Tax Fairness
Debate between Mel Stride and Mark Reckless(11 years, 1 month ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Mark Reckless
Who can tell with these things? My hon. Friend the Member for Bristol West (Stephen Williams) has given assurances, but the policy proposals that I cited have been submitted to the federal policy committee of his party. It is difficult as an outsider to judge how formal and important that is, but there are clearly Liberal Democrats who are talking about a broader tax on wealth and capital, including on jewellery. I think that would be a mistake.
It is unfortunate that the Opposition with this motion and our friends on the Liberal Democrat Benches have become so focused on the arbitrary sum of £2 million. The Government are doing very good things in raising tax from people who own high-value properties but have not been paying their fair share of tax. The Opposition and the Liberal Democrats seem to want to confine their efforts to rein in tax avoidance to those who own houses worth more than £2 million. I and my Conservative colleagues do not understand why we should be concerned about tax avoidance just when a person’s house is worth more than £2 million.
It is hugely welcome that the Government are bringing in the anti-avoidance measure of a 15% tax when homes that are worth more than £2 million are enveloped into a company, which is generally done for the purposes of tax avoidance. However, I am not entirely clear why we are doing that only for homes worth more than £2 million, except for the fact that that is the arbitrary number that has been chosen by the Liberal Democrats for such taxation. [Interruption.] The Opposition are calling out, but they did nothing about this matter for 13 years. It is a huge improvement that this Government are dealing with tax avoidance using properties worth more than £2 million.
Mark Reckless
If I may, I will continue for a while.
There have been consultation papers and draft legislation on how the anti-avoidance measure will be introduced. There will be self-assessment, so there will be no need for the great costs of revaluing properties. I am sure that the Minister is keen to raise more money, so will he say whether there is any hope that the Government will take action against people who avoid the 5% tax on a property that is worth between £1 million and £2 million by putting it into a company?
Perhaps the Minister will assist me on another point. Where people have enveloped houses into a company there will be an annual charge of between 0.3% and 0.7% of the property’s value, which is welcome. Many of the papers have suggested that the purpose of that is to encourage people—or in this case companies—to de-envelope their properties, and the measure will come in only after 1 April 2013. Do the Government expect stamp duty to be paid on those de-enveloping transactions, so that if the property’s value is more than £2 million there will be a 7% charge, or do they expect the sale to be from a controlled company to the person controlling that company, perhaps at a nominal rate that will not attract stamp duty, in order to recoup some of the avoidance they may have made over previous years? I would be interested to hear the Minister’s response to that.
As well as dealing with tax avoidance on properties under £2 million, I would also like non-residents to make a fairer contribution. I was first alerted to the issue by the Chancellor when in opposition. He said that he found the situation extraordinary, and there was a great deal of resentment when he explained how it worked and about the exemption from capital gains tax for non-residents. I do not understand why a resident of this country must pay capital gains tax on the sale of their property—unless it is their principal residence—yet a non-resident is exempt from that tax.
A huge flow of overseas money has come to this country as people fear the break-up of the eurozone and there is a rush to safety, and much of that has gone into property in central London. We say to people who own those homes, “As long as you don’t live there and you stay overseas, we will give you a tax break and you won’t have to pay capital gains tax.” When we go to Mayfair or parts of Belgravia, it sometimes feels as if not many people are about. We are subsidising and giving a tax break to people as long as they do not live in this country, and I have never understood the purpose of that.
Given that the Labour party did nothing about that situation for 13 years, I was pleased that the Budget and Finance Bill contained measures to extend stamp duty to at least some overseas residents. The Government consultation states:
“The Government announced in the Budget that it will extend the Capital Gains Tax (CGT) regime from April 2013 to gains on the disposal of UK residential property by non-resident non-natural persons, such as companies. The measure creates a more equal treatment in the CGT regime between UK residents and non-residents, and brings the UK’s tax policy in line with that of other countries, many of whom already tax non-residents’ gains.”
If we want an equal regime between UK residents and non-residents, why are we extending CGT only to non-resident, non-natural persons—basically companies? Surely we should also extend it to natural persons who are resident overseas. Other countries are doing that; India and China have made moves in that direction, so why not us? Some industrialised countries do not do it, but none of those have such a pool of property that acts as a free piggy bank for overseas residents. We keep their wealth and capital completely secure in central London yet they pay no capital gains tax on it. Could we perhaps consider going further in that area and look at extending capital gains tax to overseas non-residents who are natural persons, rather than concentrating simply on companies?
I welcome what the Government are doing. The Liberal Democrats refer to a mansion tax on properties worth more than £2 million, but the Government are already doing substantial work to obtain a more proper tax take from such properties and we could look at whether that could go further. Obviously, I do not expect answers about what will be in the forthcoming Budget, but in some areas higher tax would be a good thing. I am not generally in favour of that, but where people avoid tax by putting houses into companies, even if they are worth less than £2 million, we should try to get the proper tax. Where overseas residents are doing nicely by securing capital in the UK but paying very little for the privilege, by taxing the capital gains they make on later sales of those houses it would be welcome to see them paying their share and doing a little to help us close the deficit, which, of course, is the great uniting purpose of the coalition.