glasgow Caledonian University, as well as bounding on Glasgow University. All those universities could be affected by that decision.