Finance (No. 2) Bill (Fourth sitting)

Victoria Atkins Excerpts

Committee stage
Thursday 18th May 2023 Public Bill Committees

In conclusion, these clauses make valuable changes that incentivise greener choices and maintain efficiency, and will help progress the Government’s climate and environmental objectives. I therefore commend clauses 326 to 329 to the Committee.

[The Financial Secretary to the Treasury (Victoria Atkins)]

Again, out of an abundance of caution, I refer hon. Members to my entry in the ministerial register of interests. I am recused from any consideration, in a ministerial capacity, of this levy.

[James Murray]

As we have heard, clause 326 increases both rates of the landfill tax in line with inflation, rounded to the nearest 5p. The increased rates apply to any disposal of relevant materials made, or treated as being made, at a landfill site in England or Northern Ireland on or after 1 April.

The landfill tax was introduced in 1996. It increased the cost of waste disposal at landfill to encourage waste producers and the waste management industry to switch to a more sustainable way of disposing of waste material. The tax was originally UK-wide, but it was devolved in Scotland from April 2015 and in Wales from April 2018. We will not oppose the clause, but I ask the Minister to fill us in on the wider context of the landfill tax, and specifically landfill tax fraud. In a Backbench Business Committee debate on landfill tax fraud in January, my hon. Friend the Member for Cambridge (Daniel Zeichner) said:

“Landfill tax fraud is a blight on communities across the country. It causes lasting damage to the environment and, of course, deprives the Exchequer of revenue.”—[Official Report, 12 January 2023; Vol. 725, c. 793.]

As Members discussed during that debate, according to His Majesty’s Revenue and Customs’ most recent annual estimate of the tax gap, the gap between landfill tax due and revenue collected in 2021 is £125 million. That is a gap of 17.1%—much higher than the overall tax gap for that year. According to HMRC’s report, the uncertainty rating for the landfill tax gap estimate is high. The then Exchequer Secretary, the hon. Member for South Suffolk (James Cartlidge), conceded in the debate that “non-compliance is high.” In responding to the debate, he set out some details of the operational resource dedicated to landfill tax non-compliance; however, I do not think that he directly answered a question that the shadow Minister, my hon. Friend the Member for Cambridge, put to him: how much of the £125 million tax gap identified in 2021 has been recovered by HMRC? I would be grateful if the current Exchequer Secretary could address that point.

Clause 327 amends the main rates of the climate change levy on gas and other taxable commodities, and the reduced rate percentages on those commodities paid by participants in the climate change agreement scheme from 1 April next year. The climate change levy is a tax on the non-domestic use of gas, electricity, liquefied petroleum gas and solid fuels. Energy-intensive businesses that participate in the climate change agreement scheme run by the Department for Energy Security and Net Zero pay reduced rates expressed as a percentage of the four main rates of the climate change levy on the taxable commodities supplied to them.

We understand that the changes introduced by the clause were announced in the 2022 autumn statement, which froze the electricity rate, and in which it was confirmed that the climate change levy rate for LPG will continue to be frozen until 31 March 2025. It was further announced that the reduced rates of the levy for 2024-25 on gas and other taxable commodities paid by qualifying businesses in the climate change agreement scheme would be amended, so that participants will not pay more under the levy than they would have if the rates had increased in line with the retail price index.

Clause 328 increases the plastic packaging tax in line with the CPI. The plastic packaging tax was introduced in April 2022 to provide an economic incentive for businesses to use recycled plastic in the manufacture of plastic packaging. That was expected to create greater demand for the material, which would in turn stimulate increased recycling and collection of plastic waste, diverting it from landfill or incineration. I understand that the new rate maintains the real-terms value of the incentive to include 30% or more recycled plastic and plastic packaging components in a product by increasing the rate of tax in line with the CPI. As that tax has now been in place for a year, what evaluation have the Government made of it? In particular, can the Minister tell us what impact the tax had in 2022-23, in terms of fulfilling its stated aim of stimulating increased recycling and collection of plastic waste?

Clause 329 makes changes to the aggregates levy exemptions for some types of aggregate from construction sites. We understand that it replaces four exemptions for by-product aggregate arising from certain types of construction with a broader and more general one. The explanatory notes state:

“Following a review of the levy in 2019, some concerns about the operation of the levy were raised by different stakeholder groups.”

I understand that the changes were consulted on in 2021. Draft legislation was published in July 2022 for technical consultation, which has now concluded. On that basis, we will not oppose the clause.

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[The Chair]

With this it will be convenient to discuss the following:

Clause 331 stand part.

That schedule 23 be the Twenty-third schedule to the Bill.

[Victoria Atkins]

Clauses 330 and 331 will make changes to ensure that tax sites in investment zones can benefit from an optional single five-year offer of tax reliefs, identical to those available in freeports. That will mean that businesses within the tax sites can benefit from tax and national insurance reliefs to incentivise investment and reduce the cost of hiring employees.

The Government have set out an ambitious plan for growth and prosperity, rooted in boosting the UK’s potential as an innovation nation, growing strengths in key industries to support national priorities and levelling up communities across the country. At the spring Budget, the Chancellor confirmed that the investment zones programme will catalyse 12 high-potential, knowledge-intensive growth clusters around the UK, including four across Scotland, Wales and Northern Ireland. Each investment zone will bring together local partners to drive the growth of our key future sectors, bringing investment into areas that have traditionally underperformed economically. Each English investment zone will be able to benefit from access to interventions of £80 million over five years, which can be used flexibly between spending and a single, optional five-year tax offer. The changes made by clauses 330 and 331 will enable special tax sites in English investment zones to have access to that single, optional five-year tax offer.

Clause 330 will amend existing legislation to allow investment zone tax sites to be designated via secondary legislation in the same way as freeport tax sites. Clause 331 will allow the sunset date for the investment zones, tax reliefs and special tax sites to be set in that secondary legislation. Businesses investing or hiring new employees in investment zone tax sites will have access to the following tax reliefs: first, a full stamp duty land tax relief for land and buildings bought for commercial use or development for commercial purposes; secondly, a 100% relief from business rates on newly occupied business premises, and certain existing businesses where they expand in investment zone tax sites; and thirdly an enhanced capital allowance, a 100% first-year allowance for companies’ qualifying expenditure on plant and machinery assets for use in tax sites.

Furthermore, there is an enhanced structures and buildings allowance, which provides accelerated relief to allow businesses to reduce their taxable profits by 10% of the cost of qualifying non-residential investment per year, relieving 100% of their cost of investment over 10 years. [Interruption.] It is always delightful to hear from the Speaker.

Finally, there is employer national insurance contributions relief—zero-rate employer national insurance contributions on salaries of any new employee working in the tax site for at least 60% of their time, on earnings up to £25,000 per year, with employer NICs being charged at the usual rate above that level. The relief applies for 36 months per employee. The precise costs of tax sites will vary by site; however, the estimated value of 600 hectares of tax reliefs is £45 million, to be deducted from the overall £80 million funding envelope available to an investment zone.

These clauses will help to enable the investment zones tax offer to operate in special tax sites in England. That will drive private sector activity in investment zone tax sites, which will be key to catalysing the agglomeration of businesses in high-potential, knowledge-based sectors in investment zones across England.

[James Murray]

As we have heard, clause 330 and its associated schedule, schedule 23, will extend the power to designate special tax sites to allow designation of such sites in or connected with investment zones located in Great Britain, while clause 331 makes provision related to the sunset date for tax reliefs available in special tax sites.

We know that these provisions are being introduced effectively to extend the tax reliefs available in freeport tax sites to such sites in or connected with investment zones. We know that those tax reliefs include an enhanced capital allowance for qualifying expenditure and plant machinery; enhanced structures and buildings allowance for qualifying expenditure on non-residential buildings and structures; and a stamp duty land tax relief for certain acquisitions of land. Furthermore, a secondary class 1 national insurance contributions relief for eligible employers on the earnings of eligible employees up to £25,000 per annum, which is available in freeport tax sites, is also being extended to special tax sites in or connected with investment zones.

It is worth being clear that the investment zones with which the Government are currently proceeding are different from the investment zones that the right hon. Member for South West Norfolk (Elizabeth Truss) announced when she was Prime Minister. A significant number of councils put in bids for investment zones when they were announced under her premiership. According to the Association of Local Authority Chief Executives, councils had to spend an average of £20,000 to £30,000 on each bid, and may well have lost staff hours to work on preparing the submissions. Since then, investment zones have been relaunched, but it seems clear that the process for proceeding with the relaunched investment zones is entirely separate from the bidding process in operation for their former incarnation.

I would be grateful if the Minister confirmed how much money is estimated to have been wasted by councils, and indeed by central Government civil servants, on the now-abandoned bidding process for the original incarnation of investment zones. I assume that councils will be left out of pocket with respect to any money that they have spent on bids, and that the Government will not be considering refunding any of those costs, but I would be grateful if the Minister at the very least apologised to taxpayers for the money wasted as a result of this aborted policy.

I know that apologies can be hard to come by. Just last night, in fact, we heard the former Chancellor, the right hon. Member for Spelthorne (Kwasi Kwarteng), brazenly denying the harm that the mini-Budget last autumn caused to family finances. He refused to take responsibility for the impact of soaring rates on mortgage payers across the country and on renters, who are seeing higher costs passed on to them. However, I urge the Minister to do the right thing and take this opportunity to apologise more generally for the harm caused by the mini-Budget last autumn, and indeed by Conservative failures over the past decade.

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[Shaun Bailey (West Bromwich West) (Con)]

I will keep my comments incredibly brief. There is a running theme to the debate. I thank my hon. Friend the Financial Secretary to the Treasury, because my area of the west midlands and the fantastic advocate that we have in Mayor Andy Street secured significant investment as part of the Budget. I put on record my thanks for the £22.5 million investment in Tipton town centre that the Chancellor announced in his Budget statement.

I appreciate what the hon. Member for Wallasey said about the broader parts of this discussion, and I defer to her much more considerable knowledge of the issue. But in terms of the more regional aspects of investment, it is a really important part of the investment package and strategy that we put confidence into our communities and that we say to those who want to bring inward investment into our areas—particularly post-industrial areas such as mine—that there is a case to do so. That £22.5 million, combined with the £60 million transport investment that my right hon. Friend the Chancellor also announced in the Budget as part of his broader package of resources, shows the confidence we need to see. Let us not forget that the west midlands has had a tough time, particularly post pandemic, and our productivity is still 3% down on pre-pandemic levels, so what this investment means for bringing in the inward investment that secures support for industry will be key to addressing the challenges that we face.

The efficacy and efficiency of this investment is key. We need to make sure that we set out tangible metrics of success so that not only the public, but industry can measure the effect of this important investment. As we go forward, particularly on the regional investment front, I ask the Minister and her officials to make sure that dialogue continues so we can make sure that areas such as the west midlands can see the money’s true benefit. It is all well and good talking about abstract figures of billions and millions of pounds, but we need to get across the real-life, tangible results for our constituents. We see that in the increased productivity, increased employment opportunities and upskilling in our areas.

We are very grateful for the investment that we have seen in our region, and I agree somewhat with the broader points raised by the hon. Member for Wallasey, but the key point in this broader debate is tangible, real results on the ground. We can have all the economic debates we want, but it is about delivery for real people.

[Victoria Atkins]

I thank my hon. Friend for his comments, with which I agree. I will not pretend that the Labour party is in politics for different reasons from us. I genuinely believe that most Members of Parliament are in politics to do good for their local residents and for the country as a whole. The point of contention is on how we achieve that.

I am interested in the contrast between the submission of the hon. Member for Ealing North and the submission of the hon. Member for Wallasey. She represents part of Liverpool, and I grew up in the north-west, so I know Liverpool and Manchester very well. I think we would all agree that Liverpool and Manchester have seen a revitalisation over many decades. It takes a village to raise a child, as the old saying goes, and I fully accept that the previous Labour Administration may have done a great deal to help those areas. Going back a long way—a little before my time, perhaps—Lord Heseltine played his part in helping both Liverpool and Canary Wharf. We are trying to revitalise areas in the same way that Liverpool, Manchester and Canary Wharf, and indeed many other areas, have been revitalised.

[Dame Angela Eagle]

The Minister would be very, very unpopular in my constituency if she referred to it as Liverpool. I represent the Wirral, which is over the river, where the Mersey ferry goes when it ferries across the Mersey. People can still listen to Gerry singing “Ferry Cross the Mersey” on the ferry as it goes from Liverpool to the Wirral. I appreciate her comments, but the people of the Wirral regard themselves as a bit different from those in Liverpool.

[Victoria Atkins]

I apologise to the hon. Lady. I meant to refer to the wider area. I thoroughly respect the independence of the good people of the Wirral.

We saw the regeneration and revitalisation of the great city of Liverpool in the wonderful displays at last weekend’s Eurovision celebrations. The regeneration of that great city has, of course, had a much wider ripple effect.

We want to channel the focus and private sector investment to which the hon. Lady rightly refers in revitalising these areas. We want to do that in a way that takes notice and full advantage of the opportunities of the 21st century. The Chancellor set out the sectors that we will concentrate on, because we want to build that investment for the future. There is some extraordinarily good news in our economy in terms of innovative technologies, life sciences and advanced manufacturing. Indeed, I saw in a WhatsApp group only this morning that Rolls-Royce has just unleashed its latest aircraft engine, to great acclaim, here in the UK. That is an extraordinary achievement, which we want replicate across the country. That is the thinking behind investment zones.

When the shadow Minister talked about these exciting proposals, he said nothing about the principles of the investment or the enormous opportunities for communities outside London. I know that he is a Member of Parliament for London, so perhaps he does not have the natural affinity with constituencies outside London that Conservative MPs have, and which I certainly have as a proud Lincolnshire MP. We really want to focus on the excitement for what we can achieve around the rest of the country. The shadow Minister, however, just focuses on process.

[Samantha Dixon]

The point I want to make to you—[Interruption] Sorry, the point I want to make to the Minister is that the areas that have been referenced have mayoral combined authorities. My borough sits in a sub-region of Cheshire and Warrington, which, despite strenuous efforts, has not managed to get those powers devolved to it. Under this Government, it appears to have lost out on an investment zone. Upper-tier authorities were encouraged to submit bids. They did so, but none of them were successful and they have not been given an explanation of why.

[Victoria Atkins]

The work on the new investment zones is ongoing. The Department for Levelling Up, Housing and Communities has begun discussions on hosting investment zones with local partners and the Treasury. That is because we want those areas to operate at a regional level, as has happened in the past with other examples. We want them to be regional examples, as I said. We are looking forward to Scotland, Wales and Northern Ireland having their investment areas. From that, many other measures will flow. Investment zones will also sit alongside freeports. Some investment zones may include freeports, but some freeports may stand independently of them. We want to ensure that we spread innovation and a drive for growth across the country.

[Shaun Bailey]

I want to add to the Minister’s response to the hon. Member for City of Chester. I do not necessarily disagree with some of the hon. Member’s frustrations. However, as a Member who sits within a combined authority area, I know that even when the combined authority is involved in those bids, the upper-tier authority does not just vanish from the picture; it is very much involved. The investment we had came from upper-tier authority submissions that went into the Government. I appreciate what the hon. Member said about the assistance that a combined authority might give, but it is still very much on the upper-tier authority to be in the game with some of this stuff. It does not just vanish with the creation of a combined authority area.

[The Chair]

Order. I call the Minister.

[Victoria Atkins]

I am grateful to my hon. Friend for his intervention. This is about teamwork across the various authorities, and working with local businesses. We are very open to the idea that different investment zones will focus on different sectors and specialisms. We want them to be driven at a local level by people who know their areas best. For example, they know what their local university specialises in, what local manufacturing there may be and so on. This must be driven from local areas.

[Samantha Dixon]

At the risk of repeating myself, the bid put in by my local authority, in partnership with two other upper-tier authorities, was fully cognisant of both the business interests in the sub-region and the HE factor. It was an excellent bid. It vanished, and no explanation has been given. It is extremely frustrating.

[Victoria Atkins]

I will commit to our trying to get an answer to the hon. Lady’s local authority about that. She will appreciate that other bids are run by other Departments. I am not intimately involved in what happens after a bid has been announced, but I will certainly try to get some answers for her. For the future, that is how we can ensure that the investment zones and other investment opportunities best work for local people. I am happy to commit to trying to get her an answer, although it will probably come from another Department.

Question put and agreed to.

Clause 330 accordingly ordered to stand part of the Bill.

Clause 331 ordered to stand part of the Bill.

Schedule 23 agreed to.

Clause 332

Right to repayment of income tax to be inalienable

Question proposed, That the clause stand part of the Bill.

[The Chair]

With this it will be convenient to discuss clauses 333 to 337 stand part.

[Victoria Atkins]

I hope that clause 332 will be of real interest to hon. Members and their constituents. In recent years, there has been a growth in what are commonly called repayment agents. Hon. Members may have received a great deal of correspondence from their constituents about such agents. They are paid tax agents who specialise solely in making claims for income tax relief on behalf of their clients.

Repayment agents can provide a useful service to taxpayers by helping them to claim reliefs or allowances to which they are entitled from HMRC, but last year HMRC received around 2,800 complaints about repayment agents from taxpayers who were unclear about the terms or conditions to which they had signed up. Those taxpayers were unaware that they were claiming through a third party and that they would be charged a fee of up to 50% of the repayment, and they were unaware of the use of assignments. Clause 332 prohibits the assignment of income tax repayments and, where such rights have been assigned, renders the assignment void. It is a consumer protection measure that is aimed at ensuring that taxpayers have better control over their income tax repayments, and I hope that hon. Members will advertise the measure to their constituents.

I turn to clauses 333 to 335. New late payment penalty and interest legislation was approved by Parliament in 2021. The new system is built on fairness and proportionality. In implementing penalty reform and interest harmonisation for VAT, we have identified some minor defects in the legislation that the clauses seek to correct. Clause 333 ensures that, for customers who use the VAT annual accounting scheme, late payment interest will not be charged on interim instalments of VAT that are paid late. Clause 334 ensures that late payment penalties do not apply to instalments payable under the VAT annual accounting scheme, and clause 335 makes a minor technical change to repayment interest on VAT to ensure that the rules operate as intended.

Clause 336 gives HMRC a power to move insurance premium tax administration forms out of secondary legislation and into a public notice. Currently, whenever administration forms need to be updated, a statutory instrument needs to be passed. Moving administration forms out of that regime will enable them to be updated without the need to pass legislation each time an update is required. That will simplify the administration of tax and support HMRC in keeping pace with developments in tax policy and insurance industry practices.

Finally, clause 337 relates to the plastic packaging tax. Currently, late payments in respect of plastic packaging tax by liable businesses and businesses that are held secondarily liable or joint and severally liable incur the same penalties. In contrast, late payments of assessments made by HMRC where a business has failed to submit a return incur different penalties. Clause 337 addresses that anomaly and amends schedule 56 to the Finance Act 2009, so that all late payments of plastic packaging tax incur the same penalties.

[James Murray]

As we heard, clause 332 introduces a new provision that renders void assignments of income tax repayments. We understand that the clause removes the ability of a taxpayer to legally transfer their entitlement to an income tax repayment to a third party such as an agent. It enables HMRC to disregard assignments when issuing income tax repayments, although we understand that it does not remove a taxpayer’s ability to use a non-legally binding nomination where they wish their repayment to be made to a third party. The decision to prohibit assignments seems to have been driven largely by the practices of Tax Credits Ltd, which ultimately led to HMRC having to issue tax refunds directly to 60,000 affected taxpayers.

The changes in the clause have been broadly welcomed by groups including the Low Incomes Tax Reform Group, which pointed out that they mean that taxpayers will no longer be able to assign their rights to an income tax repayment to a third party repayment agent, and that includes taxpayers who have been tricked or misled into doing so by an unscrupulous agent. However, LITRG highlights that issues remain around the nomination process—the alternative way that I mentioned of enabling an agent to receive a payment. It is concerned that the provisions in the clause will not stop taxpayers being tricked or misled into nominating an unscrupulous agent to receive an income tax repayment. LITRG also raised its concern that responsible repayment agents, who were not misusing assignments, may exit the market, given the risk of non-payment for their work. LITRG therefore suggests that HMRC carefully monitors the impact of the provision on taxpayers and their ability to obtain refunds.

I am sure that the Minister will try to assure us that HMRC carefully monitors all its operations, but I would press her to give a more specific commitment in response to LITRG’s concerns. In particular, will she commit to publishing certain metrics proposed by LITRG, such as the total number of refund claims made and the total number made by third party companies?

Clauses 333 to 335 amend legislation governing a new penalty regime and rules on interest for VAT, which the Government announced at spring Budget 2021. As we heard, clause 333 makes two technical changes to the late payment interest rules. The first change ensures that late payment interest does not apply to instalments payable under the VAT annual accounting scheme. The second change means that when HMRC is recovering a VAT payment, the late payment interest start date is the date from which HMRC paid that amount. Clause 334 amends the Finance Act 2021 to ensure that late payment penalties do not apply to instalments payable under the VAT annual accounting scheme. Clause 335 amends the Finance Act 2009 to remove a restriction on the accrual of repayment interest on VAT paid by HMRC to the taxpayer. We will not oppose these clauses.

We understand that clause 336 will broaden existing powers, thereby enabling HMRC to move insurance premium tax forms from secondary legislation and into a public notice by way of a statutory instrument. As the Minister outlined, these technical changes are intended to reduce the administrative burden and make it easier to make administrative updates to the forms without the need for legislation. We also understand that this provides a necessary step for future legislation allowing HMRC to further digitise the insurance premium tax forms. We will not oppose the measure.

Finally, clause 337 amends schedule 56 to the Finance Act 2009, to align inconsistent late payment penalty provisions and ensure that all businesses liable for a late payment penalty in respect of the plastic packaging tax are charged the same penalty, however that liability arises. As we discussed earlier, the plastic packaging tax was introduced from 1 April last year to provide an economic incentive for businesses to use recycled plastic in the manufacture of plastic packaging, which was intended in turn to create greater demand for that material. The clause introduces a technical, administrative change and we will not oppose it.

[Victoria Atkins]

We are pleased that LITRG is one of the many groups that we work closely with. We listen to them very carefully. Indeed, I met the head of the group only last week, I think, to listen to their concerns or thoughts about the tax system.

Just to reassure hon. Members, some people want to nominate tax agents to reclaim their taxes, and we do not want to shut down that route if people want to use it and do so in a fully informed and consenting manner. That is why we are moving from the assignment process through to nominations, and taxpayers will be able to withdraw easily from nominations. The point is that nominations are not permanent; they can be changed if taxpayers should wish to do so.

That is a really critical consumer protection. It is why we have put it in the Bill. It took immediate effect, because we wanted to apply it as soon as possible to prevent taxpayers from being tied into agreements that they could not rescind. Repayment agents were made aware of the Government’s intentions to legislate in January and we would say that they will have had time to adjust to the new forms, if you like, by the time that this Bill receives Royal Assent.

In relation to the other matters, I understand that the Opposition are not challenging them, so I will stop there.

Question put and agreed to.

Clause 332 accordingly ordered to stand part of the Bill.

Clauses 333 to 337 ordered to stand part of the Bill.

Clause 338

Approval of aerodromes

Question proposed, That the clause stand part of the Bill.

[The Chair]

With this, it will be convenient to discuss clauses 339 and 340 stand part.

[Victoria Atkins]

These clauses make changes to strengthen HMRC’s framework for approving aerodromes and excise businesses. Clauses 338 and 339 deal with aircraft carrying passengers or goods into and out of the United Kingdom. These aircraft are required to land at or depart from a designated customs and excise airport, unless permitted by HMRC to use an aerodrome.

There are approximately 540 aerodromes in the UK, which may handle small private jets with passengers and goods under a duty allowance, with very limited movements of freight. The typical requirements placed upon customs and excise airports are not appropriate for these smaller locations.

The Government currently agree the certificate of agreement with aerodrome operators and that provides the permission required to land at these locations. The changes made by these clauses will strengthen the legal basis for the aerodrome approval process. First, clause 338 will allow HMRC to issue approvals to aerodromes for customs purposes, to attach conditions and restrictions to these approvals and to vary or revoke approvals where necessary. Secondly, this clause provides a power to allow HMRC to make regulations about approval conditions for aerodromes and civil penalties for non-compliance with approval conditions and restrictions. Finally, the clause will require operators of unapproved aerodromes to take reasonable steps to ensure that pilots and importers do not depart from or arrive at their aerodrome in contravention of legal requirements on aircraft movements into and out of the United Kingdom.

Clause 339 makes minor and consequential amendments.

Clause 340 concerns excise regimes. Colleagues may be aware that businesses in a several excise regimes operated by HMRC require approval to conduct certain controlled activities. Those include the alcohol wholesaler registration scheme and the raw tobacco approval scheme. Approval is dependent on a business continuing to satisfy certain fit and proper criteria. Where evidence shows that the business is no longer fulfilling that criteria, HMRC may as a last resort revoke its approval. The business may request an internal review of the decision by an independent officer and ultimately has the right to appeal to tribunal and higher courts, in which case a temporary approval may be given so that the business can carry on trading until the matter is finally determined.

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[The Chair]

With this it will be convenient to discuss clause 342 stand part.

[Victoria Atkins]

Clause 341 makes the renewal of certain licences to trade conditional on licence applicants completing tax checks in Scotland and Northern Ireland from 2 October 2023. Clause 342 makes amendments to licensing legislation in Scotland, which are consequential on clause 341

This is an extension of existing principles of conditionality that already apply to renewal applications in England and Wales for taxis and scrap metal dealer licences. The checks will confirm applicants are registered for tax and have notified HMRC of their income tax or corporation tax liability. This will make it harder for traders to operate in the hidden economy. It will also help licence holders get their tax affairs right and give honest businesses confidence that their competitors are playing by the same rules. New licence applicants will be supported and directed to HMRC’s guidance on tax obligations.

[James Murray]

We know that the Finance Act 2021 made provision for tax conditionality connected to the application for certain licences issued in England and Wales, namely licences to drive taxis, licences to drive and operate private-hire vehicles and licences to deal in scrap metal. We understand that clauses 341 and 342 extend the existing tax conditionality legislation to similar licences issued in Scotland and Northern Ireland. In Scotland, this applies to licences to drive taxis and private-hire cars, operate a booking office, and be a metal dealer, while in Northern Ireland it applies to licences to drive taxis.

We will not be opposing these clauses, but I would be grateful to the Minister if she can explain what, if any, additional resources will be made available to HMRC to effectively implement this extension of tax conditionality legislation.

[Victoria Atkins]

I wrote to the hon. Gentleman to set out the amounts and estimates that HMRC has given in its annual report and accounts about the collection protection in compliance yield, and this includes the compliance officers that would be put forward to help reduce the tax gap. They are changes to existing tax exemptions, reliefs and policies that HMRC is already resourced to administer, and it undertakes compliance interventions based on risk, with investigations normally covering multiple taxes and duties, as opposed to narrowly focusing on a single area of taxation. For example, we do not have a compliance team solely dedicated to investigating cases relating to the HGV levy, but if HMRC opened a tax inquiry into an HGV business, this would be one of many areas of taxation that it would look into to ensure that the business is compliant with its total tax obligations.

Question put and agreed to.

Clause 341 accordingly ordered to stand part of the Bill.

Clause 342 ordered to stand part of the Bill.

Clause 343

Definition of “charity” restricted to UK charities

Question proposed, That the clause stand part of the Bill.

[The Chair]

With this it will be convenient to debate clause 344 stand part.

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[The Chair]

With this it will be convenient to consider that schedule 24 be the Twenty-fourth schedule to the Bill.

[Victoria Atkins]

The clause and schedule 24 confirm that income tax and corporation tax exemptions will apply to “thank you” payments made to sponsors under the Homes for Ukraine sponsorship scheme. They also introduce legislation for temporary reliefs from the 15% rate of stamp duty land tax and the annual tax on enveloped dwellings for dwellings owned by companies when they are made available to Ukrainian refugees under the sponsorship scheme.

In March last year, we announced the Homes for Ukraine sponsorship scheme, which supports those who generously open their homes to Ukrainians arriving in the UK. As part of that scheme, sponsors receive a monthly “thank you” payment for housing an individual or family. Without specific legislation, those payments could be subject to tax. Likewise, ATED and the 15% may also have presented barriers to those who wish to provide homes for Ukrainian refugees. We therefore committed to legislate to exempt “thank you” payments from income tax and corporation tax, and to provide temporary reliefs from ATED and the 15% rate of stamp duty. We thank those public-spirited people and I commend the clause to the Committee.

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[Samantha Dixon]

I welcome this measure, and it is really important that these provisions be extended, but will the Minister consider extending them to the Afghan citizens resettlement scheme and the Afghan relocations and assistance policy? This morning, we talked about the number of Afghan refugees who have come to the country under those schemes and are currently accommodated in hotels. The Minister may be aware that charitable organisations, such as Refugees at Home, put sponsors in touch with refugees. Will she ask her officials to consider whether there are opportunities for similarly public-spirited people who are willing to use their accommodation to assist Afghan families in this country?

[Victoria Atkins]

On the case cited by the hon. Member for Ealing North, clearly we would like banks to enter into the public-spirited nature of the Help for Ukraine scheme and other refugee schemes. I will take that issue away and reflect on it with my ministerial compadre in the Treasury, the Economic Secretary, to see what we can do. Of course, the first port of call for anyone in that situation is their constituency MP. We are, I hope, good constituency MPs, and we can draw these matters to banks’ attention and can often get answers that our constituents sadly cannot, but I will take this matter away and mull it over.

The hon. Member for City of Chester mentioned other refugee schemes. I am not aware that the Afghan scheme has quite the same system of payments as the Ukrainian scheme, but I am happy to reflect on that issue. It is probably not a matter for this Bill, but I will think that one over.

Question put and agreed to.

Clause 345 accordingly ordered to stand part of the Bill.

Schedule 24 agreed to.

Clause 346

Abolition of the Office of Tax Simplification

[Douglas Chapman]

I beg to move amendment 2, in clause 346, page 264, line 31, at end insert—

“(9) This section shall not come into force until the Chancellor of the Exchequer has published—

(a) a response to the letter from the Chair of the House of Commons Treasury Committee, dated 2 March 2023, on the closure of the Office of Tax Simplification, and

(b) a statement of his assessment of the costs and benefits of abolishing it.”

This amendment would prevent the Office of Tax Simplification from being abolished until the Chancellor has replied to outstanding correspondence from the Treasury Committee on the subject, and published a cost/benefit analysis of the policy.

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[James Murray]

It is a pleasure to follow my hon. Friend the Member for Wallasey, who spoke to new clause 1. I will address some of the points she raised, as well as amendment 2 and clause 346.

As several Members have said, the Office of Tax Simplification was set up in July 2010. It was an independent office in the Treasury before being placed on a statutory footing by the Finance Act 2016. As we have heard, on 23 September last year, the right hon. Member for Spelthorne (Kwasi Kwarteng) announced that it would be abolished. He said:

“Instead of having a separate arms-length body oversee simplification, the government will embed tax simplification into the institutions of government.”

I will return to that quote in a moment.

As hon. and right hon. Members have said, the policy was announced during the tenure of the previous Prime Minister and is being continued under the current leadership. That makes the abolition of the OTS one of the few elements of the so-called growth plan of that premiership to survive. In an earlier sitting of this Bill Committee, I commented:

“There is at the very least something ironic about a Government who use one clause of a Finance Bill to implement a recommendation of the Office of Tax Simplification and another clause of the same Bill to abolish that institution.”––[Official Report, Finance (No. 2) Public Bill Committee, 16 May 2023; c. 47.]

As was mentioned, the Chartered Institute of Taxation has pointed out that almost every Finance Act of the last decade has included measures that owe their genesis to the OTS.

To return to the reason originally cited for abolishing the OTS, the right hon. Member for Spelthorne said that the Government wanted to

“embed tax simplification into the institutions of government.”

We therefore have great sympathy with amendment 2, which was tabled by the hon. Member for Aberdeen North and has been spoken to. It would at least require the Chancellor to publish an analysis of the cost and benefit of the policy. That has been entirely lacking so far.

If the Government press ahead with abolishing the OTS, it is important that they make clear how they will deliver on their commitment to tax simplification. As was mentioned by my hon. Friend the Member for Wallasey, the Chartered Institute of Taxation sent a joint letter with the Low Incomes Tax Reform Group, the Association of Taxation Technicians, the Institute of Chartered Accountants in England and Wales, and the Institute of Chartered Accountants of Scotland to the Financial Secretary to the Treasury on 5 April. The letter covered identifying the characteristics of tax simplification; ensuring that someone is accountable for the delivery of tax simplification; including simplification declarations in tax information and impact notes; gaining external input on policy design and implementation; seeking feedback from a broad range of stakeholders; ensuring that HMRC and Treasury engagement groups have tax simplification as a standing objective; increasing awareness and improving guidance; allowing time for the development and integration of systems; and adopting a consistent approach across tax regimes.

I would be grateful if the Minister updated us on her response to the specific points set out by the Chartered Institute of Taxation. I also ask her again to set out clearly what costs and benefits, including the cost impact of any proposed new operational arrangements, she believes the abolition of the OTS will have, so that members of the Committee can consider this matter with all the relevant information to hand.

[Victoria Atkins]

For ease and convenience, I will speak to all the amendments and new clauses as well as clause 346. First, I thank the OTS—

[The Chair]

To clarify, we are debating new clause 1, clause 346 and amendment 2.

[Victoria Atkins]

Thank you, Mr Stringer

I thank the members of the Office for Tax Simplification for their contribution to the tax debate over the years. I had the pleasure of meeting some of them just after I was appointed. As I said to them at the time, although the OTS will longer exist once the Bill has passed, their expertise will none the less not be lost to the Government, and I very much look forward to working with its members in different ways over the coming months and years.

The closure of the OTS does not mean that simplifying tax is no longer a priority. In fact, I have set three criteria for tax policy across the Treasury and HMRC: for any document or proposal that I am given, officials must tell me, first, how it meets the expectation that it will make tax fairer; secondly, how it meets the expectation that it will make tax simpler; and, thirdly, how it meets the expectation that it will help to support growth. Having that in the document—I have said this many times, because it was a very early commitment that I put down—has really helped our discussion of those principles when forming tax policy.

As I have mentioned in Budget debates and so on, one of the tensions between those first two criteria is that to make a tax fairer, sometimes we end up making it more complicated—for example, when we talk about tapering schemes, as we are doing in the Bill more widely. We have a scheme whereby we are tapering the rise in corporation tax for businesses that have smaller profits. That makes it more complicated but also fairer, so there is sometimes a trade-off between the interests and wishes of those involved in administering tax or helping taxpayers. With the best will in the world, the OTS, as an arm’s length body set up to comment on simplification alone, could not help with those sorts of balancing acts, which is why the Chancellor has set a clear mandate for officials in the Treasury and HMRC to focus on simplicity in tax policy design as part of our decision-making process.

[Dame Angela Eagle]

There is clearly a difference between the accrued complexity across a particular tax from end to end, which can gather barnacles over time, and a ministerial decision on whether to opt explicitly for a bit more complexity to achieve fairness, which is not a design issue but a political choice. Surely the Office for Tax Simplification was good at looking at the former, while leaving decisions on the latter to those who ought to be making them: the Ministers in charge at the time.

[Victoria Atkins]

Of course, pretty much every decision that comes across my desk is political in nature. Officials have very much taken on board their responsibilities in this regard.

The hon. Member for Ealing North asked about a letter sent to me in April from important tax specialists and organisations. In fact, I met them last week to discuss that very letter. I wanted to meet the organisations to discuss, for example, how to make tax simpler for the lowest paid in society and how we can try to help tax agents to navigate their way around the tax system, because that will help not just taxpayers but also, importantly, HMRC. We really have begun to embed this in our decision-making process.

The reason we want to make this change is that people were concerned that there was a tendency to rely on the OTS to look at simplification because that was its job, and we wanted to bring it very much into the Treasury. Of course, that does not mean that there is never going to be any commentary or analysis or observations about simplicity. My goodness me, I do not think anyone could claim that the world of tax lacks analysis, commentary and often criticism—hopefully constructive—of the tax system. I do not perhaps have quite the same concerns about us being accountable for the political decisions we make.

[Dame Angela Eagle]

Will the Minister give way?

[Victoria Atkins]

If I may, I will make some progress, because I want to deal with new clause 1 and amendment 2, which are important.

On new clause 1, the Chancellor committed to Select Committee colleagues that he is asking officials about tax simplification ahead of every Budget and fiscal event. That will mean that hon. Members will have the opportunity to scrutinise the Government’s progress. In the last Budget, we were able to bring forward measures such as the cash basis for business, which will help enormously by helping more than 4 million sole traders to calculate and pay their income tax. We also introduced the permanent £1 million limit to the annual investment allowance, which will simplify the tax treatment of capital expenditure for 99% of businesses. There are also other measures.

In relation to the point about measuring and metrics in simplification, the Government are genuinely considering how to develop a suite of metrics to measure progress on simplification, working with businesses and representative bodies to ensure that measures reflect the real-world experience of taxpayers.

On amendment 2, it is right that the Chancellor has responded to the Committee, having written on 20 March to explain the rationale for the decision. I hope that helps to answer some of the questions that the hon. Member for Dunfermline and West Fife may have had. I refer again to the point that simplification is a vital principle to bear in mind when looking at the tax system, but it is not the only one. As the hon. Member for Wallasey rightly says, I have to make political decisions on a host of matters.

[Dame Angela Eagle]

I agree about that and I am glad to hear that the Minister is making decisions on a host of issues, although politically we may not always have the same approach to them. She was talking about there being plenty of commentary on tax issues. There always is, but the point about the Office of Tax Simplification was that it was not doing it from a set stance. For example, one will get plenty of commentary from accountants about particular things, and it will tend to be mainly about the interests of the people who use accountants—their clients. That comes from a particular space, as a user of the tax system, or someone that helps comment or advise on the tax system. The Office of Tax Simplification could look at a tax from its start all the way through its process—look at what it was intended to do and whether it would be possible to administer it in a different way, for simplification purposes, without coming from a particular viewpoint. If the OTS goes, I do not think there is anybody out there now that will do that in a neutral way. As such, a lot of the commentary that one gets on the tax system comes from a very particular, interested place, which often gives a bigger voice to small groups of taxpayers than to larger numbers of taxpayers. Is the Minister not worried that by making this decision, she is going to lose objective oversight of a system that is not coming from a biased place, but is looking purely at the criterion of simplicity?

[Victoria Atkins]

That is a fair challenge. It is one that we will meet through the meetings that we are already having, and that I am personally having, with organisations to discuss simplification. Of course we will discuss other matters in the future as well, but that is the No. 1 issue I am raising with those organisations. Also, I am very lucky to be able to work in the Treasury with incredibly talented officials. They do not hold back from giving Ministers of any Government proper advice on the tax system and other parts of the economy, so through all of this—as well as mulling over how we are ourselves able to check the progress we are making, as I say—I am confident that we will be able to make real progress in this area.

[Douglas Chapman]

On that point, I think the Labour party spokesperson, the hon. Member for Wallasey, was also alluding to the fact that it was that element of independence that really made the Office of Tax Simplification stand out from anything that can be provided in-house. That is the real danger of Government Departments, and Governments in general, marking their own homework. That is what it sounds very much like, and that is how it will be seen outside the bubble we inhabit here in Westminster. I sincerely ask the Minister to reconsider her stance and have a really long think about not making that decision just now, but instead doing a full evaluation of the benefits and value of the Office of Tax Simplification to see how it might be either enhanced or supported in future.

[The Chair]

Order. I remind Committee members of the point I made to the hon. Member for Blaydon earlier: interventions should be short. They are getting longer.

[Victoria Atkins]

I do not feel there is anything I can add to what I have already said, but I thank the hon. Gentleman for his intervention.

[The Chair]

In which case, I call the hon. Gentleman to respond to the debate, and ask him to tell me whether he wishes to push the amendment to a Division.

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Question proposed, That the clause stand part of the Bill.

[Victoria Atkins]

Clause 347 makes changes to support the expansion of the dormant assets scheme to a wider range of assets, including insurance assets, pension assets, investment assets, client money assets and security assets such as shares. The Government estimate that up to a further £880 million will be made available for good causes across the UK thanks to the expansion of the scheme to the new sectors.

[James Murray]

As we know, under the UK’s dormant assets scheme, dormant asset funds are transferred to an authorised reclaim fund, Reclaim Fund Ltd. People can reclaim from that fund what they otherwise would have owned if their asset had never been transferred into the scheme. In some cases, it will be the monetary value of the dormant asset that will be transferred into the RFL rather than the original asset.

We understand that clause 347 ensures that the payments from an authorised reclaim fund are treated, for the purposes of income tax, as if they were from a pension asset that was initially transferred. We understand that it also seeks to ensure that, where an asset has been transferred from an authorised reclaim fund and its owner was alive at the time but subsequently dies before the asset has been reclaimed, the owner will be treated for inheritance tax purposes as still owning the original asset. We do not oppose the clause.

Question put and agreed to.

Clause 347 accordingly ordered to stand part of the Bill.

Clause 348

International arrangements for exchanging information

Question proposed, That the clause stand part of the Bill.

[The Chair]

With this it will be convenient to discuss clauses 349 to 352 stand part.

[Victoria Atkins]

Clause 348 introduces technical and administrative changes to four powers used to implement international tax arrangements relating to the exchange of information. Clause 349 introduces a 13-year time limit on funds paid into the Court Funds Office as civil claims that remain unclaimed, after which the right to claim will be extinguished.

Clause 350 clarifies HMRC’s functions regarding payment obligations in relation to individuals and organisations subject to UK financial sanctions. The measure clearly sets out which payments HMRC is prohibited from making in accordance with financial sanctions, namely all payments, repayments and set-offs to or for the benefit of designated persons subject to financial sanctions. Clauses 351 and 352 simply set out the Bill’s legal interpretation and short title in the usual way.

[James Murray]

As we have heard, clause 348 consolidates existing automatic exchange of information powers that allow the Treasury to implement the domestic requirements of certain international instruments, relating to, among other things, the automatic exchange of information between tax authorities. We recognise that the purpose of the consolidation is to create a general power to allow the Treasury to give effect to existing and future international exchange of information instruments. We understand that once the Bill is enacted, the previous powers will be repealed. We do not oppose the clause.

We understand that clause 349 will allow the transfer of moneys that have remained unclaimed in the Courts Fund Office account for many years, despite attempts to trace the beneficiaries and the account titles being available to the public via the unclaimed balances database on gov.uk. We recognise that at present such moneys are being held in perpetuity unless claimed. I also noted that some moneys have apparently been held since 1726. Does the Minister know what rate of interest those moneys have been earning for the last 300 years, and how much money is expected to be earned from that interest at the point of transfer?

Clause 350 defines how HMRC’s payment functions across the taxes, duties and benefits it administers interact with financial sanctions regulations and seeks to ensure that relevant changes to UK financial sanctions regulations are automatically reflected in HMRC’s functions. I understand that subsection (1) prohibits the making of a payment, whether directly or indirectly,

“to or for the benefit of a person who is, at that time, a designated person for the purposes of financial sanctions regulations.”

We will not oppose the clause. However, the fact that subsection (1) is necessary could be seen to imply that payments have in fact been made to, or the benefit of, a person who was at the time

“a designated person for the purposes of financial sanctions regulations.”

Will the Minister confirm whether that was the case, and tell us how many payments have been made to such people, what the total value of such payments was in each of the last 10 years and under which financial sanctions regulations the people involved have been designated? Clauses 351 and 352 relate to the interpretation and short title, and we will not oppose them.

Very briefly, Mr Stringer, may I take this opportunity to thank people? I thank all Ministers and Committee members, particularly my hon. Friends the Members for Wallasey, for City of Chester, for West Lancashire, for Ilford South, for Erith and Thamesmead, and for Blaydon. I thank the Clerks, parliamentary authorities and third parties, including the Chartered Institute of Taxation. I also thank you, Mr Stringer, and of course Ms McVey, who chaired the sitting on Tuesday.

[Victoria Atkins]

The shadow Minister asked about the amount of money that is expected to be paid into the consolidated fund in 2024-25. It is some £50 million. I am afraid that I do not know the interest rate charged in 1726; I obviously have room to improve on that—apologies. I suppose that in an idle moment we may put our minds to it and see whether we can come up with something, but I do not commit to that. I regret that I did not hear the detail of his questions on financial sanctions.

[James Murray]

I thank the Minister for giving way. The fact that clause 350(1) is necessary could be seen to imply that payments have in fact been made

“to or for the benefit of a person who is, at that time, a designated person for the purposes of financial sanctions regulations.”

My question was, if that is the case, will the Minister tell us how many payments have been made to such people, the total value of such payments in each of the last 10 years and which financial sanctions regulations the people involved were designated under?

[Victoria Atkins]

I am in the situation that I find myself in from time to time, which is that, although I am extremely conscious of the desire for transparency, there is still the principle of taxpayer confidentiality. Given the sensitivities of the subject matter, and given that, I suspect, a small group of individuals would be subject to the measure, I regret that I am unable to give those details. I have to give that answer from time to time, and I know that it is frustrating for hon. Members, because I can understand why they want answers. I regret that I cannot assist the hon. Member for Ealing North on this occasion.

Question put and agreed to.

Clause 348 accordingly ordered to stand part of the Bill.

Clause 349 to 352 ordered to stand part of the Bill.

New Clause 1

Reports to Treasury Committee on measures to simplify tax system

“(1) The Treasury must report to the Treasury Committee of the House of Commons on steps taken by the Treasury and HMRC to simplify the tax system in the absence of the Office of Tax Simplification.

(2) Reports under this section must include information on steps to—

(a) simplify existing taxes, tax reliefs and allowances,

(b) simplify new taxes, tax reliefs and allowances,

(c) engage with stakeholders to understand needs for tax simplification,

(d) develop metrics to measure performance on tax simplification, and performance against those metrics.

(3) A report under this section must be sent to the Committee before the end of each calendar year after the year in which section 346 (abolition of the Office of Tax Simplification) comes into force.”—(Dame Angela Eagle.)

This new clause would require the Treasury to report annually to the Treasury Committee on tax simplification if the Office of Tax Simplification is abolished.

Brought up, and read the First time.

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[Douglas Chapman]

I thank the Minister for his response. I have no intention of pursuing this new clause any further, but I hope the Government have taken these views on board and, if those broad and sunlit uplands are still there in their heads, let us make them a reality. I beg to ask leave to withdraw the clause.

Clause, by leave, withdrawn.

Question proposed, That the Chair do report the Bill, as amended, to the House.

[Victoria Atkins]

I thank you, Mr Stringer, for your superb chairmanship of this Committee and Ms McVey for hers. I thank my ministerial colleague, my hon. Friend the Member for Grantham and Stamford, who did very well on his first Bill Committee; it has been a pleasure. I thank all Back-Benchers for lively debates and their attention to these important matters, and those on the shadow Front Bench for their important contributions.

I thank the Doorkeepers—Monty—the Clerks and of course our Hansard reporters, who help to make our words look more polished than perhaps they are in real life. Of course I must also thank the Whips, who have an incredibly difficult job arranging such a huge piece of legislation and have done so with great skill—and I thank them for the wine gums.

Finally, I thank the massive team of officials, primarily in the Treasury, but also in other Government Departments. There is so much work that goes into preparing a Bill for Committee. This is such an important stage of its scrutiny, and we take it very seriously. I offer my sincere thanks to each and every one of the officials who have been kind enough to brief me and my hon. Friend.

[The Chair]

That is quite out of order, but thank you.

Question put and agreed to.

Bill, as amended, accordingly to be reported.