Tuesday 14th March 2017
(7 years, 8 months ago)
Commons ChamberFinance Act 2017 Read Hansard Text
18:59 - The House divided: - Ayes: 319 / Noes: 275 - Question accordingly agreed to.
19:14 - The House divided: - Ayes: 309 / Noes: 286 - Question accordingly agreed to.
19:29 - The House divided: - Ayes: 313 / Noes: 276 - Question accordingly agreed to.
This text is a record of ministerial contributions to a debate held as part of the Finance Act 2017 passage through Parliament.
In 1993, the House of Lords Pepper vs. Hart decision provided that statements made by Government Ministers may be taken as illustrative of legislative intent as to the interpretation of law.
This extract highlights statements made by Government Ministers along with contextual remarks by other members. The full debate can be read here
This information is provided by Parallel Parliament and does not comprise part of the offical record
The Secretary of State for Education (Justine Greening)
This Government are about delivering opportunity—the opportunities that matter to ordinary working people up and down this country: the opportunity to work in a skilled, well-paying career; the opportunity to send their children to a good school; and the opportunity to contribute to a shared, fairer society, where everyone is empowered to do their best for their community.
Those ambitions are not too much for us to ask—they are not unreasonable—but the truth is that, for too long, too many people in our country have felt cut off from opportunity. They see doors open for others, but stay closed for them. What they want is the chance to show their worth and reach their potential. This Government want them to reach their potential, too, so we will work with the grain of human nature to spread opportunity to every village, town, city and region in our country and to give everyone a chance to succeed and to contribute to a strong, united nation.
A strong economy is a vital part of that mission. A strong economy provides the careers and jobs that equip people with financial independence, protect them by providing financial security over the course of their life, and fill them with a sense of self-worth—the knowledge that we all have a role and a valued place at the heart of our society. A strong economy is at the heart of how people can contribute to our country as a whole.
This Government are in the business of building a strong economy and creating great careers and jobs—over two million jobs since 2010. This year, there are more people working than ever before. The employment rate for women is at its highest level since records began, with 70% of 16 to 64-year-olds now in work. That represents more than 1 million more women in employment since 2010.
Mrs Maria Miller (Basingstoke) (Con)
Does my right hon. Friend agree that one of the most important things the Government can do is support women returners to work, particularly when we have record numbers of women in the workplace?
Justine Greening
My right hon. Friend is absolutely right. I hope she will welcome the element of the Budget that saw £5 million invested in returnships, specifically looking at how we can help women who have been out of the workplace—often starting and having a family—to go back into it and rebuild their careers. I will come on to that later in my speech.
Mr Barry Sheerman (Huddersfield) (Lab/Co-op)
I believe absolutely that wealth creation is important to give us the resources we need to provide a good education, but is the Secretary of State aware that so many schools have seen cutbacks? We in Huddersfield are the 64th worst-hit area out of 650. We do not feel the affluence she is talking about.
Justine Greening
We have record investment coming into our schools now.
To secure and build a strong economy, we need sustained investment in human capital—the skills, knowledge and technical excellence that drive productivity and growth. It is people who will lift our country, and we are investing in people. We need to do that now more than ever, because we know there is a productivity gap between the UK and other advanced economies, and we know that part of that gap is caused by skills shortages.
Nick Thomas-Symonds (Torfaen) (Lab)
On the issue of human capital, does the Secretary of State agree that it is a mistake by the Government to cut the work allowance under universal credit, which will particularly affect women and deny them work opportunities?
Justine Greening
We cut the taper rate on universal credit at the last autumn statement. As I said, the strong economy that this Government’s policies have helped to create means that more women are now in work than ever before. I was talking about how skills and plugging skills shortages for employers is so important. Top employers and businesses are telling us that the skills they need, particularly in science, technology, engineering and maths, are in too short supply.
Mrs Flick Drummond (Portsmouth South) (Con)
On the point made earlier about women returners, is my right hon. Friend aware that just 5% of women returning to work would generate an extra £750 million in the economy—a very good return?
Justine Greening
Absolutely. Women’s economic empowerment is one of the most powerful levers we have to help drive growth in our economy and, more broadly, around the world over the years ahead.
Looking at how we are going to plug the skills gap, only 10% of adults in our country hold a technical qualification as their highest educational achievement. Germany currently produces twice as many science, engineering and technology technicians. Driving these skills will power innovation and growth and, in turn, our economy. That benefits everyone, so we cannot afford to wait. Other economies have been ahead of us in developing the skills of the future, and this Government are clear that we will not fall further behind. We should recognise that globalisation and automation are changing the modern workplace. Thirty-five per cent. of our existing jobs are at a high risk of being replaced in the next 10 to 20 years, not through competition but by technology.
George Kerevan (East Lothian) (SNP)
The Secretary of State mentions Germany’s lead in training in technical positions. Does she link that in any way with the fact that Germany consistently has a much higher level of corporation tax in order to fund that?
Justine Greening
Germany has its own approach to corporation tax. Ours has been steadily, and dramatically, to reduce it in order to make sure that companies can retain the profits they are making to be able to reinvest in growing their companies. The proof of the pudding is in the substantial and significant job creation that we have seen in our economy, by comparison with many other countries, over recent years. That is why we are able to put money into our public services.
As we prepare to leave the European Union, we will need to be more self-sufficient in our workforces, in our skills and in the training of our young people to set ourselves up for success. We will need new ideas, new jobs and new investment to confidently meet every challenge and grasp the opportunities ahead of us. We want a global Britain strong at home and strong abroad. It is now time for Britain to step up a gear to begin the shift up to the high-skill, high-productivity economy that we can be. This Government are ready to act.
John Mann (Bassetlaw) (Lab)
Is it not a fact that under this Government, while the Secretary of State has been in office, we have fallen two places in the research and development international league tables, behind Slovenia and the Czech Republic?
Justine Greening
The autumn statement saw us provide further investment for R and D. Indeed, the national productivity fund has been set up to make sure that we can fund infrastructure, including R and D, more broadly. However, it is not just through physical infrastructure that our country will be successful—we need to invest in our people and in human capital as well. Through this Budget we are investing in human capital in skills, education and training to create a strong economy that works for everyone.
Justine Greening
If I can make a bit more progress, I will give way.
This Government are rightly focused on apprenticeships because of the huge difference that they can make to individuals, boosting a person’s lifetime earnings by 11% on average. Eighty-three per cent. of apprentices tell us that they believe it is improving their career prospects. This is already making a big difference to individuals. Last year 900,000 people were enrolled in an apprenticeship, which means that more than 3 million people have started an apprenticeship since 2010. They include apprentices such as Adam Sharp, last year’s advanced apprentice of the year, who moved 150 miles to take up a mechanical design apprenticeship in Sellafield and dreams of becoming that nuclear power plant’s chief mechanical engineer; and Becky King, who went to train at the National Physical Laboratory in London straight after college in order to develop her passion for science.
Last week I kicked off National Apprenticeships Week with Barclays in the City. I met young people on apprenticeships at Barclays who were inspiring because they were finding out just how well they could do. Apprenticeships are bringing out the underlying talent of our young people. It is cathartic for them to be able to discover their potential.
Mims Davies (Eastleigh) (Con)
Earlier I met Nationwide representatives from my area keen to support women in getting more maths skills to lead businesses. Recently apprentices from Lloyds met the all-party women in Parliament group. One area where we really need to keep up momentum is with the maths skills that will make sure that our women can lead companies as well. The apprenticeship work at Eastleigh College is doing exactly that in building the basic skills for the gas fitters and plumbers we need—
Madam Deputy Speaker (Natascha Engel)
Order. We are already going to have to impose a time limit of eight minutes on Back Benchers right from the beginning. This debate is very heavily subscribed. If people are going to intervene, they must keep it very brief.
Justine Greening
I pay tribute to the work that my hon. Friend’s local college is doing. She is absolutely right. In order to see a change in the workplace and in careers, we have to start in early education to build the pipeline to make sure that girls, and subsequently women, are going into these careers, which have traditionally often been more male dominated.
This is not just making a difference to the people who are doing apprenticeships; apprenticeships are making a difference to our country. Employers tell us that apprenticeships increase quality and increase productivity, so investing in an apprenticeship pays out for them and their business, and it is paying out for our wider economy. This is only the beginning of our apprenticeship reforms. Next month, we are introducing the apprenticeship levy, which will ensure that by 2020 over £2.5 billion is available to support apprenticeships. Contributing to the levy will mean that employers are, for the very first time, truly fully invested in apprenticeships. This keeps us on track to meet our manifesto commitment of delivering 3 million apprenticeships by 2020.
Apprenticeships will play a key role in delivering the skills that our modern economy needs to level up, but we need to do more to meet the broader challenges that our economy faces. The most successful countries do not just rely on apprenticeships—work-based routes—to get skilled professionals. They also depend on more college-based routes—on technical courses with workplace experience and training as a crucial element. So we will up our game, looking at reforming our technical education system to make it a central plank of how to sustain a growing economy. For decades, our country has neglected technical education, despite the fact that a substantial proportion—over half—of our young people who choose not to go to university take this path. We have never achieved a sustainable strategy because it has never been truly led by employers. We need a strategy that asks businesses what a world-class technical curriculum should look like—that invests in the tools, the teaching and the skills expertise that help young people to navigate the complex web of choices on careers to find the skills and the career that is right for them.
Over many years, we have allowed the technical curriculum to emphasise quantity rather than quality. There are currently around 13,000 separate technical qualifications. In plumbing alone, a young person has the choice of 33 different courses. How on earth are they supposed to know which course is the highest quality, which one is valued by businesses, and which option is the right fit for them? This cannot be right. In recent years, we have made some important steps forward in tightening the requirements for qualifications included in school and college performance tables, but we need to go much further to ensure that technical education is high quality and meets employers’ needs. In place of complexity, this Government are following the advice of Lord Sainsbury and replacing the current system with a streamlined set of just 15 technical skills routes. Each route will be a pathway to skilled employment—from construction to digital, whether bricks and mortar or lines of code—and our standards for each route will be designed and agreed by our best businesses to make sure there is a direct flow through to the skills that our economy needs.
We know that we need investment as well as reform. At the moment, a young person working towards a technical qualification receives a programme of about 600 hours a year, but in countries with the best technical education—Germany, Denmark, the Netherlands, Norway —students train for far more hours per year. If we really are serious about becoming world-class on skills, we need to rival the commitment and investment of the world’s leading countries.
That is why my right hon. Friend the Chancellor announced last Wednesday over half a billion pounds a year of new funding for technical education. It will be used to increase the number of teaching hours for students. As the Sainsbury panel recommended, it will also fund institutions to organise a substantial, high-quality work placement for every technical education student, helping them to apply their skills in the workplace and to prepare for a successful move into employment. In total, this will mean that a student’s programme hours will increase by more than 50%, from 600 hours per year to more than 900. It is no surprise that the CBI has called this Budget a “breakthrough Budget for skills”.
The funding for extra hours will be rolled out alongside the new technical routes, beginning with the first programmes in autumn 2019. Each of the routes will lead to a new certificate, the T-level, which will be a gold standard for technical and professional excellence. The name will remind Members of another prominent qualification, and that is very deliberate. I want there to be no ambiguity whatsoever: this is the most ambitious reform of post-16 education since the introduction of A-levels 70 years ago. The investment announced by my right hon. Friend the Chancellor shows that the Government are committed to making it a success.
Graham Evans (Weaver Vale) (Con)
I am very privileged to have my constituency office based at Sci-Tech Daresbury, which is all about technology, innovation and skills. Will the T-level be significantly stronger than existing technical qualifications?
Justine Greening
The qualification will be stronger on a number of fronts. First, it will have the commitment of, and its design will be led by, employers. Secondly, it will have more hours, so the student will simply have had a more comprehensive programme of education in achieving the T-level. Thirdly, its quality will be much higher, with more time spent in the classroom and, critically, more time spent on a quality work placement with an employer. Once the person finishes the T-level, they will come out of it ready to work and to begin their career with a high-quality qualification that employers truly value. That I why we feel this is such a significant step forward.
Building such a world-class technical education system will not just generate the skills and productivity that are the foundations of a strong economy; it will also spread opportunity and increase social mobility, helping to break the link between a person’s background and where they get to in life. It will be no surprise to the House that many young people from disadvantaged backgrounds are more likely to be on technical courses than their peers, yet such an education has not been at the level that they deserve or that our economy deserves. A report by the Boston Consulting Group and the Sutton Trust suggests that greater social mobility could boost our economy by a staggering £140 billion every year. Different young people have different talents, and if we can successfully put technical education on a par with academic routes, it will not just be good for those young people, but it will be exactly what our economy needs.
Improving the quality of technical education will boost the life chances and future earnings of those young people. This is not about designing a second chance system for the disadvantaged. I do not want technical education to be seen as a back-up to the academic path; I want parity of esteem. I want technical education to take its rightful place alongside the academic track as a totally credible path to a professional career, but we are not there yet.
Lucy Powell
Did you call me Lucy Allan, Madam Deputy Speaker? I am very much a Powell.
Labour Members very much welcome any attempt to raise the status of technical and vocational education and the esteem in which it is held, something we began during our time in government. Does the Secretary of State agree that it is often a mix or blend of the technical and the academic—in engineering, digital opportunities, the creative industries or even health and social care—that will be important in the global world of the future, and will she assure the House that people will not be separated at the age of 16?
Justine Greening
The key to success is strengthening the technical education routes, as I have said. Having longevity in the strategy, as was done in Lord Sainsbury’s work, is absolutely critical in giving us an architecture around which we can now build a strategy and, as we saw in the Budget, in which we can now invest. As the hon. Lady says, it is important to ensure that the whole education system fits together. That is why it is so important, as we create more national colleges and institutes of technology, that we talk with further education colleges—they will be at the centre of all this—and also with universities. Universities of course already offer degrees in areas such as engineering, but they can clearly offer more applied learning and more technical education routes for many young people. As she says, we have to make sure that that fits together.
Indeed, we want to increase the quality and availability of higher-level technical education, so that technically gifted students can continue their studies beyond the age of 19. One of our challenges is that not only are the lower rungs of the technical education ladder not as high quality as on the academic route, but there are not really the higher rungs for young people to aim for and to climb successfully. The Government’s new national colleges and institutes of technology will make sure that there are world-class institutions at which to study higher level technical qualifications.
From September 2019, we will introduce maintenance loans for students studying level 4 or higher qualifications at these institutions. This will mean that for them, just as for university students, our best technical minds will not be limited by financial circumstances or place. This approach is just as much about parity between places as it is about parity between people. Nearly three quarters of young people in Barnsley follow a technical path, while less than one quarter do so in Kensington and Chelsea. By levelling up technical education—putting it on a par with academic routes, with reform, investment and focus—we can steadily erase regional inequalities and make sure that the door of opportunity for young people in all parts of the country, whatever education route they choose that fits them, is firmly kept open.
Building opportunity and a strong economy is about having good school places as well as skills. Good schools are the foundation of economic success and social mobility. This Government are resolute in our pursuit of more good school places in every part of the country, especially where they are most needed, to power higher educational attainment. That is why almost 1.8 million more children are in good or outstanding schools compared with 2010. That means, critically, that 1.8 million more young people are getting a better start in attempting to reach their potential. However, 1 million pupils are still in schools judged by Ofsted to be inadequate or to require improvement, so there is more work to do.
Alongside the £5 million a year of investment in skills, the Budget delivers £320 million of investment to fund over 70,000 places in up to 110 new free schools, on top of the 500 free schools we have committed to deliver by 2020. That includes funding for specialist maths schools, building on the successes of the outstanding Exeter Mathematics School, which I had the privilege of being able to visit recently, and King’s College London Mathematics School, which the Prime Minister has visited. Every child in every part of the country needs access to a fantastic school place, so we have to plan ahead and leave no stone unturned in pursuit of those places.
Mrs Miller
My right hon. Friend is making a powerful case for the importance of education, but does she not share my concern about the current funding system in this country, which is based more on a postcode lottery than on the needs of schools in a particular location?
Justine Greening
Absolutely. Our current approach is not just outdated but, in places, extremely unfair. We want our schools to be able to achieve the same outcomes, but we are funding them fundamentally differently in different places. There are differences for children often for no other reason than where they are growing up. No one who wants social mobility to get better should accept that, so we have to move to a more equitable funding approach. That is what we are consulting on right now.
We have to make sure that school places are there for children as they move through the system, but this is not just about the extra school places and new schools that we need; it is also about investing in the schools and school places that we already have. My right hon. Friend the Chancellor has therefore put forward an additional £216 million to help to refurbish existing schools and make them fit for the 21st century. Of course, that is on top of our existing plans to invest more than £10 billion improving the condition of the school estate by 2021.
Maria Eagle (Garston and Halewood) (Lab)
Does the right hon. Lady accept that academic A-levels are one way in which young people can ensure that they get a good start in life, from which they can perhaps go on to great success through our university system? What will the proposals that she is outlining do for young people in Halewood and Knowsley, who have no option in the entire borough for doing academic A-levels and must leave the borough in order to study?
Justine Greening
The hon. Lady raises a profound and important point. There are parts of the country where, for far too long, young people’s educational attainment has simply not been good enough. I know that the situation she highlights is part of the much broader challenge that her local community faces in seeking to raise educational attainment steadily. It is important that alongside the investment in technical education that we have set out in the Budget, we make sure through approaches such as opportunity areas that we zone in on the places that most need additional support so that we can shift outcomes there.
The Government’s focus on opportunity does not end when someone leaves full-time education. In a dynamic, modern economy we need to foster a culture of lifelong learning, in which all of us—adults from every walk of life—are passionate about continuing to upskill ourselves.
John Pugh (Southport) (LD)
Before the Secretary of State moves off the issue of the fabric of schools, may I say that although the money from the Chancellor for school repairs is welcome, there is a £6.7 billion backlog of repairs to bring schools up to satisfactory condition? What does she think that backlog will be by the end of this Parliament?
Justine Greening
The investment that we have brought forward in the Budget will enable us to go further and faster on that backlog, but as I said earlier, it is also important that we plan ahead. We need to make sure that the demographic bulge of people who have been in our primary schools and are moving through to our secondary schools have school places and classrooms to go to when they need them. That is why balanced investment was announced in the Budget, not just in refurbishing existing schools and school places, with a particular focus on those that need it the most, but in ensuring that we have the extra good school places that our country will need in the future.
I touched briefly on why lifelong learning and the investment in it in the Budget are so important. Lifelong learning needs to become the norm in our country, and I want to ensure that people have the tools to do it. The reality is that many of us will never study again after leaving school, yet we know that in the economy of the future, readapting to new skills and continuing to learn will be vital. That is why we are making available up to £40 million over the next two years to fund lifetime learning trials. That will help us to ensure that we know what works, where it is needed and how we can change our country so that we have a culture in which more adults seize opportunities to upskill and take control of their lives.
As I said earlier, we have the highest level of female employment on record, which is a fantastic achievement, and the gender pay gap is at a record low of 18.1%, but there is still a gap. The Government are implacable in our commitment to close that gap to zero within a generation, and we know that some women find it hard to return to work after taking time out to care for young children. Many feel that they come back to work at a lower level or have to expect less progression in their work and pay. That is not good enough, and our economy cannot afford to miss out on that talent. Some employers are already running schemes to help women return to work, and we want to learn from those businesses and work with them to support more women to be able to do so. We also want to apply the same lessons in the public sector, together with improving people’s ability to take up lifelong learning.
I want to see people coming back to work better skilled than when they left to take a career break, rather than somehow having to struggle to get their career back on track. That is why I have announced that my Department will work with business groups.
Mr Iain Wright (Hartlepool) (Lab)
On labour market participation, the Red Book shows that funding for returnships will be £5 million, as opposed to £655 million for extending the free schools programme. Does the Secretary of State think that is an appropriate balance?
Justine Greening
Returnships are not widely used at the moment—in fact, they are used by just a few companies—but we know that where they have been invested in, they have made a real difference. We are at the beginning of bringing forward some pilots so that we can better understand what works and get a clearer sense of the broader strategy that we should have for the long term. That comes alongside the investment in lifelong learning, which ties into that work. Critically, we will consider how we can ensure that, as we develop those policies and ideas, they are informed by evidence. That was the reason for the investment that we announced in the Budget.
Mims Davies
On returners, will the Secretary of State also consider people who have stepped out of the workplace because of caring responsibilities? They are not necessarily youngsters, but include people who have given up a career thinking that it would be for the long term, but have found that it is for a shorter time.
Justine Greening
My hon. Friend raises an important point. We need to understand that flexible working must be able to adapt to the different lives that people lead today, not just at one point in their life but as it changes, which happens to all of us through our working lives and careers.
Of course, International Women’s Day was last week, and I thought it was a sign of how important that day has become in our calendar that the Chancellor chose to mark it by making it Budget day. We have our second woman in No. 10 Downing Street, and I am proud that both female Prime Ministers have been Conservative Prime Ministers. There is a long way still to go, but we should celebrate the important progress that has been made. Nearly 100 years after women were first given the vote, the Chancellor has set aside £5 million to celebrate that historic event.
This Budget continues the Government’s mission to spread opportunity to every part of the country. That mission rests on a strong, stable economy that provides the careers and jobs that will lead to financial independence and success for a new generation, and a sense of place and meaning in people’s lives. We cannot be complacent. There will be more challenges to come, but by investing in a world-class system of technical education, alongside schools, lifelong learning and returnships, the Government have taken a crucial step in underwriting the flow of skills that our country and our businesses need. We will level up opportunity. We will lift our country by lifting up our young people, and this breakthrough Budget on skills and schools merits the support of this House.
The Chief Secretary to the Treasury (Mr David Gauke)
This is a Budget that demonstrates the Government’s determination to face up to our long-term challenges. This is a Budget that recognises that the only sustainable way to improve living standards is to improve our productivity. This is a Budget that recognises that sustainable public finances are not an impediment to prosperity but a necessary precondition.
I would like to thank my hon. Friends who participated in the debate: my hon. Friends the Members for Croydon South (Chris Philp), for Gainsborough (Sir Edward Leigh), for Telford (Lucy Allan), for Warwick and Leamington (Chris White), for South Dorset (Richard Drax), for Weaver Vale (Graham Evans) and for Faversham and Mid Kent (Helen Whately).
May I say a particular word of congratulation to the hon. Member for Stoke-on-Trent Central (Gareth Snell)? I apologise for having missed his speech, but I have heard from a number of people that it was excellent, and it proves that, in terms of his attributes as a Member of Parliament, it is not only because he is not Paul Nuttall that he will be welcome in this place.
I could probably summarise the other contributions from the Opposition Benches as saying that we are not spending enough, we are taxing too much and we are borrowing too much. Thankfully, it is not my job to reconcile all of that, and I wish the hon. Member for Bootle (Peter Dowd) the best of luck—he can say it is fiscal rectitude if he likes.
An important part of this Budget has been ensuring that this country has the skills we need to grow in the 21st century. We have to face up to the fact that tomorrow’s labour market is going to look very different from today’s. One study, for example, estimates that over a third of all jobs in the UK are at high risk of replacement in the next one to two decades, as technology and society advance. Economic, social and technological change can make certain jobs or institutions obsolete: lamplighters, handloom weavers and the Hansom Cab Company—I suppose we could add the Labour party to that list.
The job of the Government is not to stand in the way of those changes, preserving the old by stifling the new; instead, our role is to prepare the country and its people to adapt to the changes ahead, and that is what this Budget was all about: giving young people the skills they will need to get ahead in tomorrow’s world. That includes expanding the programme of free schools, investing more in schools maintenance, reforming technical education, and increasing teaching hours for further education students.
Alongside that, we also took steps to help people with the opportunities to upskill and reskill throughout their working lives, as well as to help our top researchers to develop so that our brightest can become the world’s best. We are taking forward an ambitious plan to improve education across the board for people of all backgrounds and of all ages, because that, alongside our investment in the country’s underlying infrastructure, is what will count in turning the tide on Britain’s long-standing productivity problem. Only by doing that can we increase living standards and fund world-class public services.
But as we prepare a bright future for the 21st century, we do so responsibly. This was a Budget that protected and improved our health and social services, and a Budget that invested in reform for the benefit of the next generation of workers and businesses alike, but a Budget that did so by funding all the new spending commitments it made, because, unlike Labour, we do not believe in spending and promising what we cannot deliver. That means having a tax base that is capable of funding the public services we provide, and doing so in a way that is fair.
We have heard a lot about the change we made to national insurance for the self-employed, and we are listening to hon. Members’ concerns. I think we all have to recognise that the difference between the benefits received by the employed and the self-employed have narrowed but the gap in contributions has not. This means that the employed pay a lot more for the same benefits. As self-employment grows in our economy—a welcome trend—that should not place a pressure on funding public services and deficit reduction. A Government addressing long-term challenges have to address this point, not ignore it.
This is a Budget that keeps Britain working—one that invests in our people, infrastructure and public services but does so responsibly, continuing to steer the country’s course away from Labour’s “spend what you can borrow” approach to our “spend what you can afford”. In doing so, we are once again demonstrating that we are the party that is delivering for this generation but not at the expense of the next generation. That is why the House should support the Budget in the Lobby tonight.
Question put and agreed to.
Resolved,
(1) That it is expedient to amend the law with respect to the National Debt and the public revenue and to make further provision in connection with finance.
(2) This Resolution does not extend to the making of any amendment with respect to value added tax so as to provide—
(a) for zero-rating or exempting a supply, acquisition or importation;
(b) for refunding an amount of tax;
(c) for any relief, other than a relief that—
(i) so far as it is applicable to goods, applies to goods of every description, and
(ii) so far as it is applicable to services, applies to services of every description.
Mr Deputy Speaker (Mr Lindsay Hoyle)
I am now required under Standing Order No. 51(3) to put successively, without further debate, the Question on each of the Ways and Means motions numbered 2 to 46, and on the motions on procedure numbered 47 to 51, on all of which a Bill is to be brought in. These motions are set out in a separate paper distributed with today’s Order Paper. Column 1 Column 2 Section Section 81(1) 87(1) 94(1) 102(1A) 120(1) 149(1) 154(1) 160(1) 175(1) 203(1) 81(1A)(b) 87A(1)(a) 94A(1)(a) 102(1B)(b) 120A(1)(a) 149A(2)(a) 154A(1)(a) 160A(2)(a) 175(1A)(b) 203A(1)(a) “amount foregone (in relation to a benefit) (in the benefits code) Section 69B” “optional remuneration arrangements (in the benefits code) Section 69A” “3A Income tax Amount payable under regulations under section 244L(2)(a) of FA 2004 The date falling 30 days after the due date determined by or under the regulations” “Charge under section 244A (overseas transfer charge). 1. The name, date of birth and national insurance number of each individual in whose case a transfer results in the scheme administrator becoming liable to the overseas transfer charge. 2. The date, and transferred value, of each transfer. 3. The reference number of the qualifying recognised overseas pension scheme to which each transfer is made. 4. The amount of tax due in respect of each transfer.”
I must inform the House that for the purposes of Standing Order No. 83U and on the basis of material put before him, Mr Speaker has certified that in his opinion the following founding motions published on 8 March 2017 and to be moved by the Chancellor of the Exchequer relate exclusively to England, Wales and Northern Ireland and are within devolved legislative competence: 3, Income Tax (main rates); and 36, Landfill tax.
The Deputy Speaker put forthwith the Questions necessary to dispose of the motions made in the name of the Chancellor of the Exchequer (Standing Order No. 51(3)).
2. Income tax (charge)
Resolved,
That income tax is charged for the tax year 2017-18.
And it is declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.
3. Income tax (main rates)
Resolved,
That for the tax year 2017-18 the main rates of income tax are as follows—
(a) the basic rate is 20%,
(b) the higher rate is 40%, and
(c) the additional rate is 45%.
And it is declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.
4. Income tax (default and savings rates)
Resolved,
That—
(1) For the tax year 2017-18 the default rates of income tax are as follows—
(a) the default basic rate is 20%,
(b) the default higher rate is 40%, and
(c) the default additional rate is 45%.
(2) For the tax year 2017-18 the savings rates of income tax are as follows—
(a) the savings basic rate is 20%,
(b) the savings higher rate is 40%, and
(c) the savings additional rate is 45%.
And it is declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.
5. Income tax (savings rate limit)
Resolved,
That—
(1) For the amount specified in section 12(3) of the Income Tax Act 2007 (starting rate for savings) substitute “£5000”.
(2) The amendment made by this Resolution has effect for the tax year 2017-18 and subsequent tax years. (3) Section 21 of the Income Tax Act 2007 (indexation), so far as relating to the starting rate limit for savings, does not apply in relation to the tax year 2017-18 (but this Resolution does not override that section for subsequent tax years).
And it is declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968
6. Corporation tax (charge for financial year 2018)
Resolved,
That corporation tax is charged for the financial year 2018.
7. PUBLIC SECTOR OFF-PAYROLL WORKERS
Resolved,
That—
(1) The Income Tax (Earnings and Pensions) Act 2003 is amended as follows.
(2) In section 7(5)(a) (amounts treated as earnings by Chapters 7 to 9 of Part 2 are “employment income” and “general earnings”), for “9” substitute “10”.
(3) In section 48 (scope of Chapter 8 of Part 2: workers’ services provided through intermediaries)—
(a) In subsection (1), after “through an intermediary” insert “, but not where the services are provided to a public authority”, and
(b) after subsection (2) insert—
“(3) In this Chapter “public authority” has the same meaning as in Chapter 10 of this Part (see section 61L).”
(4) In section 49 (engagements to which Chapter 8 of Part 2 applies)—
(a) in subsection (1), after paragraph (a) insert—
“(aa) the client is not a public authority,”, and
(b) after subsection (4) insert—
“(4A) Holding office as statutory auditor of the client does not count as holding office under the client for the purposes of subsection (1)(c), and here “statutory auditor” means a statutory auditor within the meaning of Part 42 of the Companies Act 2006 (see section 1210 of that Act).”
(5) In section 52(2)(b) and (c) (conditions of liability under Chapter 8 where intermediary is a partnership), for “this Chapter” substitute “one or other of this Chapter and Chapter 10”.
(6) In section 61(1) (interpretation of Chapter 8), before the definition of “engagement to which this Chapter applies” insert—
““engagement to which Chapter 10 applies” has the meaning given by section 61M(5);”.
(7) In section 61A (scope of Chapter 9 of Part 2: workers’ services provided by managed service companies), after subsection (2) insert—
“(3) See also section 61D(4A) (disapplication of this Chapter if Chapter 10 applies).”
(8) In section 61D (deemed earnings where worker’s services provided by managed service company), after subsection (4) insert—
“(4A) This section does not apply where the provision of the relevant services gives rise (directly or indirectly) to an engagement to which Chapter 10 applies, and for this purpose it does not matter whether the client is also “the client” for the purposes of section 61M(1).”
(9) In section 61J(1) (interpretation of Chapter 9), before the definition of “managed service company” insert—
““engagement to which Chapter 10 applies” has the meaning given by section 61M(5),”.
(10) In Part 2 (employment income: charge to tax), after Chapter 9 insert—
“Chapter 10
workers’ services provided to public sector through intermediaries
61K Scope of this Chapter
(1) This Chapter has effect with respect to the provision of services to a public authority through an intermediary.
(2) Nothing in this Chapter—
(a) affects the operation of Chapter 7 of this Part (agency workers), or
(b) applies to payments or transfers to which section 966(3) or (4) of ITA 2007 applies (visiting performers: duty to deduct and account for sums representing income tax).
61L Meaning of “public authority”
(1) In this Chapter “public authority” means—.
(a) a public authority as defined by the Freedom of Information Act 2000,
(b) a Scottish public authority as defined by the Freedom of Information (Scotland) Act 2002 (asp 13),
(c) the Corporate Officer of the House of Commons,
(d) the Corporate Officer of the House of Lords,
(e) the National Assembly for Wales Commission, or
(f) the Northern Ireland Assembly Commission.
(2) An authority within paragraph (a) or (b) of subsection (1) is a public authority for the purposes of this Chapter in relation to all its activities even if provisions of the Act mentioned in that paragraph do not apply to all information held by the authority.
61M Engagements to which Chapter applies
(1) Sections 61N to 61R apply where—
(a) an individual (“the worker”) personally performs, or is under an obligation personally to perform, services for another person (“the client”),
(b) the client is a public authority,
(c) the services are provided not under a contract directly between the client and the worker but under arrangements involving a third party (“the intermediary”), and
(d) the circumstances are such that—
(i) if the services were provided under a contract directly between the client and the worker, the worker would be regarded for income tax purposes as an employee of the client or the holder of an office under the client, or
(ii) the worker is an office-holder who holds that office under the client and the services relate to the office.
(2) The reference in subsection (1)(c) to a “third party” includes a partnership or unincorporated association of which the worker is a member.
(3) The circumstances referred to in subsection (1)(d) include the terms on which the services are provided, having regard to the terms of the contracts forming part of the arrangements under which the services are provided.
(4) Holding office as statutory auditor of the client does not count as holding office under the client for the purposes of subsection (1)(d), and here “statutory auditor” means a statutory auditor within the meaning of Part 42 of the Companies Act 2006 (see section 1210 of that Act).
(5) In this Chapter “engagement to which this Chapter applies” means any such provision of services as is mentioned in subsection (1).
61N Worker treated as receiving earnings from employment
(1) If one of Conditions A to C is met, identify the chain of two or more persons where—
(a) the highest person in the chain is the client,
(b) the lowest person in the chain is the intermediary, and
(c) each person in the chain above the lowest makes a chain payment to the person immediately below them in the chain.
(See section 61U for cases where one of Conditions A to C is treated as being met.).
(2) In this section and sections 61O to 61S—
“chain payment” means a payment, or money’s worth or any other benefit, that can reasonably be taken to be for the worker’s services to the client,
“make”—
(a) in relation to a chain payment that is money’s worth, means transfer, and
(b) in relation to a chain payment that is a benefit other than a payment or money’s worth, means provide, and”
“the fee-payer” means the person in the chain immediately above the lowest.
(3) The fee-payer is treated as making to the worker, and the worker is treated as receiving, a payment which is to be treated as earnings from an employment (“the deemed direct payment”), but this is subject to subsections (5) to (7) and sections 61T and 61V.
(4) The deemed direct payment is treated as made at the same time as the chain payment made by the fee-payer.
(5) Subsections (6) and (7) apply, subject to sections 61T and 61V, if the fee-payer—
(a) is not the client, and
(b) is not a qualifying person
(6) If there is no person in the chain below the highest and above the lowest who is a qualifying person, subsections (3) and (4) have effect as if for any reference to the fee-payer there were substituted a reference to the client.
(7) Otherwise, subsections (3) and (4) have effect as if for any reference to the fee-payer there were substituted a reference to the person in the chain who—
(a) is above the lowest,
(b) is a qualifying person, and
(c) is lower in the chain than any other person in the chain who—
(i) is above the lowest, and
(ii) is a qualifying person.
(8) In subsections (5) to (7) a “qualifying person” is a person who—
(a) is resident in the United Kingdom or has a place of business in the United Kingdom,
(b) is not a person who is controlled by—
(i) the worker, alone or with one or more associates of the worker, or
(ii) an associate of the worker, with or without other associates of the worker, and
(c) if a company, is not one in which—
(i) the worker, alone or with one or more associates of the worker, or
(ii) an associate of the worker, with or without other associates of the worker,
has a material interest (within the meaning given by section 51(4) and (5)).
(9) Condition A is that—
(a) the intermediary is a company, and
(b) the conditions in section 61O are met in relation to the intermediary.
(10) Condition B is that—
(a) the intermediary is a partnership,
(b) the worker is a member of the partnership,
(c) the provision of the services is by the worker as a member of the partnership, and
(d) the condition in section 61P is met in relation to the intermediary.
(11) Condition C is that the intermediary is an individual.
(12) Where a payment, money’s worth or any other benefit can reasonably be taken to be for both—
(a) the worker’s services to the client, and
(b) anything else,
then, for the purposes of this Chapter, so much of it as can, on a just and reasonable apportionment, be taken to be for the worker’s services is to be treated as (and the rest is to be treated as not being) a payment, or money’s worth or another benefit, that can reasonably be taken to be for the worker’s services.
61O Conditions where intermediary is a company
(1) The conditions mentioned in section 61N(9)(b) are that—
(a) the intermediary is not an associated company of the client that falls within subsection (2), and
(b) the worker has a material interest in the intermediary.
(2) An associated company of the client falls within this subsection if it is such a company by reason of the intermediary and the client being under the control—
(a) of the worker, or
(b) of the worker and other persons.
(3) The worker is treated as having a material interest in the intermediary if—
(a) the worker, alone or with one or more associates of the worker, or
(b) an associate of the worker, with or without other associates of the worker,
has a material interest in the intermediary.
(4) For this purpose “material interest” has the meaning given by section 51(4) and (5).
(5) In this section “associated company” has the meaning given by section 449 of CTA 2010.
61P Conditions where intermediary is a partnership
(1) The condition mentioned in section 61N(10)(d) is—
(a) that the worker, alone or with one or more relatives, is entitled to 60% or more of the profits of the partnership, or
(b) that most of the profits of the partnership derive from the provision of services under engagements to which one or other of this Chapter and Chapter 8 applies—
(i) to a single client, or
(ii) to a single client together with associates of that client, or
(c) that under the profit sharing arrangements the income of any of the partners is based on the amount of income generated by that partner by the provision of services under engagements to which one or other of this Chapter and Chapter 8 applies.
(2) In subsection (1)(a) “relative” means spouse or civil partner, parent or child or remoter relation in the direct line, or brother or sister.
(3) Section 61(4) and (5) apply for the purposes of this section as they apply for the purposes of Chapter 8.
61Q Calculation of deemed direct payment
(1) The amount of the deemed direct payment is the amount resulting from the following steps—
Step 1
Identify the amount or value of the chain payment made by the person who is treated as making the deemed direct payment, and deduct from that amount so much of it (if any) as is in respect of value added tax.
Step 2
Deduct, from the amount resulting from Step 1, so much of that amount as represents the direct cost to the intermediary of materials used, or to be used, in the performance of the services.
Step 3
Deduct, at the option of the person treated as making the deemed direct payment, from the amount resulting from Step 2, so much of that amount as represents expenses met by the intermediary that would have been deductible from the taxable earnings from the employment if—
(a) the worker had been employed by the client, and
(b) the expenses had been met by the worker out of those earnings.
Step 4
If the amount resulting from the preceding Steps is nil or negative, there is no deemed direct payment. Otherwise, that amount is the amount of the deemed direct payment.
(2) For the purposes of Step 1 of subsection (1), any part of the amount or value of the chain payment which is employment income of the worker by virtue of section 863G(4) of ITTOIA 2005 (salaried members of limited liability partnerships: anti-avoidance) is to be ignored.
(3) In subsection (1), the reference to the amount or value of the chain payment means the amount or value of that payment before the deduction (if any) permitted under section 61S.
(4) If the actual amount or value of the chain payment mentioned in Step 1 of subsection (1) is such that its recipient bears the cost of amounts due under PAYE regulations or contributions regulations in respect of the deemed direct payment, that Step applies as if the amount or value of that chain payment were what it would be if the burden of that cost were not being passed on through the setting of the level of the payment.
(5) In Step 3 of subsection (1), the reference to expenses met by the intermediary includes—
(a) expenses met by the worker and reimbursed by the intermediary, and
(b) where the intermediary is a partnership and the worker is a member of the partnership, expenses met by the worker for and on behalf of the partnership.
(6) In subsection (4) “contributions regulations” means regulations under the Contributions and Benefits Act providing for primary Class 1 contributions to be paid in a similar manner to income tax in relation to which PAYE regulations have effect (see, in particular, paragraph 6(1) of Schedule 1 to the Act); and here “primary Class 1 contribution” means a primary Class 1 contribution within the meaning of Part 1 of the Contributions and Benefits Act.
61R Application of Income Tax Acts in relation to deemed employment
(1) The Income Tax Acts (in particular, Part 11 and PAYE regulations) apply in relation to the deemed direct payment as follows.
(2) They apply as if—
(a) the worker were employed by the person treated as making the deemed direct payment, and
(b) the services were performed, or to be performed, by the worker in the course of performing the duties of that employment.
(3) The deemed direct payment is treated in particular—
(a) as taxable earnings from the employment for the purpose of securing that any deductions under Chapters 2 to 6 of Part 5 do not exceed the deemed direct payment, and
(b) as taxable earnings from the employment for the purposes of section 232.
(4) The worker is not chargeable to tax in respect of the deemed direct payment if, or to the extent that, by reason of any combination of the factors mentioned in subsection (5), the worker would not be chargeable to tax if—
(a) the client employed the worker,
(b) the worker performed the services in the course of that employment, and
(c) the deemed direct payment were a payment by the client of earnings from that employment.
(5) The factors are—
(a) the worker being resident or domiciled outside the United Kingdom or meeting the requirement of section 26A,
(b) the client being resident outside, or not resident in, the United Kingdom, and
(c) the services being provided outside the United Kingdom.
(6) Where the intermediary is a partnership or unincorporated association, the deemed direct payment is treated as received by the worker in the worker’s personal capacity and not as income of the partnership or association.
(7) Where—.
(a) the client is the person treated as making the deemed direct payment,
(b) the worker is resident in the United Kingdom,
(c) the services are provided in the United Kingdom,
(d) the client is not resident in the United Kingdom, and
(e) the client does not have a place of business in the United Kingdom,
the client is treated as resident in the United Kingdom.
61S Deductions from chain payments
(1) This section applies if, as a result of section 61R, a person who is treated as making a deemed direct payment is required under PAYE Regulations to pay an amount to the Commissioners for Her Majesty’s Revenue and Customs (the Commissioners) in respect of the payment.
(But see subsection (4)).
(2) The person may deduct from the underlying chain payment an amount which is equal to the amount payable to the Commissioners, but where the amount or value of the underlying chain payment is treated by section 61Q(4) as increased by the cost of any amount due under PAYE Regulations, the amount that may be deducted is limited to the difference (if any) between the amount payable to the Commissioners and the amount of that increase.
(3) Where a person in the chain other than the intermediary receives a chain payment from which an amount has been deducted in reliance on subsection (2) or this subsection, that person may deduct the same amount from the chain payment made by them.
(4) This section does not apply in a case to which 61V(2) applies (services-provider treated as making deemed direct payment).
(5) In subsection (2) “the underlying chain payment” means the chain payment whose amount is used at Step 1 of section 61Q(1) as the starting point for calculating the amount of the deemed direct payment.
61T Information to be provided by clients and consequences of failure
(1) If the conditions in section 61M(1)(a) to (1)(c) are met in any case, and a person as part of the arrangements mentioned in section 61M(1)(c) enters into a contract with the client, the client must inform that person (in the contract or otherwise) of which one of the following is applicable—
(a) the client has concluded that the condition in section 61M(1)(d) is met in the case;
(b) the client has concluded that the condition in section 61M(1)(d) is not met in the case.
(2) If the contract is entered into on or after 6 April 2017, the duty under subsection (1) must be complied with—
(a) on or before the time of entry into the contract, or
(b) if the services begin to be performed at a later time, before that later time.
(3) If the contract is entered into before 6 April 2017, the duty under subsection (1) must be complied with on or before the date of the first payment made under the contract on or after 6 April 2017.
(4) If the information which subsection (1) requires the client to give to a person has been given (whether in the contract, as required by subsection (2) or (3) or otherwise), the client must, on a written request by the person, provide the person with a written response to any questions raised by the person about the client’s reasons for reaching the conclusion identified in the information.
(5) A response required by subsection (4) must be provided before the end of 31 days beginning with the day the request for it is received by the client.
(6) If—
(a) the client fails to comply with the duty under subsection (1) within the time allowed by subsection (2) or (3),
(b) the client fails to provide a response required by subsection (4) within the time allowed by subsection (5), or
(c) the client complies with the duty under subsection (1) but fails to take reasonable care in coming to its conclusion as to whether the condition in section 61M(1)(d) is met in the case,
section 61N(3) and (4) have effect in the case as if for any reference to the fee-payer there were substituted a reference to the client, but this is subject to section 61V.
61U Information to be provided by worker and consequences of failure
(1) In the case of an engagement to which this Chapter applies, the worker must inform the potential deemed employer of which one of the following is applicable—
(a) that one of conditions A to C in section 61N is met in the case,
(b) that none of conditions A to C in section 61N is met in the case
(2) If the worker has not complied with subsection (1), then for the purposes of section 61N(1), one of conditions A to C in section 61N is to be treated as met.
(3) In this section, “the potential deemed employer” is the person who, if one of conditions A to C in section 61N were met, would be treated as making a deemed direct payment to the worker under section 61N(3).
61V Consequences of providing fraudulent information
(1) Subsection (2) applies if in any case—
(a) a person (“the deemed employer”) would, but for this section, be treated by section 61N(3) as making a payment to another person (“the services-provider”), and
(b) the fraudulent documentation condition is met.
(2) Section 61N(3) has effect in the case as if the reference to the fee-payer were a reference to the services-provider, but—
(a) section 61N(4) continues to have effect as if the reference to the fee-payer were a reference to the deemed employer, and
(b) Step 1 of section 61Q(1) continues to have effect as referring to the chain payment made by the deemed employer.
(3) Subsection (2) has effect even though that involves the services-provider being treated as both employer and employee in relation to the deemed employment under section 61N(3).
(4) “The fraudulent documentation condition” is that a relevant person provided any person with a fraudulent document intended to constitute evidence—
(a) that the case is not an engagement to which this Chapter applies, or
(b) that none of conditions A to C in section 61N is met in the case.
(5) A “relevant person” is—
(a) the services-provider;
(b) a person connected with the services-provider;
(c) if the intermediary in the case is a company, an office-holder in that company.
61W Prevention of double charge to tax and allowance of certain deductions
(1) Subsection (2) applies where—
(a) a person (“the payee”) receives a payment or benefit (“the end-of-line remuneration”) from another person (“the paying intermediary”),
(b) the end-of-line remuneration can reasonably be taken to represent remuneration for services of the payee to a public authority,
(c) a payment (“the deemed payment”) has been treated by section 61N(3) as made to the payee,
(d) the underlying chain payment can reasonably be taken to be for the same services of the payee to that public authority, and
(e) the recipient of the underlying chain payment has (whether by deduction from that payment or otherwise) borne the cost of any amounts due, under PAYE regulations and contributions regulations in respect of the deemed payment, from the person treated by section 61N(3) as making the deemed payment.
(2) For income tax purposes, the paying intermediary and the payee may treat the amount of the end-of-line remuneration as reduced (but not below nil) by any one or more of the following—
(a) the amount (see section 61Q) of the deemed payment;
(b) the amount of any capital allowances in respect of expenditure incurred by the paying intermediary that could have been deducted from employment income under section 262 of CAA 2001 if the payee had been employed by the public authority and had incurred the expenditure;
(c) the amount of any contributions made, in the same tax year as the end-of-line payment, for the benefit of the payee by the paying intermediary to a registered pension scheme that if made by an employer for the benefit of an employee would not be chargeable to income tax as income of the employee.
(3) Subsection (2)(c) does not apply to—
(a) excess contributions paid and later repaid,
(b) contributions set under subsection (2) against another payment by the paying intermediary, or
(c) contributions deductible at Step 5 of section 54(1) in calculating the amount of the payment (if any) treated by section 50 as made in the tax year concerned by the paying intermediary to the payee.
(4) For the purposes of subsection (3)(c), the contributions to which Step 5 of section 54(1) applies in the case of the particular calculation are “deductible” at that Step so far as their amount does not exceed the result after Step 4 in that calculation.
(5) In subsection (1)(d) “the underlying chain payment” means the chain payment whose amount is used at Step 1 of section 61Q(1) as the starting point for calculating the amount of the deemed payment.
(6) Subsection (2) applies whether the end-of-line remuneration—
(a) is earnings of the payee,
(b) is a distribution of the paying intermediary, or
(c) takes some other form.
61X Interpretation
In this Chapter—
“associate” has the meaning given by section 60;
“company” means a body corporate or unincorporated association, and does not include a partnership;
“engagement to which Chapter 8 applies” has the meaning given by section 49(5).”
(11) In section 339A (travel for employment involving intermediaries), after subsection (6) insert—
“(6A) Subsection (3) does not apply in relation to an engagement if—
(a) sections 61N to 61R in Chapter 10 of Part 2 apply in relation to the engagement,
(b) one of Conditions A to C in section 61N is met in relation to the employment intermediary, and
(c) the employment intermediary is not a managed service company.
(6B)This section does not apply in relation to an engagement if—
(a) sections 61N to 61R in Chapter 10 of Part 2 do not apply in relation to the engagement because the circumstances in section 61M(l)(d) are not met,
(b) assuming those circumstances were met, one of Conditions A to C in section 61N would be met in relation to the employment intermediary, and
(c) the employment intermediary is not a managed service company.
(6C) In determining for the purposes of subsection (6A) or (6B) whether one of Conditions A to C in section 61N is or would be met in relation to the employment intermediary, read references to the intermediary as references to the employment intermediary.”
(12) The amendments made by paragraphs 2 to 9 and 11 of this Resolution have effect for the tax year 2017-18 and subsequent tax years.
(13) The amendment made by paragraph 10 of this Resolution has effect in relation to deemed direct payments treated as made on or after 6 April 2017, and does so even if relating to services provided before that date.
And it is declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.
8. Optional remuneration arrangements
Resolved,
That—
(1) In Part 3 of the Income Tax (Earnings and Pensions) Act 2003 (employment income: earnings and benefits etc treated as earnings), in Chapter 2 (taxable benefits: the benefits code), after section 69 insert—
“69A Optional remuneration arrangements
(1) Subsections (2) to (7) have effect for the purposes of the benefits code.
(2) A benefit provided for an employee is provided under “optional remuneration arrangements” so far as it is provided under arrangements of type A or B (regardless of whether those arrangements are made before or after the beginning of the person’s employment).
(3) “Type A arrangements” are arrangements under which, in return for the benefit, the employee gives up the right (or a future right) to receive an amount of earnings within Chapter 1 of Part 3.
(4) “Type B arrangements” are arrangements (other than type A arrangements) under which the employee agrees to be provided with the benefit rather than an amount of earnings within Chapter 1 of Part 3.
(5) A benefit provided for an employee is to be regarded as provided under optional remuneration arrangements (whether of type A or type B) so far as it is just and reasonable to attribute the provision of the benefit to the arrangements in question.
(6) Where a benefit is provided for an employee under any arrangements, the mere fact that under the arrangements the employee makes good, or is required to make good, any part of the cost of provision is not to be taken to show that the benefit is (to any extent) provided otherwise than under optional remuneration arrangements.
(7) Where a benefit is provided for an employee partly under optional remuneration arrangements and partly otherwise than under such arrangements, the benefits code is to apply with any modifications (including provision for just and reasonable apportionments) that may be required for ensuring that the benefit is treated—
(a) in accordance with the relevant provision in the column 2 of the table so far as it is provided under optional remuneration arrangements, and
(b) in accordance with the relevant provision in column 1 of the table so far as it is provided otherwise than under such arrangements.
69B Optional remuneration arrangements: supplementary
(1) For the purposes of the benefits code “the amount foregone”—
(a) in relation to a benefit provided for an employee under type A arrangements means the amount of earnings mentioned in section 69A(3);
(b) in relation to a benefit provided for an employee under type B arrangements means the amount of earnings mentioned in section 69A(4);
(c) in relation to a benefit provided for an employee partly under type A arrangements and partly under type B arrangements, means the sum of the amounts foregone under the arrangements of each type.
(2) Subsection (3) applies where, in order to determine the amount foregone with respect to a particular benefit mentioned in section 69A(3) or (4), it is necessary to apportion an amount of earnings to the benefit.
(3) The apportionment is to be made on a just and reasonable basis.
(4) In this section and section 69A references to a benefit provided for an employee include a benefit provided for a member of an employee’s family or household.
(5) In this section and section 69A—
“benefit” includes any benefit or facility, regardless of its form and the manner of providing it;
“earnings” means earnings within Chapter 1 of Part 3 (and includes a reference to amounts which would have been such earnings if the employee had received them).”
(2) Part 3 of the Income Tax (Earnings and Pensions) Act 2003 (employment income: earnings and benefits in kind etc treated as earnings) is amended as follows.
(3) Section 81 (benefit of cash voucher treated as earnings) is amended as follows.
(4) After subsection (1) insert—
“(1A) Where a cash voucher to which this Chapter applies is provided pursuant to optional remuneration arrangements—
(a) subsection (1) does not apply, and
(b) the relevant amount is to be treated as earnings from the employment for the tax year in which the voucher is received by the employee.
(1B) In this section “the relevant amount” means—
(a) the cash equivalent, or
(b) if greater, the amount foregone with respect to the benefit of the voucher (see section 69B).”
(5) At the end insert—
“(3) For the purposes of subsection (1B), assume that the cash equivalent is zero if the condition in subsection (4) is met.
(4) The condition is that the benefit of the voucher would be exempt from income tax but for section 228A (exclusion of certain exemptions).”
(6) After section 87 insert—
“87A Benefit of non-cash voucher treated as earnings: optional remuneration arrangements
(1) Where a non-cash voucher to which this Chapter applies is provided pursuant to optional remuneration arrangements—
(a) the relevant amount is to be treated as earnings from the employment for the tax year in which the voucher is received by the employee, and
(b) section 87(1) does not apply.
(2) To find the relevant amount, first determine which (if any) is the greater of—
(a) the cost of provision (see section 87(3)), and
(b) the amount foregone with respect to the benefit of the voucher (see section 69B).
(3) If the cost of provision is greater than or equal to the amount foregone, the “relevant amount”
is the cash equivalent of the benefit of the non-cash voucher (see section 87(2)).
(4) Otherwise, the “relevant amount” is the difference between—
(a) the amount foregone, and
(b) any part of the cost of provision that is made good by the employee, to the person incurring it, on or before 6 July following the relevant tax year.
(5) If the voucher is a non-cash voucher other than a cheque voucher, the relevant tax year is—
(a) the tax year in which the cost of provision is incurred, or
(b) if later, the tax year in which the employee receives the voucher.
(6) If the voucher is a cheque voucher, the relevant tax year is the tax year in which the voucher is handed over in exchange for money, goods or services.
(7) For the purposes of subsections (2) and (3), assume that the cost of provision is zero if the condition in subsection (8) is met.
(8) The condition is that the non-cash voucher would be exempt from income tax but for section 228A (exclusion of certain exemptions).”
(7) In section 88 (year in which earnings treated as received)—
(a) in subsection (1), after “87” insert “or 87A”;
(b) in subsection (2), after “87” insert “or 87A.”
(8) After section 94 insert—
“94A Benefit of credit-token treated as earnings: optional remuneration arrangements
(1) If the conditions in subsections (2) and (3) are met in relation to any occasions on which a credit-token to which this Chapter applies is used by the employee in a tax year to obtain money, goods or services—
(a) the relevant amount is to be treated as earnings from the employment for that year, and
(b) section 94(1) does not apply in relation to the use of the credit-token on those occasions.
(2) The condition in this subsection is that the credit-token is used pursuant to optional remuneration arrangements.
(3) The condition in this subsection is that AF is greater than the relevant cost of provision for the tax year.
In this section “AF” means so much of the amount foregone (see section 69B) as is attributable on a just and reasonable basis to the use of the credit-token by the employee in the tax year pursuant to the optional remuneration arrangements to obtain money, goods or services.
(4) The “relevant amount” is the difference between—
(a) AF, and
(b) any part of the relevant cost of provision for the tax year that is made good by the employee, to the person incurring it, on or before 6 July following the tax year which contains the occasion of use of the credit-token to which the making good relates.
(5) But the relevant amount is taken to be zero if the amount given by paragraph (b) of subsection (4) exceeds AF.
(6) For the purposes of this section the “relevant cost of provision for the tax year” is determined as follows—
Step 1
Find the cost of provision with respect to each occasion of use of the credit-token by the employee in the tax year pursuant to the optional remuneration arrangements to obtain money, goods or services.
Step 2
The total of those amounts is the relevant cost of provision for the tax year.
(7) But the relevant cost of provision for the tax year is to be taken to be zero if the condition in subsection (8) is met.
(8) The condition is that use of the credit token by the employee in the tax year pursuant to the optional remuneration arrangements to obtain money, goods or services would be exempt from income tax but for section 228A (exclusion of certain exemptions).
(9) In this section “cost of provision” has the same meaning as in section 94.”
(9) In section 97 (living accommodation to which Chapter 5 applies), in subsection (1A)(b), for “the cash equivalent of” substitute “an amount in respect of”.
(10) In section 98 (accommodation provided by local authority), in the words before paragraph (a), for “This Chapter” substitute “In section 102 (benefit of accommodation treated as earnings) subsection (1A) (accommodation provided otherwise than pursuant to optional remuneration arrangements)”.
(11) Section 99 (accommodation provided for performance of duties) is amended as follows.
(12) In subsection (1), for “This Chapter” substitute “In section 102 (benefit of accommodation treated as earnings) subsection (1A) (accommodation provided otherwise than pursuant to optional remuneration arrangements)”.
(13) In subsection (2), for “This Chapter” substitute “In section 102 (benefit of accommodation treated as earnings) subsection (1A)”.
(14) In section 100 (accommodation provided as result of security threat), in the words before paragraph (a), for “This Chapter” substitute “In section 102 (benefit of accommodation treated as earnings) subsection (1A) (accommodation provided otherwise than pursuant to optional remuneration arrangements)”.
(15) In section 100A (homes outside UK owned by company etc), in subsection (1), for “This Chapter” substitute “In section 102 (benefit of accommodation treated as earnings) subsection (1A) (accommodation provided otherwise than pursuant to optional remuneration arrangements)”.
(16) In section 101 (Chevening House), in the words before paragraph (a), for “This Chapter” substitute “In section 102 (benefit of accommodation treated as earnings) subsection (1A) (accommodation provided otherwise than pursuant to optional remuneration arrangements)”.
(17) Section 102 (benefit of living accommodation treated as earnings) is amended as follows.
(18) In subsection (1), for the words before paragraph (a) substitute “This section applies if living accommodation to which this Chapter applies is provided in any period (“the taxable period”)—”.
(19) The words in subsection (1) from “the cash equivalent” to the end become subsection (1A).
(20) After subsection (1A) insert—
“(1B) If the benefit of the accommodation is provided pursuant to optional remuneration arrangements—
(a) subsection (1A) does not apply, and
(b) the relevant amount is to be treated as earnings from the employment for that tax year.”
(21) Omit subsection (2).
(22) At the end insert—
“(4) Section 103A indicates how the relevant amount is determined.”
(23) In section 103 (method of calculating cash equivalent), in subsection (3), for “102(2)” substitute “102(1)”.
(24) After section 103 insert—
“103A Accommodation provided pursuant to optional remuneration arrangements: relevant amount
(1) To find the relevant amount, first determine which (if any) is the greater of—
(a) the modified cash equivalent of the benefit of the accommodation (see sections 105(2A) and 106(2A)), and
(b) the amount foregone with respect to the benefit of the accommodation (see section 69B).
(2) If the amount mentioned in subsection (1)(a) is greater than or equal to the amount mentioned in subsection (1)(b), the “relevant amount” is the cash equivalent of the benefit of the accommodation (see section 103).
(3) Otherwise, the “relevant amount” is the difference between—
(a) the amount foregone with respect to the benefit of the accommodation, and
(b) the deductible amount (see subsections (7) and (8)).
(4) If the amount foregone with respect to the benefit of the accommodation does not exceed the deductible amount, the relevant amount is taken to be zero.
(5) For the purposes of subsections (1) and (2), assume that the modified cash equivalent of the benefit of the accommodation is zero if the condition in subsection (6) is met.
(6) The condition is that the benefit of the accommodation would be exempt from income tax but for section 228A (exclusion of certain exemptions).
(7) If the cost of providing the living accommodation does not exceed £75,000, the “deductible amount” means any sum made good, on or before 6 July following the tax year which contains the taxable period, by the employee to the person at whose cost the accommodation is provided that is properly attributable to its provision.
(8) If the cost of providing the living accommodation exceeds £75,000, the “deductible amount” means the total of amounts A and B where—
A is equal to so much of MG as does not exceed RV;
B is the amount of any excess rent paid by the employee in respect of the taxable period;
MG is the total of any sums made good, on or before 6 July following the tax year which contains the taxable period, by the employee to the person at whose cost the accommodation is provided that are properly attributable to its provision (in the taxable period);
RV is the rental value of the accommodation for the taxable period as set out in section 105(3) or (4A)(b) (as applicable).
(9) In subsection (8) “excess rent” means so much of the rent in respect of the taxable period paid—
(a) by the employee,
(b) in respect of the accommodation,
(c) to the person providing it, and
(d) on or before 6 July following the tax year which contains the taxable period, as exceeds the rental value of the accommodation.
(10) Where it is necessary for the purposes of subsection (1)(b) and (3)(a) to apportion an amount of earnings to the benefit of the accommodation in the taxable period, the apportionment is to be made on a just and reasonable basis.
In this subsection “earnings” is to be interpreted in accordance with section 69B(5).”
(25) Section 105 (cash equivalent: cost of accommodation not over £75,000) is amended as follows.
(26) In subsection (1), after “equivalent” insert “or modified cash equivalent”.
(27) After subsection (2) insert—
“(2A) The modified cash equivalent is equal to the rental value of the accommodation for the taxable period.”
(28) Section 106 (cash equivalent: cost of accommodation over £75,000) is amended as follows.
(29) In subsection (1), after “equivalent” insert “or modified cash equivalent”.
(30) After subsection (2) insert—
“(2A) to calculate the modified cash equivalent—
(a) apply steps 1 to 3 in subsection (2), as if the words “cash equivalent” in step 1 were “modified cash equivalent (for the purposes of section 105)”;
(b) calculate the modified cash equivalent by adding together the amounts calculated under steps 1 and 3 as applied by paragraph (a).”
(31) Section 109 (priority of Chapter 5 over Chapter 1 of Part 3 of the Act) is amended as follows.
(32) In subsection (1)(a), for “the cash equivalent of the benefit of living accommodation” substitute “an amount”.
(33) In subsection (2), for “of the cash equivalent” substitute “mentioned in subsection (1)(a)”.
(34) In subsection (4), in the words before paragraph (a), for “cash equivalent of the benefit of the living accommodation” substitute “amount mentioned in subsection (1)(a)”.
(35) In section 114 (cars, vans and related benefits), in subsection (2)—
(a) in paragraph (a), for “the cash equivalent of” substitute “an amount in respect of”;
(b) in paragraph (b), for “the cash equivalent of” substitute “an amount in respect of”;
(c) in paragraph (c), for “the cash equivalent of” substitute “an amount in respect of”;
(d) in paragraph (d), for “the cash equivalent of” substitute “an amount in respect of”.
(36) Section 119 (where alternative to benefit of car or van offered) is amended as follows.
(37) For subsection (1) substitute—
“(1) This section applies where in a tax year—
(a) a car is made available as mentioned in section 114(1),
(b) the car’s CO2 emissions figure (see sections 133 to 138) does not exceed 75 grams per kilometre, and
(c) an alternative to the benefit of the car is offered.”
(38) In the heading, before “car” insert “low emission”.
(39) In section 120 (benefit of car treated as earnings), after subsection (3) insert—
“(4) This section is subject to section 120A.”
(40) After section 120 insert—
“120A Benefit of car treated as earnings: optional remuneration arrangements
(1) Where this Chapter applies to a car in relation to a particular tax year and the conditions in subsection (3) are met—
(a) the relevant amount (see section 121A) is to be treated as earnings from the employment for that tax year, and
(b) section 120(1) does not apply.
(2) In such a case (including a case where the relevant amount is nil) the employee is referred to in this Chapter as being chargeable to tax in respect of the car in the tax year.
(3) The conditions are that—
(a) the car is made available to the employee or member of the employee’s household pursuant to optional remuneration arrangements,
(b) the amount foregone (see section 69B) with respect to the benefit of the car for the tax year is greater than the modified cash equivalent of the benefit of the car for the tax year (see section 121B), and
(c) the car’s CO2 emissions figure (see sections 133 to 138) exceeds 75 grams per kilometre.”
(41) After section 121 insert—
“121A Optional remuneration arrangements: method of calculating relevant amount
(1) To find the relevant amount for the purposes of section 120A, take the following steps—
Step 1
Take the amount foregone with respect to the benefit of the car for the tax year.
Step 2
Make any deduction under section 132A in respect of capital contributions made by the employee to the cost of the car or accessories.
The resulting amount is the provisional sum.
Step 3
Make any deduction from the provisional sum under section 144 in respect of payments by the employee for the private use of the car.
The result is the “relevant amount” for the purposes of section 120A.
(2) Where it is necessary, for the purpose of determining the “amount foregone” under step 1 of subsection (1), to apportion an amount of earnings to the benefit of the car for the tax year, the apportionment is to be made on a just and reasonable basis.
In this subsection “earnings” is to be interpreted in accordance with section 69B(5).
“121B Meaning of “modified cash equivalent”
(1) The “modified cash equivalent” of the benefit of a car for a tax year is calculated in accordance with the following steps (which must be read with subsections (2) to (4))—
Step 1
Find the price of the car in accordance with sections 122 to 124A.
Step 2
Add the price of any accessories which fall to be taken into account in accordance with sections 125 to 131.
The resulting amount is the interim sum.
Step 3
Find the appropriate percentage for the car for the year in accordance with sections 133 to 142.
Step 4
Multiply the interim sum by the appropriate percentage for the car for the year.
The resulting amount is the interim sum.
Step 5
Make any deduction under section 143 for any periods when the car was unavailable.
The resulting amount is the modified cash equivalent of the benefit of the car for the year.
(2) Where the car is shared the modified cash equivalent is calculated under this section in accordance with section 148.
(3) The modified cash equivalent of the benefit of a car for a tax year is to be taken to be zero if the condition in subsection (4) is met.
(4) The condition is that the benefit of car for the tax year would be exempt from income tax but for section 228A (exclusion of certain exemptions).
(5) The method of calculation set out in subsection (1) is modified in the special cases dealt with in—
(a) section 146 (cars that run on road fuel gas), and
(b) section 147A (classic cars: optional remuneration arrangements).”
(42) In section 126 (amounts taken into account in respect of accessories), in subsection (1), in the words before paragraph (a), after “121(1)” insert “and step 2 of section 121B(1)”.
(43) Section 131 (replacement accessories) is amended as follows.
(44) In subsection (1), in the words before paragraph (a), after “applies” insert “for the purposes of sections 121(1) and 121B(1)”.
(45) After subsection (1) insert—
“(1A) In the application of this section for the purposes of section 121B(1)—
(a) references to the cash equivalent of the benefit of the car for the tax year are to be read as references to the modified cash equivalent of the benefit of the car for the tax year, and
(b) references to step 2 of section 121(1) are to be read as references to step 2 of section 121B(1).”
(46) In section 132 (capital contributions by employee), in subsection (1), in the words before paragraph (a), after “applies” insert “for the purposes of section 121(1)”.
(47) After section 132 insert—
“132A Capital contributions by employee: optional remuneration arrangements
(1) This section applies for the purposes of section 121A(1) if the employee contributes a capital sum to expenditure on the provision of—
(a) the car, or
(b) any qualifying accessory which is taken into account in calculating under section 121B the modified cash equivalent of the benefit of the car.
(2) A deduction is to be made from the amount carried forward from step 1 of section 121A(1)—
(a) for the tax year in which the contribution is made, and
(b) for all subsequent tax years in which the employee is chargeable to tax in respect of the car by virtue of section 120A.
(3) The amount of the deduction allowed in any tax year is found by multiplying the capped amount by the appropriate percentage.
(4) In subsection (3) the reference to “the appropriate percentage” is to the appropriate percentage for the car for the tax year (determined in accordance with sections 133 to 142).
(5) In this section “the capped amount” means the lesser of—
(a) the total of the capital sums contributed by the employee in that year and any earlier years to expenditure on the provision of—
(i) the car, or
(ii) any qualifying accessory which is taken into account in calculating under section 121B the modified cash equivalent of the benefit of the car for the tax year in question, and
(b) £5,000.
(6) This section is modified by section 147A (optional remuneration arrangements: classic cars).”
(48) Section 143 (deduction for periods when car unavailable) is amended as follows.
(49) Before subsection (1) insert—
“(A1) This section has effect for the purposes of—
(a) section 121(1) (method of calculating the cash equivalent of the benefit of a car), and
(b) section 121B(1) (optional remuneration arrangements: meaning of “modified cash equivalent”).”
(50) In subsection (1), after “121(1)” insert “or (as the case may be) step 4 of section 121B(1)”.
(51) In subsection (3), in the definition of “A”, at the end insert “of section 121(1) or (as the case may be) step 4 of section 121B(1)”.
(52) Section 144 (deduction for payments for private use) is amended as follows.
(53) In subsection (1), for “calculated under step 7 of section 121(1)” substitute “(see subsection (1A))”.
(54) After subsection (1) insert
“(1A) In this section “the provisional sum” means the provisional sum calculated under—
(a) step 7 of section 121(1) (method of calculating the cash equivalent of the benefit of a car), or
(b) step 2 of section 121A(1) (optional remuneration arrangements: method of calculating relevant amount”).”
(55) In subsection (2), for the words from “so that” to the end substitute “so that—
(a) in a case within subsection (1A)(a), the cash equivalent of the benefit of the car for the year is nil, or
(b) in a case within subsection (1A)(b), the relevant amount for the purposes of section 120A is nil.”
(56) In subsection (3)—
(a) for “In any other case” substitute “Where subsection (2) does not apply,” and
(b) for the words from “give” to the end substitute “give—
(a) in a case within subsection (1A)(a), the cash equivalent of the benefit of the car for the year, or
(b) in a case within subsection (1A)(b), the relevant amount for the purposes of section 120A.”
(57) Section 145 (modification of provisions where car temporarily replaced) is amended as follows.
(58) In subsection (1), for paragraph (c) substitute—
“(c) the employee is chargeable to tax—
(i) in respect of both the normal car and the replacement car by virtue of section 120, or
(ii) in respect of both the normal car and the replacement car by virtue of section 120A, and”.
(59) After subsection (5) insert—
“(6) Where this section applies by virtue of subsection (1)(c)(ii), the condition in subsection (5)(b) is to be taken to be met if it would be met on the assumption that the cash equivalent of the benefit of the cars in question is to be calculated under section 121 (1).”
(60) Section 146 (cars that run on road fuel gas) is amended as follows.
(61) In subsection (1), in the words before paragraph (a), after “applies” insert “for the purposes of sections 121 and 121B”.
(62) In subsection (2), after “121(1)” insert “or (as the case may be) step 1 of section 121B(1)”.
(63) After subsection 147 insert—
“147A Classic cars: optional remuneration arrangements
(1) This section applies in calculating the relevant amount in respect of a car for a tax year for the purposes of section 120A (benefit of car treated as earnings: optional remuneration arrangements) if—
(a) the age of the car at the end of the year is 15 years or more,
(b) the market value of the car for the year is £15,000 or more, and
(c) that market value exceeds the specified amount (see subsection (4)).
(2) In calculating the modified cash equivalent of the benefit of the car, for the interim sum calculated under step 2 of section 121B(1) substitute the market value of the car for the tax year in question.
(3) Section 132A (capital contributions by employee: optional remuneration arrangements) has effect as if—
(a) in subsection (1)(b) the reference to calculating under section 121B the modified cash equivalent of the benefit of the car were to determining the market value of the car, and
(b) in subsection (5)(a)(ii) the reference to calculating under section 121B the modified cash equivalent of the benefit of the car for the tax year in question were to determining the market value of the car for the tax year in question.
(4) The “specified amount” is found as follows.
Step 1
Find what would be the interim sum under step 2 of section 121B(1) (if subsection (2) of this section did not have effect).
Step 2
(Assuming for this purpose that the reference in section 132(2) to step 2 of section 121(1) includes a reference to step 1 of this subsection) make any deduction under section 132 for capital contributions made by the employee to the cost of the car or accessories.
The resulting amount is the specified amount.
(5) The market value of a car for a tax year is to be determined in accordance with section 147(3) and (4).”
(64) Section 148 (reduction of cash equivalent where car is shared) is amended as follows.
(65) In subsection (1)—
(a) in the words before paragraph (a), after “applies” insert “for the purposes of sections 121 and 121B”;
(b) in the words after paragraph (c), for “section 120” substitute “sections 120 and 120A”.
(66) For subsection (2) substitute—
“(2) The amount to be treated as earnings in respect of the benefit of the car is to be calculated separately for each of those employees for that tax year (whether under section 120 or section 120A).”
(67) In subsection (2A), at the beginning insert “In the case of an employee chargeable to tax in respect of the car by virtue of section 120”.
(68) After subsection (2A) insert—
“(2B) In the case of an employee chargeable to tax in respect of the car by virtue of section 120A, the modified cash equivalent (as determined under section 121B(1)) is to be reduced on a just and reasonable basis.”
(69) In section 149 (benefit of car fuel treated as earnings), in subsection (1)(b), at the end insert “or 120A”.
(70) After section 149 insert—
“149A Benefit of car fuel treated as earnings: optional remuneration arrangements
(1) This section applies if—
(a) fuel is provided for a car in a tax year by reason of an employee’s employment,
(b) the employee is chargeable to tax in respect of the car in the tax year by virtue of section 120 or 120A, and
(c) the fuel is provided pursuant to optional remuneration arrangements.
(2) If the condition in subsection (3) is met—
(a) the amount foregone with respect to the benefit of the fuel (see section 69B) is to be treated as earnings from the employment for the tax year, and
(b) section 149(1) does not apply.
(3) The condition mentioned in subsection (2) is that the amount foregone with respect to the benefit of the fuel is greater than the cash equivalent of the benefit of the fuel.
(4) For the purposes of subsection (3), assume that the cash equivalent of the benefit of the fuel is zero if the condition in subsection (5) is met.
(5) The condition mentioned in subsection (4) is that the benefit of the fuel would be exempt from income tax but for section 228A (exclusion of certain exemptions).
(6) References in this section to fuel do not include any facility or means for supplying electrical energy or any energy for a car which cannot in any circumstances emit CO2 by being driven.
(7) Where it is necessary for the purposes of subsections (2)(a) and (3) to apportion an amount of earnings to the benefit of the fuel in the tax year, the apportionment is to be made on a just and reasonable basis. In this subsection “earnings” is to be interpreted in accordance with section 69B(5).”
(71) In section 154 (benefit of van treated as earnings), after subsection (3) insert—
“(4) This section is subject to section 154A.”
(72) After section 154 insert—
“154A Benefit of van treated as earnings: optional remuneration arrangements
(1) Where this Chapter applies to a van in relation to a particular tax year and the conditions in subsection (2) are met—
(a) the relevant amount is to be treated as earnings from the employment for that tax year, and
(b) section 154(1) does not apply.
In such a case (including a case where the relevant amount is nil) the employee is referred to in this Chapter as being chargeable to tax in respect of the van in the tax year.
(2) The conditions are that—
(a) the van is made available to the employee or member of the employee’s household pursuant to optional remuneration arrangements, and
(b) the amount foregone with respect to the benefit of the van (see section 69B) is greater than the modified cash equivalent of the benefit of the van.
(3) To find the relevant amount for the purposes of this section take the following steps—
Step 1
Take the amount foregone with respect to the benefit of the van for the tax year.
Step 2
Make any deduction under section 158A in respect of payments by the employee for the private use of the van.
The result is “relevant amount”.
(4) In subsection (2) the reference to the “modified cash equivalent” is to the amount which would be the cash equivalent of the benefit of the van (after any reductions under section 156 or 157) if this Chapter had effect the following modifications—
(a) omit paragraph (c) of section 155(8);
(b) omit section 158;
(c) in section 159(2)(b), for “155, 157 and 158” substitute “155 and 157”.
(5) For the purposes of subsection (2) assume that the modified cash equivalent of the benefit of the van is zero if the condition in subsection (6) is met.
(6) The condition is that the benefit of the van would be exempt from income tax but for section 228A (exclusion of certain exemptions).
(7) Where it is necessary for the purposes of subsection (2)(b) and step 1 of subsection (3) to apportion an amount of earnings to the benefit of the van in the tax year, the apportionment is to be made on a just and reasonable basis.
In this subsection “earnings” is to be interpreted in accordance with section 69B(5).”
(73) After section 158 insert—
“158A Van provided pursuant to optional remuneration arrangements: private use
(1) In calculating the relevant amount under section 154A in relation to a van and a tax year, a deduction is to be made under step 2 of subsection (3) of that section if, as a condition of the van being available for the employee’s private use, the employee—
(a) is required in that year to pay (whether by way of deduction from earnings or otherwise) an amount of money for that use, and
(b) pays that amount on or before 6 July following that year.
(2) The amount of the deduction is—
(a) the amount paid as mentioned in subsection (1)(b) by the employee in respect of the year, or
(b) if less, the amount that would reduce the relevant amount to nil.
(3) In this section the reference to the van being available for the employee’s private use includes a reference to the van being available for the private use of a member of the employee’s family or household.”
(74) Section 160 (benefit of van fuel treated as earnings) is amended as follows.
(75) In subsection (1)(b), after “154” insert “or 154A”.
(76) At the end insert—
“(5) This section is subject to section 160A.”
(77) After section 160 insert—
“160A Benefit of van fuel treated as earnings: optional remuneration arrangements
(1) This section applies if—
(a) fuel is provided for a van in a tax year by reason of an employee’s employment,
(b) the benefit of the fuel is provided pursuant to optional remuneration arrangements, and
(c) the employee is chargeable to tax in respect of the van in the tax year by virtue of section 154 or 154A.
(2) If the condition in subsection (3) is met—
(a) the amount foregone with respect to the benefit of the fuel (see section 69B) is to be treated as earnings from the employment for that year, and
(b) section 160(1) does not apply.
(3) The condition mentioned in subsection (2) is that the amount foregone with respect to the benefit of the fuel is greater than the cash equivalent of the benefit of the fuel.
(4) For the purposes of subsection (3), assume that the cash equivalent of the benefit of the fuel is zero if the condition mentioned in subsection (5) is met.
(5) The condition mentioned in subsection (4) is that the benefit of the fuel would be exempt from income tax but for section 228A (exclusion of certain exemptions).
(6) Where it is necessary for the purposes of subsections (2)(a) and (3) to apportion an amount of earnings to the benefit of the fuel in the tax year, the apportionment is to be made on a just and reasonable basis. In this subsection “earnings” is to be interpreted in accordance with section 69B(5).”
(78) In section 170 (orders etc relating to Chapter 6 of Part 3), in subsection (1)—
(a) after paragraph (c) insert—
“(ca) section 132A(5)(b) (corresponding provision with respect to optional remuneration arrangements),”;
(b) omit “or” at the end of paragraph (d);
(c) after paragraph (e) insert—
“(f) section 147A(1)(b) (classic car: minimum value: optional remuneration arrangements).”
(79) In section 173 (loans to which Chapter 7 applies), in subsection (1A)(b), for the words from “provide” to the end substitute “make provision about amounts which, in the case of a taxable cheap loan, are to be treated as earnings in certain circumstances”.
(80) In section 175 (benefit of taxable cheap loan treated as earnings), for subsection (1) substitute—
“(A1) This section applies where an employment-related loan is a taxable cheap loan in relation to a tax year.
(1) The cash equivalent of the benefit of the loan is to be treated as earnings from the employee’s employment for the tax year.
(1A) If the benefit of the loan is provided pursuant to optional remuneration arrangements and the condition in subsection (1B) is met—
(a) subsection (1) does not apply, and
(b) the relevant amount (see section 175A) is to be treated as earnings from the employee’s employment for the tax year.
(1B) The condition is that the amount foregone with respect to the benefit of the loan for the tax year (see section 69B) is greater than the modified cash equivalent of the benefit of the loan for the tax year (see section 175A).”
(81) After section 175 insert—
“175A Optional remuneration arrangements: “relevant amount” and “modified cash equivalent”
(1) In section 175(1A) “the relevant amount”, in relation to a loan the benefit of which is provided pursuant to optional remuneration arrangements, means the difference between—
(a) the amount foregone (see section 69B) with respect to the benefit of the loan, and
(b) the amount of interest (if any) actually paid on the loan for the tax year.
(2) For the purposes of section 175 the “modified cash equivalent” of the benefit of an employment-related loan for a tax year is the amount which would be the cash equivalent if section 175(3) had effect with the following modifications—
(a) in the opening words, omit “the difference between”;
(b) omit paragraph (b) and the “and” before it.”
(3) But the modified cash equivalent of the benefit of the loan is to be taken to be zero if the condition in subsection (4) is met.
(4) The condition is that the benefit of the loan for the tax year would be exempt from income tax but for section 228A (exclusion of certain exemptions).
(5) For the purpose of calculating the modified cash equivalent of the benefit of an employment-related loan, assume that section 186(2) (replacement loans: aggregation) and section 187(3) (aggregation of loans by close company to a director) do not have effect.
(6) Where it is necessary for the purposes of section 175(1B) and subsection (1) of this section to apportion an amount of earnings to the benefit of the loan for the tax year, the apportionment is to be made on a just and reasonable basis.
In this subsection “earnings” is to be interpreted in accordance with section 69B(5).”
(82) In section 180 (threshold for benefit of loan to be treated as earnings), in subsection (1), for the words before paragraph (a) substitute “Section 175 does not have effect in relation to an employee and a tax year—”.
(83) In section 184 (interest treated as paid), in subsection (1), for the words from “the cash equivalent” to the end substitute “—
(a) the cash equivalent of the benefit of a taxable cheap loan is treated as earnings from an employee’s employment for a tax year under section 175(1), or
(b) the relevant amount in respect of the benefit of a taxable cheap loan is treated as earnings from an employee’s employment for a tax year under section 175(1A).”
(84) In section 202 (excluded benefits), after subsection (1) insert—
“(1A) But a benefit provided to an employee or member of an employee’s family or household is to be taken not to be an excluded benefit by virtue of subsection (1)(c) so far as it is provided under optional remuneration arrangements.”
(85) After section 203 insert—
“203A Employment-related benefit provided under optional remuneration arrangements
(1) Where an employment-related benefit is provided pursuant to optional remuneration arrangements—
(a) the relevant amount is to be treated as earnings from the employment for the tax year in which the benefit is provided, and
(b) section 203(1) does not apply.
(2) To find the relevant amount, first determine which (if any) is the greater of—
(a) the cost of the employment-related benefit, and
(b) the amount foregone with respect to the benefit (see section 69B).
(3) If the cost of the employment-related benefit is greater than or equal to the amount foregone, the “relevant amount” is the cash equivalent (see section 203(2)).
(4) Otherwise, the “relevant amount” is—
(a) the amount foregone with respect to the employment-related benefit, less
(b) any part of the cost of the benefit made good by the employee, to the persons providing the benefit, on or before 6 July following the tax year in which it is provided.
(5) For the purposes of subsections (2) and (3), assume that the cost of the employment-related benefit is zero if the condition in subsection (6) is met.
(6) The condition is that the employment-related benefit would be exempt from income tax but for section 228A (exclusion of certain exemptions).
(7) Where it is necessary for the purposes of subsections (2)(b) and (4) to apportion an amount of earnings to the benefit provided in the tax year, the apportionment is to be made on a just and reasonable basis.
In this subsection “earnings” is to be interpreted in accordance with section 69B(5).”
(86) In Part 4 of the Income Tax (Earnings and Pensions) Act 2003 (employment income: exemptions), after section 228 insert—
“228A General exclusion from exemptions: optional remuneration arrangements
(1) A relevant exemption does not apply (whether to prevent liability to income tax from arising or to reduce liability to income tax) in respect of a benefit or facility so far as the benefit or facility is provided pursuant to optional remuneration arrangements.
(2) For the purposes of subsection (1) it does not matter whether the relevant exemption would (apart from that subsection) have effect as an employment income exemption or an earnings-only exemption.
(3) For the purposes of this section an exemption conferred by this Part is a “relevant exemption” unless it is—
(a) a special case exemption (see subsection (4)), or
(b) an excluded exemption (see subsection (5)).
(4) “Special case exemption” means an exemption conferred by any of the following provisions—
(a) section 289A (exemption for paid or reimbursed expenses);
(b) section 289D (exemption for other benefits);
(c) section 308B (independent advice in respect of conversions and transfers of pension scheme benefits);
(d) section 312A (limited exemption for qualifying bonus payments);
(e) section 317 (subsidised meals);
(f) section 320C (recommended medical treatment);
(g) section 323A (trivial benefits provided by employers).
(5) “Excluded exemption” means an exemption conferred by any of the following provisions—
(a) section 239 (payments and benefits connected with taxable cars and vans and exempt heavy goods vehicles);
(b) section 244 (cycles and cyclist’s safety equipment);
(c) section 266(2)(c) (non-cash voucher regarding entitlement to exemption within section 244);
(d) section 270A (limited exemption for qualifying childcare vouchers);
(e) section 308 (exemption of contribution to registered pension scheme);
(f) section 308A (exemption of contributions to overseas pension scheme);
(g) section 308C (provision of pensions advice);
(h) section 309 (limited exemptions for statutory redundancy payments);
(i) section 310 (counselling and other outplacement services);
(j) section 311 (retraining courses);
(k) section 318 (childcare: exemption for employer-provided care);
(l) section 318A (childcare: limited exemption for other care).
(6) In this section “benefit or facility” includes anything which constitutes employment income or in respect of which employment income is treated as arising to the employee (regardless of its form and the manner of providing it).
(7) In this section “optional remuneration arrangements” has the same meaning as in the benefits code (see section 69A).
(8) The Treasury may by order amend subsections (4) and (5) by adding or removing an exemption conferred by Part 4.”
(87) Section 19 of the Income Tax (Earnings and Pensions) Act 2003 (receipt of non-money earnings) is amended as follows.
(88) In subsection (2), after “94” insert “or 94A”.
(89) In subsection (3), after “87” insert “or 87A”.
(90) In section 95 of the Income Tax (Earnings and Pensions) Act 2003 (disregard for money, goods or services obtained), in subsection (1), in the words before paragraph (a), after “credit-token” insert “or the relevant amount in respect of a cash voucher, a non-cash voucher or a credit-token”.
(91) In section 236 of the Income Tax (Earnings and Pensions) Act 2003 (interpretation of Chapter 2 of Part 4: exemptions for mileage allowance relief etc), in subsection (2)(b)—
(a) in the words before sub-paragraph (i), for “the cash equivalent of” substitute “an amount in respect of”;
(b) in sub-paragraph (i), after “120” insert “or 120A”;
(c) in sub-paragraph (ii), after “154” insert “or 154A”;
(d) in sub-paragraph (iii), after “203” insert “or 203A”.
(92) In section 236 of the Income Tax (Earnings and Pensions) Act 2003 (interpretation of Chapter 2 of Part 4), in subsection (2)(c), for “the cash equivalent of” substitute “an amount in respect of”.
(93) Section 239 of the Income Tax (Earnings and Pensions) Act 2003 (payments and benefits connected with taxable cars and vans etc) is amended as follows.
(94) In subsection (3)—
(a) after “149” insert “or 149A”;
(b) after “160” insert “or 160A”.
(95) In subsection (6), for “the cash equivalent of” substitute “an amount (whether the cash equivalent or the relevant amount) in respect of”.
(96) In section 362 of the Income Tax (Earnings and Pensions) Act 2003 (deductions where non-cash voucher provided), in subsection (1)(a), for “87(1) (cash equivalent” substitute “87(1) or 87A(1) (amount in respect”.
(97) In section 318A of the Income Tax (Earnings and Pensions) Act 2003 (childcare: limited exemption for other care), in subsection (1)(b), for “cash equivalent of the benefit” substitute “amount treated as earnings in respect of the benefit by virtue of section 203(1) or 203A(1) (as the case may be)”.
(98) In section 363 of the Income Tax (Earnings and Pensions) Act 2003 (deductions where credit-token provided), in subsection (1)(a), for “94(1) (cash equivalent” substitute “94(1) or 94A(1) (amount in respect”.
(99) In section 693 of the Income Tax (Earnings and Pensions) Act 2003 (cash vouchers), in subsection (1), for “section 81(2)” substitute “subsection (2) of, or (as the case may be) referred to in subsection (1A)(b) of, section 81”.
(100) In section 694 of the Income Tax (Earnings and Pensions) Act 2003 (non-cash vouchers), in subsection (1), after “87(2)” insert “or 87A(4)”.
(101) In section 695 of the Income Tax (Earnings and Pensions) Act 2003 (benefit of credit-token treated as earnings), after subsection (1) insert—
“(1A) If the credit-token is provided pursuant to optional remuneration arrangements, the reference in subsection (1) to the amount ascertained under section 94(2) is to be read as a reference to what that amount would be were the credit-token provided otherwise than pursuant to optional remuneration arrangements.
In this subsection “optional remuneration arrangements” is to be interpreted in accordance with section 69A.”
(102) In Part 2 of Schedule 1 to the Income Tax (Earnings and Pensions) Act 2003 (index of defined expressions), at the appropriate places insert—
(103) In Part 2 of Schedule 1 to the Income Tax (Earnings and Pensions) Act 2003 (index of defined expressions), in the entry relating to “the taxable period”, for “102(2)” substitute “102(1)”.
(104) The amendments made by paragraphs (1), (91)(a), (92) and (102) of this Resolution have effect for the tax year 2017-18 and subsequent tax years.
(105) The amendments made by paragraphs (2) to (90), (91)(b) to (d), (93) to (101) and (103) of this Resolution have effect for the tax year 2017-18 and subsequent tax years.
(106) But paragraph (105) does not apply in relation to benefits provided pursuant to pre-6 April 2017 arrangements.
(107) In relation to a benefit provided pursuant to pre-6 April 2017 arrangements, the amendment made by paragraph (86) has effect for the tax year 2018-19 and subsequent tax years.
(108) In relation to a benefit provided pursuant to pre-6 April 2017 arrangements, the amendments made by paragraphs (9) to (78), (91)(b) and (c), (93) to (95) and (103) (and paragraph (2), so far as relating to those paragraphs) have effect for the tax year 2021-22 and subsequent tax years.
(109) In relation to a benefit provided pursuant to pre-6 April 2017 arrangements, the amendments made by paragraphs (3) to (8), (79) to (85), (87) to (90), (91)(d) and (96) to (101) (and paragraph (2), so far as relating to those paragraphs) have effect for the tax year 2018-19 and subsequent tax years (but see paragraph (115)).
(110) If any terms of a pre-6 April 2017 arrangement which relate to the provision of a particular benefit are varied on or after 6 April 2017, that benefit is treated, with effect from the beginning of the day on which the variation takes effect, as not being provided pursuant to pre-6 April 2017 arrangements for the purposes of this Resolution.
(111) If pre-6 April 2017 arrangements are renewed on or after 6 April 2017, this Resolution has effect as if those arrangements were entered into at the beginning of the day on which the renewal takes effect (and are distinct from the arrangements existing immediately before that day).
(112) In paragraph (111) the reference to renewal includes a renewal which takes effect automatically.
(113) In paragraph (110) the reference to variation does not include any variation which is required in connection with accidental damage to a benefit provided under the arrangements, or otherwise for reasons beyond the control of the parties to the arrangements.
(114) In paragraph (110) the reference to variation does not include any variation which occurs in connection with a person’s entitlement to statutory sick pay, statutory maternity pay, statutory adoption pay, statutory paternity pay or statutory shared parental pay.
(115) In relation to relevant school fee arrangements which were entered into before 6 April 2017—
(a) paragraph (109) is to be read as if it did not include a reference to paragraph (85);
(b) the amendment made by paragraph (85) has effect for the tax year 2021-22 and subsequent tax years.
(116) Relevant school fee arrangements to which an employee is a party (“the continuing arrangements”) are to be regarded for the purposes of this Resolution as the same arrangements as any relevant school fee arrangements to which the employee was previously a party (“the previous arrangements”) if the continuing arrangements and the previous arrangements relate—
(a) to employment with the same employer,
(b) to the same school, and
(c) to school fees in respect of the same child.
(117) Paragraphs (110) and (111) do not have effect in relation to relevant school fee arrangements.
(118) If a non-cash voucher is provided under pre-6 April 2017 arrangements and is used to obtain anything (whether money, goods or services) that is provided on or after 6 April 2018 (“delayed benefits”), so much of the benefit of the voucher as it is reasonable to regard as being applied to obtain the delayed benefits is to be treated for the purposes of this Resolution as not having been provided pursuant to pre-6 April 2017 arrangements.
(119) For the purposes of this Resolution arrangements are “relevant school fee arrangements” if the benefit mentioned in section 69A(1) of the Income Tax (Earnings and Pensions) Act 2003 consists in the payment or reimbursement (in whole or in part) of, or a waiver or reduction of, school fees.
(120) In this Resolution—
(a) “arrangements” means optional remuneration arrangements (as defined in section 69A of the Income Tax (Earnings and Pensions) Act 2003);
(b) “benefit” includes any benefit or facility, regardless of the manner of providing it;
(c) “non-cash voucher” has the same meaning as in Chapter 4 of Part 3 of the Income Tax (Earnings and Pensions) Act 2003;
(d) “pre-6 April 2017 arrangements” means arrangements which are entered into before 6 April 2017.
And it is declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.
9. TAXABLE BENEFITS (MAKING GOOD)
Resolved,
That provision may be made about making good the cost of taxable benefits.
10. Taxable Benefits (Assets made available without transfer)
Resolved,
That—
(1) The Income Tax (Earnings and Pensions) Act 2003 is amended as follows.
(2) In section 205 (cost of taxable benefit subject to the residual charge: asset made available without transfer)—
(a) in subsection (1), for paragraph (a) substitute—
“(a) the benefit consists in an asset being made available for private use, and”,
(b) after subsection (1) insert—
“(1A) In this section and section 205A, “private use” means private use by the employee or a member of the employee’s family or household.
(1B) ) For the purposes of subsection (1) and sections 205A and 205B, an asset made available in a tax year for use by the employee or a member of the employee’s family or household is to be treated as made available throughout the year for private use unless—
(a) at all times in the year when it is available for use by the employee or a member of the employee’s family or household, the terms under which it is made available prohibit private use, and
(b) no private use is made of it in the year.
(1C) The cost of the taxable benefit is—
(a) the annual cost of the benefit determined in accordance with subsection (2), less
(b) any amount required to be deducted by section 205A (deduction for periods when asset unavailable for private use).
(1D) In certain cases, the cost of the taxable benefit is calculated under this section in accordance with section 205B (reduction of cost of taxable benefit where asset is shared).”, and
(c) in subsection (2), in the words before paragraph (a), for “cost of the taxable” substitute “annual cost of the”.
(3) After section 205 insert—
“Deduction for periods when asset unavailable for private use
(1) A deduction is to be made under section 205(1C)(b) if the asset mentioned in section 205(1) has been unavailable for private use on any day during the tax year concerned.
(2) For the purposes of this section an asset is “unavailable” for private use on any day if—
(a) that day falls before the day on which the asset is first available to the employee,
(b) that day falls after the day on which the asset is last available to the employee,
(c) for more than 12 hours during that day the asset—
(i) is not in a condition fit for use,
(ii) is undergoing repair or maintenance,
(iii) could not lawfully be used,
(iv) is in the possession of a person who has a lien over it and who is not the employer, not a person connected with the employer, not the employee, not a member of the employee’s family and not a member of the employee’s household, or
(v) is used in a way that is neither use by, nor use at the direction of, the employee or a member of the employee’s family or household, or
(d) on that day the employee—
(i) uses the asset in the performance of the duties of the employment, and
(ii) does not use the asset otherwise than in the performance of the duties of the employment.
(3) The amount of the deduction is given by—
Where—
U is the number of days, in the tax year concerned, on which the asset is unavailable for private use,
Y is the number of days in that year, and
A is the annual cost of the benefit of the asset determined under section 205(2).
(4) The reference in subsection (2)(a) to the time when the asset is first available to the employee is to the earliest time when the asset is made available, by reason of the employment and without any transfer of the property in it, for private use.
(5) The reference in subsection (2)(b) to the time when the asset is last available to the employee is to the last time when the asset is made available, by reason of the employment and without any transfer of the property in it, for private use.
205B Reduction of cost of taxable benefit where asset is shared
(1) This section applies where the cost of an employment-related benefit (“the taxable benefit”) is to be determined under section 205.
(2) If, for the whole or part of the tax year concerned, the same asset is available for more than one employee’s private use at the same time, the total of the amounts which are the cost of the taxable benefit for each of those employees is to be limited to the annual cost of the benefit of the asset determined in accordance with section 205(2).
(3) The cost of the taxable benefit for each employee is determined by taking the amount given by section 205(1C) and then reducing that amount on a just and reasonable basis.
(4) For the purposes of this section, an asset is available for an employee’s private use if it is available for private use by the employee or a member of the employee’s family or household.”
(4) In section 365 (deductions where employment-related benefit provided)—
(a) in subsection (1)—
(i) omit the “and” at the end of paragraph (a), and
(ii) after that paragraph insert—
“(aa) the cost of the benefit was determined under section 204 or 206, and”,
(b) in subsection (3), for “sections 204 to 206” substitute “section 204 or 206”, and
(c) in the heading, for “employment-related benefit” substitute “certain employment-related benefits”.
(5) The amendments made by this Resolution have effect for the tax year 2017-18 and subsequent tax years.
And it is declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.
11. Pensions
Resolved,
That provision may be made about the taxation of pensions.
12. Pensions (Offshore Transfers)
Resolved,
That—
(1) Schedule 34 to the Finance Act 2004 (non-UK pension schemes: application of certain charges) is amended as follows.
(2) Paragraph 1 (application of member payment charges to relevant non-UK schemes) is amended as follows.
(3) After sub-paragraph (6) insert—
“(6A) There are three types of relevant transfer—
(a) an original relevant transfer,
(b) a subsequent relevant transfer, and
(c) any other (including, in particular, all relevant transfers before 9 March 2017).
(6B) “An original relevant transfer” is—
(a) a relevant transfer within sub-paragraph (6)(a) made on or after 9 March 2017,
(b) a relevant transfer within sub-paragraph (6)(b), made on or after 9 March 2017, of the whole or part of the UK tax-relieved fund of a relieved member of a qualifying recognised overseas pension scheme, or
(c) a relevant transfer within sub-paragraph (6)(b), made on or after 6 April 2017, of the whole or part of the UK tax-relieved fund of a relieved member of a relevant non-UK scheme that is not a qualifying recognised overseas pension scheme.
(6C) The sums or assets transferred as a result of an original relevant transfer constitute a ring-fenced transfer fund, and the key date for that fund is the date of the transfer.
(6D) Where in the case of a ring-fenced transfer fund (“the source fund”) there is a relevant transfer of the whole or part of the fund—
(a) the sums or assets transferred as a result of the transfer constitute a ring-fenced transfer fund,
(b) that fund has the same key date as the source fund, and
(c) the transfer is “a subsequent relevant transfer”, and is not an original relevant transfer.
(6E) Sub-paragraph (6D) applies whether the source fund is a ring-fenced transfer fund as a result of sub-paragraph (6C) or as a result of sub-paragraph (6D).
(6F) The Commissioners for Her Majesty’s Revenue and Customs may by regulations provide that sums or assets identified in accordance with the regulations are not included in a ring-fenced transfer fund as a result of sub-paragraph (6D)(a).”
(4) Paragraph 2 (member payment provisions apply to payments out of non-UK schemes if member is UK resident or has been UK resident in any of the preceding 5 tax years) is amended as follows.
(5) The existing text becomes sub-paragraph (1).
(6) In that sub-paragraph, after “scheme” insert “so far as it is referable to 5-year-rule funds”.
(7) After that sub-paragraph insert—
“(2) The member payment provisions do not apply in relation to a payment made (or treated by this Part as made) to or in respect of a relieved member of a relevant non-UK scheme so far as it is referable to 10-year rule funds unless the member—
(a) is resident in the United Kingdom when the payment is made (or treated as made), or
(b) although not resident in the United Kingdom at that time, has been resident in the United Kingdom earlier in the tax year in which the payment is made (or treated as made) or in any of the 10 tax years immediately preceding that year.
(3) The member payment provisions do not apply in relation to a payment made (or treated by this Part as made) to or in respect of a transfer member of a relevant non-UK scheme, so far as it is referable to any particular ring-fenced transfer fund of the member’s under the scheme which has a key date of 6 April 2017 or later, unless—
(a) the member is resident in the United Kingdom when the payment is made (or treated as made), or
(b) although the member is not resident in the United Kingdom at that time—
(i) the member has been resident in the United Kingdom earlier in the tax year containing that time, or
(ii) the member has been resident in the United Kingdom in any of the 10 tax years immediately preceding the tax year containing that time, or
(iii) that time is no later than the end of 5 years beginning with the key date for the particular fund.
(4) In this paragraph—
“5-year rule funds”, in relation to a payment to or in respect of a relieved member of a relevant non-UK scheme, means so much of the member’s UK tax-relieved fund under the scheme as represents tax-relieved contributions, or tax-exempt provision, made under the scheme before 6 April 2017;
“5-year rule funds”, in relation to a payment to or in respect of a transfer member of a relevant non-UK scheme, means—
(a) the member’s relevant transfer fund under the scheme, and
(b) any of the member’s ring-fenced transfer funds under the scheme that has a key date earlier than 6 April 2017;
“10-year rule funds”, in relation to a payment to or in respect of a relieved member of a relevant non-UK scheme, means so much of the member’s UK tax-relieved fund under the scheme as represents tax-relieved contributions, or tax-exempt provision, made under the scheme on or after 6 April 2017.
(5) See also—
paragraph 1(6C), (6D) and (6F) (meaning of “ring-fenced transfer fund”),
paragraph 3 (meaning of “UK tax-relieved fund”, “tax-relieved contributions” and “tax-exempt provision” etc), and
paragraph 4 (meaning of “relevant transfer fund” etc).”
(8) Paragraph 3 (payments to or in respect of relieved members of schemes) is amended as follows.
(9) After sub-paragraph (5) insert—
“(5A) The Commissioners for Her Majesty’s Revenue and Customs may by regulations provide that, in circumstances specified in the regulations, something specified in the regulations is to be treated as done by, to in respect of or in the case of a relieved member of a relevant non-UK scheme.”
(10) In sub-paragraph (6) (power to specify whether payments by scheme are referable to UK tax-relieved fund) after “payments made (or treated as made) by” insert “, or other things done by or to or under or in respect of or in the case of,”.
(11) After sub-paragraph (7) insert—
“(8) Where regulations under sub-paragraph (6) make provision for a payment or something else to be treated as referable to a member’s UK tax-relieved fund under a scheme, regulations under that sub-paragraph may make provision for the payment or thing, or any part or aspect of the payment or thing, also to be treated as referable to a particular part of that fund.”
(12) Paragraph 4 (payments to or in respect of transfer members of schemes) is amended as follows.
(13) In sub-paragraph (1), after “relevant transfer fund” insert “, or ring-fenced transfer funds,”.
(14) In sub-paragraph (2) (meaning of “relevant transfer fund”), before “so much of” insert “, subject to sub-paragraph (3A),”.
(15) After sub-paragraph (3) insert—
“(3A) The member’s relevant transfer fund under the scheme does not include sums or assets that are in any of the member’s ring-fenced transfer funds under the scheme.”
(16) After sub-paragraph (4) insert—
“(5) The Commissioners for Her Majesty’s Revenue and Customs may by regulations provide that, in circumstances specified in the regulations, something specified in the regulations is to be treated as done by, to, in respect of or in the case of a transfer member of a relevant non-UK scheme.
(6) Regulations made by the Commissioners for Her Majesty’s Revenue and Customs may make provision for determining whether payments or transfers made (or treated as made) by, or other things done by or to or under or in respect of or in the case of, a relevant non-UK scheme are to be treated as referable to a member’s ring-fenced transfer funds under the scheme (and so whether or not they reduce the funds or any of them).
(7) Where regulations under sub-paragraph (6) make provision for a payment or transfer or something else to be treated as referable to a member’s ring-fenced transfer funds under a scheme, regulations under that sub-paragraph may make provision for the payment or transfer or other thing, or any part or aspect of the payment or transfer or thing, also to be treated as referable to a particular one of those funds.
(17) In paragraph 7(2)(c) (regulations about application of member payment provisions), after “relevant transfer fund” insert “or ring-fenced transfer funds”.
(18) Paragraph 9ZB (application of section 227G) is amended as follows.
(19) In sub-paragraph (2), after “relevant transfer fund” insert “or ring-fenced transfer funds”.
(20) After sub-paragraph (3) insert—
“(4) The reference in sub-paragraph (2) to the individual’s ring-fenced transfer funds under the relevant non-UK scheme is to be read in accordance with paragraph 1.”
(21) The amendments made by paragraphs (4) to (7) of this Resolution apply in relation to payments made (or treated as made) on or after 6 April 2017, and the amendments made by paragraphs (3) and (8) to (20) of this Resolution come into force on 9 March 2017.
(22) Section 576A of the Income Tax (Earnings and Pensions) Act 2003 (as it applies where the year of departure is the tax year 2013-14 or a later tax year) is amended as follows.
(23) In subsection (6)(b) (pension income: temporary non-residents: non-application where payment not referable to relevant transfer fund)—
(c) for “not referable” substitute “referable neither”, and
(d) after “relevant transfer fund” insert “, nor to the member’s ring-fenced transfer funds,”.
(24) In subsection (10) (interpretation), at the end insert—
““member’s ring-fenced transfer fund” (see paragraph 1(6C) and (6D).”
(25) Section 576A of the Income Tax (Earnings and Pensions) Act 2003, as it applies where the year of departure is the tax year 2012-13 or an earlier tax year, is amended as follows.
(26) In subsection (6) (pension income: temporary non-residents: non-application unless payment referable to relevant transfer fund), after “member’s relevant transfer fund” insert “, or the member’s ring-fenced transfer funds,”.
(27) In subsection (8) (interpretation), before the definition of “scheme pension” insert—
““member’s ring-fenced transfer funds” has the same meaning as in that Schedule (see paragraph 1(6C) and (6D));”.
(28) The amendments made by paragraphs (22) to (27) of this Resolution apply in relation to relevant withdrawals on or after 6 April 2017.
(29) In Part 4 of the Finance Act 2004 (pension schemes etc), after section 244 insert—
“Non-UK schemes: the overseas transfer charge
244A Overseas transfer charge
(1) A charge to income tax, to be known as the overseas transfer charge, arises where—
(a) a recognised transfer is made to a QROPS, or
(b) an onward transfer is made during the relevant period for the original transfer, and
and the transfer is not excluded from the charge by or under any of sections 244B to 244H.
(2) Sections 244B to 244H are subject to section 244I (circumstances in which exclusions do not apply).
(3) In this group of sections, an “onward transfer” is a transfer of sums or assets held for the purposes of, or representing accrued rights under, an arrangement under a QROPS or former QROPS in relation to a member so as to become held for the purposes of, or to represent rights under, an arrangement under another QROPS in relation to that person as a member of that other QROPS.
(4) In this group of sections “relevant period” means—
(a) in the case of a recognised transfer made on 6 April in any year, the 5 years beginning with the date of the transfer,
(b) in the case of any other recognised transfer, the period consisting of the combination of—
(i) the period beginning with the date of the transfer and ending with the next 5 April, and
(ii) the 5 years beginning at the end of that initial period,
(c) in the case of an onward transfer, the period—
(i) beginning with the date of the transfer, and
(ii) ending at the end of the relevant period for the original transfer (see paragraphs (a) and (b) or, as the case may be, paragraphs (d) and (e)),
(d) in the case of a relevant transfer that—
(i) is made on 6 April in any year, and
(ii) is the original transfer for an onward transfer,
the 5 years beginning with the date of the relevant transfer, and
(e) in the case of a relevant transfer that—
(i) is made otherwise than on 6 April in any year, and
(ii) is the original transfer for an onward transfer,
the period consisting of the combination of: the period beginning with the date of the relevant transfer and ending with the next 5 April; and the 5 years beginning at the end of that initial period.
(5) In this group of sections “the original transfer”, in relation to an onward transfer, means (subject to subsection (6))—
(a) the recognised transfer in respect of which the following conditions are met—
(i) it is from a registered pension scheme to a QROPS,
(ii) the sums and assets transferred by the onward transfer directly or indirectly derive from those transferred by it, and
(iii) it is more recent than any other recognised transfer in respect of which the conditions in sub-paragraphs (i) and (ii) are met, or
(b) where there is no such recognised transfer, the relevant transfer (see paragraph 1(6) of Schedule 34) in respect of which the following conditions are met—
(i) it is from a relevant non-UK scheme (see paragraph 1(5) of Schedule 34),
(ii) it is a transfer of the whole or part of the UK-tax relieved fund (see paragraph 3 of Schedule 34) of a member of the scheme,
(iii) it is to a QROPS, and
(iv) the sums and assets transferred by the onward transfer directly or indirectly derive from those transferred by it.
(6) Where apart from this subsection there would be different original transfers for different parts of an onward transfer, each such part of the onward transfer is to be treated as a separate onward transfer for the purposes of this group of sections.
(7) In this section and sections 244B to 244N—
“QROPS” means a qualifying recognised overseas pension scheme, and “former QROPS” means a scheme that has at any time been a QROPS;
“ring-fenced transfer fund”, in relation to a QROPS or former QROPS, has the meaning given by paragraph 1 of Schedule 34;
“this group of sections” means this section and sections 244B to 244N.
244B Exclusion: member and receiving scheme in same country
(1) A recognised transfer to a QROPS is excluded from the overseas transfer charge if during the relevant period—
(a) the member is resident in the country or territory in which the QROPS is established, and
(b) there is no onward transfer—
(i) for which the recognised transfer is the original transfer, and
(ii) which is not excluded from the charge.
(2) If the member is resident in that country or territory at the time of the transfer mentioned in subsection (1), it is to be assumed for the purposes of subsection (1) that the member will be resident in that country or territory during the relevant period; but if, at a time before the end of the relevant period, the transfer ceases to be excluded by subsection (1) otherwise than by reason of the member’s death—
(a) that assumption is from that time no longer to be made, and
(b) the charge on the transfer is treated for the purposes of sections 244L and 254 as charged at that time.
(3) An onward transfer to a QROPS (“transfer A”) is excluded from the overseas transfer charge if during so much of the relevant period as is after the time of the transfer A—
(a) the member is resident in the country or territory in which the QROPS is established, and
(b) there is no subsequent onward transfer that—
(i) is of sums and assets which, in whole or part, directly or indirectly derive from those transferred by transfer A, and
(ii) is not excluded from the charge.
(4) If the member is resident in that country or territory at the time of transfer A, it is to be assumed for the purposes of subsection (3) that the member will be resident in that country or territory during so much of the relevant period as is after the time of transfer A; but if, at a time before the end of the relevant period, the transfer ceases to be excluded by subsection (3) otherwise than by reason of the member’s death—
(a) that assumption is from that time no longer to be made, and
(b) the charge on transfer A is treated for the purposes of sections 244L and 254 as charged at that time.
244C Exclusion: member and receiving scheme in EEA states
(1) This section applies to a transfer to a QROPS established in an EEA state.
(2) If the transfer is a recognised transfer, the transfer is excluded from the overseas transfer charge if during the relevant period—
(a) the member is resident in an EEA state (whether or not the same EEA state throughout that period), and
(b) there is no onward transfer—
(i) for which the recognised transfer is the original transfer, and
(ii) which is not excluded from the charge.
(3) If the member is resident in an EEA state at the time of the recognised transfer mentioned in subsection (2), it is to be assumed for the purposes of this section that the member will be resident in an EEA state during the relevant period; but if, at a time before the end of the relevant period, the transfer ceases be excluded by subsection (2) otherwise than by reason of the member’s death—
(a) that assumption is from that time no longer to be made, and
(b) the charge on the transfer is treated for the purposes of sections 244L and 254 as charged at that time.
(4) If the transfer is an onward transfer (“transfer B”), the transfer is excluded from the overseas transfer charge if during so much of the relevant period as is after the time of the onward transfer—
(a) the member is resident in an EEA state (whether or not the same EEA state at all of those times), and
(b) there is no subsequent onward transfer that—
(i) is of sums and assets which, in whole or part, directly or indirectly derive from those transferred by transfer B, and
(ii) is not excluded from the charge.
(5) If the member is resident in an EEA state at the time of transfer B, it is to be assumed for the purposes of subsection (4) that the member will be resident in an EEA state during so much of the relevant period as is after the time of transfer B; but if, at a time before the end of the relevant period, the transfer ceases to be excluded by subsection (4) otherwise than by reason of the member’s death—
(a) that assumption is from that time no longer to be made, and
(b) the charge on transfer B is treated for the purposes of sections 244L and 254 as charged at that time.
244D Exclusion: receiving scheme is an occupational pension scheme
A transfer to a QROPS is excluded from the overseas transfer charge if—
(a) the QROPS is an occupational pension scheme, and
(b) when the transfer is made, the member is an employee of a sponsoring employer of the QROPS.
244E Exclusion: receiving scheme set up by international organisation
(1) A transfer to a QROPS is excluded from the overseas transfer charge if—
(a) the QROPS is established by an international organisation and has effect so as to provide benefits for, or in respect of, past service as an employee of the organisation, and
(b) when the transfer is made, the member is an employee of the organisation.
(2) In this section “international organisation” means an organisation to which section 1 of the International Organisations Act 1968 applies by virtue of an Order in Council under subsection (1) of that section.
244F Exclusion: receiving scheme is an overseas public service scheme
(1) A transfer to a QROPS is excluded from the overseas transfer charge if—
(a) the QROPS is an overseas public service pension scheme, and
(b) when the transfer is made, the member is an employee of an employer that participates in the scheme.
(2) A QROPS is an “overseas public service pension scheme” for the purposes of this section if—
(a) either—
(i) it is established by or under the law of the country or territory in which it is established, or
(ii) it is approved by the government of that country or territory, and
(b) it is established solely for the purpose of providing benefits to individuals for or in respect of services rendered to—
(i) that country or territory, or
(ii) any political subdivision or local authority of that country or territory.
(3) For the purposes of this section, an employer participates in a QROPS that is an overseas public service pension scheme if the scheme has effect so as to provide benefits to or in respect of any or all of the employees of the employer in respect of their employment by the employer.
244G Exclusions: avoidance of double charge, and transitional protections
(1) A recognised transfer to a QROPS is excluded from the overseas transfer charge if it is made in execution of a request made before 9 March 2017.
(2) An onward transfer (“the current onward transfer”) is excluded from the overseas transfer charge if—
(a) the charge was paid on the original transfer and the amount paid is not repayable, or
(b) the charge was paid on an onward transfer (“the earlier onward transfer”) in respect of which the conditions in subsection (4) are met and the amount paid is not repayable, or
(c) the original transfer was made before 9 March 2017, or
(d) the original transfer was made on or after 9 March 2017 in execution of a request made before 9 March 2017.
(3) An onward transfer is excluded from the overseas transfer charge so far as the transfer is made otherwise than out of the member’s ring-fenced transfer funds under the scheme from which the onward transfer is made.
(4) The conditions mentioned in subsection (2)(b) are—
(a) that the earlier onward transfer was made before the current onward transfer,
(b) that the earlier onward transfer was made after the original transfer, and
(c) that all the sums and assets transferred by the current onward transfer directly or indirectly derive from those transferred by the earlier onward transfer.
244H Power to provide for further exclusions
The Commissioners for Her Majesty’s Revenue and Customs may by regulations make provision for a recognised transfer to a QROPS, or an onward transfer, to be excluded from the overseas transfer charge if the transfer is of a description specified in the regulations.
244I Circumstances in which exclusions do not apply
(1) Subsection (2) applies if a recognised transfer to a QROPS, or an onward transfer, would (but for this section) be excluded from the overseas transfer charge by any of sections 244B to 244F.
(2) The transfer is not excluded from the charge if the member has, in connection with the transfer, failed to comply with the relevant information regulation.
(3) In subsection (2) “the relevant information regulation” means whichever of the following is applicable—
(a) regulation 11BA of the Registered Pension Schemes (Provision of Information) Regulations 2006 (S.I. 2006/567), or any regulation having effect in place of any of that regulation, as (in either case) from time to time amended, and
(b) regulation 3AE of the Pension Schemes (Information Requirements for Qualifying Overseas Pension Schemes, Qualifying Recognised Overseas Pension Schemes and Corresponding Relief) Regulations 2006 (S.I. 2006/208), or any regulation having effect in place of any of that regulation, as (in either case) from time to time amended.
244J Persons liable to charge
(1) In the case of a recognised transfer to a QROPS, the persons liable to the overseas transfer charge are—
(a) the scheme administrator of the registered pension scheme from which the transfer is made, and
(b) the member
and their liability is joint and several.
(2) In the case of an onward transfer, the persons liable to the overseas transfer charge are—
(a) the scheme manager of the QROPS, or former QROPS, from which the transfer is made, and
(b) the member
and their liability is joint and several.
(3) Subsections (1) and (2) are subject to subsection (4), and subsections (2) and (4) are subject to subsection (5).
(4) If a transfer is one required by section 244B or 244C to be initially assumed to be excluded by that section but an event occurring before the end of the relevant period means that the transfer is not so excluded, the persons liable to the overseas transfer charge in the case of the transfer are—
(a) the scheme manager of any QROPS, or former QROPS, under which the member has, at the time of the event, ring-fenced transfer funds in which any of the sums and assets referred to in section 244K(6) in the case of the transfer are represented, and
(b) the member,
and their liability is joint and several.
(5) The scheme manager of a former QROPS is liable to the overseas transfer charge in the case of a transfer (“the transfer concerned”) only if the former QROPS—
(a) was a QROPS when a relevant inward transfer was made, and
(b) where a relevant inward transfer was made before 9 March 2017, was a QROPS at the start of 9 March 2017;
and here “relevant inward transfer” means a recognised or onwards transfer to the former QROPS (at a time when it was a QROPS) of sums and assets which, to any extent, are represented by sums or assets transferred by the transfer concerned.
(6) A person is liable to the overseas transfer charge whether or not—
(a) that person, and
(b) any other person who is liable to the charge,
are resident or domiciled in the United Kingdom.
244K Amount of charge
(1) Where the overseas transfer charge arises in the case of a transfer, the charge is 25% of the transferred value.
(2) If the transfer is from a registered pension scheme established in the United Kingdom, the transferred value is the total of—
(a) the amount of any sums transferred, and
(b) the value of any assets transferred,
but this is subject to subsections (5) to (9).
(3) If the transfer is from a registered pension scheme established in a country or territory outside the United Kingdom, the transferred value is the total of—
(a) the amount of any sums transferred that are attributable to UK-relieved funds of the scheme, and
(b) the value of any assets transferred that are attributable to UK-relieved funds of the scheme,
but this is subject to subsections (5) to (9).
(4) If the transfer is from a QROPS or former QROPS, the transferred value is the total of—
(a) the amount of any sums transferred that are attributable to the member’s ring-fenced transfer funds under the scheme, and
(b) the value of any assets transferred that are attributable to the member’s ring-fenced transfer funds under the scheme,
but this is subject to subsections (5) to (9).
(5) If the lifetime allowance charge arises in the case of the transfer and is to be deducted from the transfer, paragraphs (a) and (b) of subsections (2) to (4) are to be read as referring to what is to be transferred after deduction of the lifetime allowance charge.
(6) If the transfer is one initially assumed to be excluded by section 244B or 244C but an event occurring before the end of the relevant period means that the transfer is not so excluded, the sums and assets mentioned in whichever of subsections (2) to (4) is applicable include only those that at the time of the event are represented in any of the member’s ring-fenced transfer funds under any QROPS or former QROPS.
(7) If the operator pays the charge on the transfer and does so—
(a) otherwise than by deduction from the transfer, and
(b) out of sums and assets held for the purposes of, or representing accrued rights under, the scheme from which the transfer is made,
the transferred value is the amount given by subsections (2) to (6) grossed up by reference to the rate specified in subsection (1).
(8) If the operator pays the charge on the transfer and does so by deduction from the transfer, the transferred value is the amount given by subsections (2) to (6) before the deduction.
(9) If the member pays the charge on the transfer, the transferred value is the amount given by subsections (2) to (6) without any deduction for the charge.
(10) If the lifetime allowance charge arises in the case of the transfer, the provisions of this Part relating to the lifetime allowance charge apply (whether or not in relation to the transfer) as if the overseas transfer charge did not arise in the case of the transfer.
(11) In this section—
“the operator” means—
(a) the scheme administrator of the scheme from which the transfer is to be made if that scheme is a registered pension scheme, or
(b) the scheme manager of the scheme from which the transfer is to be made if that scheme is a QROPS or former QROPS;
“UK-relieved funds”, in relation to a registered pension scheme established in a country or territory outside the United Kingdom, has the meaning given by section 242B.
244L Accounting for overseas transfer charge by scheme managers
(1) In this section “charge” means overseas transfer charge for which the scheme manager of a QROPS or former QROPS is liable.
(2) The Commissioners for Her Majesty’s Revenue and Customs may by regulations make provision for or in connection with—
(a) the payment of charge, including due dates for payment,
(b) the charging of interest on charge not paid on or before its due date,
(c) notification by the scheme manager of errors in information provided by the scheme manager to the Commissioners in connection with charge or the scheme manager’s liability for overseas transfer charge,
(d) repayments to scheme managers under section 244M of amounts paid by way of charge, and
(e) the making of assessments, repayments or adjustments in cases where the correct amount of charge has not been paid by the due date for payment of the charge.
(3) The regulations may, in particular—
(a) modify the operation of any provision of the Tax Acts, or
(b) provide for the application of any provision of the Tax Acts (with or without modification).
244M Repayments of charge on subsequent excluding events
(1) This section applies if—
(a) overseas transfer charge arose on a transfer at the time the transfer was made, and
(b) at a time during the relevant period for the transfer, circumstances arise such that, had those circumstances existed at the time the transfer was made, the transfer would at the time it was made have been excluded from the charge by sections 244B to 244F or under section 244H.
(2) Any amount paid in respect of charge on the transfer is to be repaid by the Commissioners for Her Majesty’s Revenue and Customs so far as not already repaid.
(3) Subsection (2) does not give rise to entitlement to repayment of, or cancellation of liabilities to, interest or penalties in respect of late payment of charge on the transfer.
(4) Repayment under this section to the scheme administrator of a registered pension scheme, or the scheme manager of a QROPS or former QROPS, is conditional on prior compliance with any requirements to give information to the Commissioners, about the circumstances in which the right to the repayment arises, that are imposed on the prospective recipient under section 169 or 251 (but repayment is not conditional on compliance with any time limits so imposed for compliance with any such requirements).
(5) Repayment under this section is not a relievable pension contribution.
(6) Where—
(a) an amount is repaid under this section to the scheme administrator of a registered pension scheme, and
(b) there is a recognised transfer from that scheme to a QROPS of some or all of that amount,
that transfer is not benefit crystallisation event 8 in relation to the member (but this does not affect the amount crystallised by the benefit crystallisation event consisting of the making of the transfer mentioned in subsection (1)).
(7) Repayment under this section to the member is conditional on making a claim, and such a claim must be made no later than one year after the end of the relevant period for the transfer concerned.
(8) The Commissioners for Her Majesty’s Revenue and Customs may by regulations make provision for or in connection with claims or repayments under this section, including provision—
(a) requiring claims,
(b) about who may claim,
(c) imposing conditions for making claims, including conditions about time limits,
(d) as to additional circumstances in which repayments may be made,
(e) modifying the operation of any provision of the Tax Acts, or
(f) applying any provision of the Tax Acts (with or without modifications).
244N Discharge of liability of scheme administrator or manager
(1) In this section “operator” means—
(a) the scheme administrator of a registered pension scheme, or
(b) the scheme manager of a QROPS or former QROPS.
(2) If an operator is liable under section 244J, the operator may apply to an officer of Revenue and Customs for the discharge of the operator’s liability on the following ground.
(3) The ground is that—
(a) the operator reasonably believed that there was no liability to the offshore transfer charge on the transfer concerned, and
(b) in all the circumstances of the case, it would not be just and reasonable for the operator to the charge on the transfer.
(4) On receiving an application under subsection (2), an officer of Revenue and Customs must decide whether to discharge the operator’s liability.
(5) An officer of Revenue and Customs must notify the operator of the decision on the application.
(6) The discharge of the operator’s liability does not affect the liability of any other person to overseas transfer charge on the transfer concerned.
(7) The Commissioners for Her Majesty’s Revenue and Customs may by regulations make provision supplementing this section, including provision for time limits for making an application under this section.”
(30) Part 4 of the Finance Act 2004 is further amended as follows.
(31) Section 169 (recognised transfers, and definition and obligations of a QROPS) is amended as follows.
(32) In subsection (2) (what makes a recognised overseas pension scheme a QROPS), after paragraph (b) insert—
“(ba) the scheme manager has confirmed to an officer of Revenue and Customs that the scheme manager understands the scheme manager’s potential liability to overseas transfer charge and has undertaken to such an officer to operate the charge including by meeting the scheme manager’s liabilities to the charge,”.
(33) After subsection (2) insert—
“(2A) Regulations may make provision as to—
(a) information that is to be included in, or is to accompany, a notification under subsection (2)(a);
(b) the way and form in which such a notification, or any required information or evidence, is to be given or provided.”
(34) After subsection (4) insert—
“(4ZA) Regulations may require a member, or former member, of a QROPS or former QROPS to give information of a prescribed description to the scheme manager of a QROPS or former QROPS.”
(35) In subsection (4A) (inclusion of supplementary provision in regulations under subsection (4)), after “(4)” insert “or (4ZA)”.
(36) After subsection (4B) insert—
“(4C) Provision under subsection (2A)(b) or (4A)(a) may, in particular, provide for use of a way or form specified by the Commissioners.”
(37) After subsection (7) insert—
“(7A) Regulations may, in a case where—
(a) any of the sums and assets transferred by a relevant overseas transfer represent rights in respect of a pension to which a person has become entitled under the transferring scheme (“the original pension”), and
(b) those sums and assets are, after the transfer, applied towards the provision of a pension under the other scheme (“the new pension”),
provide that the new pension is to be treated, to such extent as is prescribed and for such of the purposes of this Part as are prescribed, as if it were the original pension.
(7B) For the purposes of subsection (7A), a “relevant overseas transfer” is a transfer of sums or assets held for the purposes of, or representing accrued rights under, a relevant overseas scheme (“the transferring scheme”) so as to become held for the purposes of, or to represent rights under—
(a) another relevant overseas scheme, or
(b) a registered pension scheme,
in connection with a member of that pension scheme.
(7C) In subsection (7B) “relevant overseas scheme” means—
(a) a QROPS, or
(b) a relevant non-UK scheme (see paragraph 1(5) of Schedule 34).
(7D) Regulations under subsection (7A) may—
(a) apply generally or only in specified cases, and
(b) make different provision for different cases.”
(38) In subsection (8) (interpretation)—
(e) in the opening words, after “subsections (4) to (6)” insert “, (7A) to (7D)”, and
(f) in the definition of “relevant requirement”, at the end insert “, or
(c) a requirement to pay overseas transfer charge, or interest on overseas transfer charge, imposed by regulations under section 244L(2) or by an assessment under such regulations.”
(39) After Chapter 5 insert—
“Chapter 5A
Registered pension schemes established outside the United Kingdom
242A Meaning of “non-UK registered scheme”
In this Chapter “non-UK registered scheme” means a registered pension scheme established in a country or territory outside the United Kingdom.
242B Meaning of “UK-relieved funds”
(1) For the purposes of this Chapter, the “UK-relieved funds” of a non-UK registered scheme are sums or assets held for the purposes of, or representing accrued rights under, the scheme—
(a) that (directly or indirectly) represent sums or assets that at any time were held for the purposes of, or represented accrued rights under, a registered pension scheme established in the United Kingdom,
(b) that (directly or indirectly) represent sums or assets that at any time formed the UK tax-relieved fund under a relevant non-UK scheme of a relieved member of that scheme, or
(c) that—
(i) are held for the purposes of, or represent accrued rights under, an arrangement under the scheme relating to a member of the scheme who on any day has been an accruing member of the scheme, and
(ii) in accordance with regulations made by the Commissioners for Her Majesty’s Revenue and Customs, are to be taken to have benefited from relief from tax.
(2) In section 242B “relevant contribution” has the meaning given by regulation 14ZB(8) of the Information Regulations.
(3) Paragraphs (7) and (8) of regulation 14ZB of the Information Regulations (meaning of “accruing member”) apply for the purposes of this section as for those of that regulation.
(4) “The Information Regulations” means the Registered Pension Schemes (Provision of Information) Regulations 2006 (S.I. 2006/567).”
(40) In section 254(6) (regulations about accounting for tax by scheme administrators), after paragraph (b) insert—
“(ba) repayments under section 244M to scheme administrators,”.
(41) In section 255(1) (power to make provision for assessments), after paragraph (d) insert—
“(da) liability of the scheme administrator of a registered pension scheme, or the scheme manager of a qualifying recognised overseas pension scheme or of a former such scheme, to the overseas transfer charge,”.
(42) In section 269(1)(a) (appeal against decision on discharge of liability), before “section 267(2)” insert “section 244N (discharge of liability to overseas transfer charge),”.
(43) In section 9(1A) of the Taxes Management Act 1970 (tax not within the scope of self-assessment), after paragraph (a) insert—
“(aa) is chargeable, on the scheme manager of a qualifying recognised overseas pension scheme or a former such scheme, under Part 4 of the Finance Act 2004,”.
(44) In Schedule 56 to the Finance Act 2009 (penalty for failure to make payments on time), in the Table in paragraph 1, after the entry for item 3 insert—
(45) In regulation 3(1) of the Registered Pension Schemes (Accounting and Assessment) Regulations 2005 (S.I. 2005/3454), in Table 1, at the end insert—
(46) The amendment made by paragraph (45) of this Resolution is to be treated as having been made by the Commissioners for Her Majesty’s Revenue and Customs under the applicable powers to make regulations conferred by section 254 of the Finance Act 2004.
(47) The Pension Schemes (Information Requirements for Qualifying Overseas Pension Schemes, Qualifying Recognised Overseas Pension Schemes and Corresponding Relief) Regulations 2006 (S.I. 2006/208) are amended as follows.
(48) In regulation 1(2) (interpretation), after the definition of “HMRC” insert—
“onward transfer” has the meaning given by section 244A;”.
(49) In regulation 3(2) (duty to provide information to HMRC)—
(a) in sub-paragraph (c), after “no relevant transfer fund remains” insert “and no ring-fenced transfer funds remain”, and
(b) after sub-paragraph (d) insert—
“(da) if the payment is made to a QROPS—
(i) whether the overseas transfer charge arises on the payment,
(ii) if the charge does arise, the transferred value and the amount of charge the scheme manager deducted from the payment before making it,
(iii) if the charge does not arise, why it does not, and
(iv) the total amount or value of the member’s relevant transfer fund, and ring-fenced transfer funds, remaining immediately after the payment;”.
(50) In regulation 3, after paragraph (2) insert—
“(2A) Paragraphs (2B) and (2C) apply where—
(a) a recognised transfer is made to a QROPS, or
(b) an onward transfer is made by a QROPS or former QROPS.
“(2B) Where an event occurring before the end of the relevant period for the transfer (see section 244A(4)) means that the transfer no longer counts as excluded from the overseas transfer charge or that entitlement to repayment under section 244M arises, the scheme manager of the QROPS or former QROPS must, within 90 days after the date the scheme manager is notified of the event, provide to HMRC notification of—
(a) the occurrence, nature and date of the event,
(b) the transferred value of the transfer,
(c) the amount of overseas transfer charge on the transfer,
(d) whether, and to what extent, the scheme manager has accounted, or intends to account, for the charge, and
(e) the total amount or value of the member’s relevant transfer fund, and ring-fenced transfer funds, remaining immediately after the event.
This paragraph is subject to the qualification in paragraph (3A).
(2C) Where the scheme manager of the QROPS or former QROPS becomes aware that the member has at any time in the relevant period for the transfer acquired a new residential address that is neither—
(a) in the country or territory in which the QROPS or former QROPS is established, nor
(b) in an EEA state,
the scheme manager is to notify that address to HMRC within 3 months after the date on which the scheme manager becomes aware of it.”
(51) In regulation 3, after paragraph (3) insert—
“(3A) No obligation arises under paragraph (2B) in relation to a transfer if the following conditions are met—
(a) at the date of the transfer more than 10 years has elapsed since the key date for the ring-fenced transfer fund arising from the transfer (see paragraph 1 of Schedule 34); and
(b) the relevant member to whom the transfer is made is a person to whom the member payment provisions do not apply.”
(52) In regulation 3(6), in the definition of “relevant member”, after “relevant transfer fund” insert “or any ring-fenced transfer fund”.
(53) In regulation 3AB(4), for the words from “as a result” to the end substitute “as a result of—
(a) a transfer of the member’s relevant transfer fund,
(b) a transfer of any of the member’s ring-fenced transfer funds, or
(c) a recognised transfer,
after the date of the relevant event concerned.”
(54) In regulation 3AC—
(a) in paragraph (1)(a), before the “or” at the end of paragraph (i) insert—
“(ia) any of the member’s ring-fenced transfer funds;”, and
(b) in the title omit “relevant”.
(55) In regulation 3AD—
(a) in paragraph (1)(a), before the “or” at the end of paragraph (i) insert—
“(ia) any of the member’s ring-fenced transfer funds;”,
(b) in paragraph (2), after sub-paragraph (a) insert—
“(aa) where any of the transferred sums or assets are referable to the member’s UK-tax relieved fund, the value of so many of them as are referable to tax-relieved contributions, or tax-exempt provision, made under the scheme before 9 March 2017;
(ab) the value of so many of the transferred sums or assets as are referable to any of the member’s ring-fenced transfer funds (if any);”,
(c) in paragraph (2)(b) omit the “and” at the end,
(d) in paragraph (2)(c)(i), after “fund” insert “or any of the member’s ring-fenced transfer funds”,
(e) in paragraph (2)(c), in the words after paragraph (ii)—
(i) omit “it is”, and
(ii) after “the date of that transfer” insert “and the date it was requested”,
(f) in paragraph (2), after sub-paragraph (c) insert—
“(d) whether the overseas transfer charge arises on the transfer;
(e) if the charge does arise on the transfer—
(i) the transferred value of the transfer, and
(ii) the amount in respect of the charge deducted by the scheme manager from the transfer;
(f) if the transfer is excluded from the charge—
(i) the reason for its exclusion, and
(ii) where section 244G(2)(a) or (b) (charge paid on earlier transfer) is the reason for its exclusion, the date of the earlier transfer on which the charge was paid and the amount of charge paid on that earlier transfer; and.”, and
(g) the relevant period for the transfer (see section 244A(4)).”, and
(g) in the title omit “relevant”.
(56) After regulation 3AD insert—
“3AE Information provided by member to QROPS: onward transfers
(1) Paragraph (4) applies where a member of a QROPS or former QROPS makes a request to the scheme manager to make an onward transfer to a QROPS.
(2) But paragraph (4) does not apply if—
(a) the transfer will be excluded from the overseas transfer charge by section 244G, or
(b) the transfer will take after the end of the relevant period (see section 244A(4)) for what would be the original transfer in relation to the requested onward transfer.
(3) In this regulation “original transfer”, in relation to an onward transfer, has the meaning given by section 244A(5).
(4) The member must provide to the scheme manager—
(a) the member’s name, date of birth and principal residential address,
(b) if the member is not UK resident for income tax purposes, the date when the member last ceased to be UK resident for those purposes,
(c) the member’s national insurance number or, where applicable, confirmation that the member does not qualify for a national insurance number,
(d) the name and address of the QROPS to which the transfer is to be made,
(e) the country or territory under the law of which that QROPS is established and regulated,
(f) the reference number, if any, given by the Commissioners for that QROPS,
(g) whether the member knows for certain that the transfer would be excluded from the overseas transfer charge by one of sections 244D, 244E and 244F, and if the member does know that for certain—
(i) the section concerned (if known),
(ii) the name and address of the member’s employer whose connection with the QROPS gives rise to exclusion of the transfer from the charge,
(iii) the member’s job title as an employee of that employer,
(iv) the date the member’s employment with that employer began, and
(v) if known, that employer’s tax reference for that employment, and
(h) the member’s acknowledgement in writing that the member—
(i) is aware that an onward transfer to a qualifying recognised overseas pension scheme may give rise to a liability to overseas transfer charge, and
(ii) is aware of the circumstances in which liability arises, in which liability is excluded from the outset and in which liability is excluded only if conditions continue to be met over a period of time.
(5) The information specified in paragraph (4) must be provided within 60 days beginning with the day the transfer request is made.
(6) The scheme manager must send the member notification of the requirements specified in this regulation within 30 days beginning with that day.
3AF Provision of information about liability for overseas transfer charge
(1) If an onward transfer is made from a QROPS or former QROPS and the overseas transfer charge arises on the transfer, the scheme manager of the QROPS or former QROPS must within 90 days after the date of the transfer provide the member with a notice stating—
(a) the date of the transfer,
(b) that overseas transfer charge arises on the transfer,
(c) the transferred value of the transfer,
(d) amount of the charge on the transfer,
(e) whether, and to what extent, the scheme manager has accounted, or intends to account, for the charge, and
(f) where the scheme manager has accounted for the charge, the date the scheme manager did so.
(2) If an onward transfer is made from a QROPS or former QROPS and the transfer is excluded from the overseas transfer charge by or under sections 244B to 244H, the scheme manager of the QROPS or former QROPS must within 90 days after the date of the transfer provide the member with a notice stating—
(a) the date of the transfer,
(b) that the transfer is excluded from the overseas transfer charge,
(c) the provision by reason of which the transfer is excluded, and
(d) where that provision is section 244B or 244C—
(i) when the relevant period for the transfer ends, and
(ii) how the transfer may turn out not to be excluded as a result of the member changing country or territory of residence within the relevant period for the transfer.
(3) Paragraph (4) applies if—
(a) a recognised transfer is made to a QROPS, or
(b) an onward transfer is made by a QROPS or former QROPS.
(4) Where an event occurring before the end of the relevant period for the transfer (see section 244A(4)) means that the transfer no longer counts as excluded from the overseas transfer charge or that entitlement to repayment under section 244M arises, the scheme manager of the QROPS or former QROPS must, within 90 days after the date the scheme manager is notified of the event, provide the member with a notice stating—
(a) the amount of overseas transfer charge on the transfer,
(b) whether, and to what extent, the scheme manager has accounted, or intends to account, for the charge, and
(c) where the scheme manager has accounted for the charge, the date the scheme manager did so.
3AG Accounting for overseas transfer charge on onward transfers
(1) Paragraph (2) applies where—
(a) overseas transfer charge arises on an onward transfer from a QROPS or former QROPS,
(b) the scheme manager has notified HMRC of the transfer or, where applicable, of the event triggering payability of the charge on the transfer, and
(c) HMRC have provided the scheme manager with an accounting reference for paying the charge on the transfer.
(2) The scheme manager must pay the charge to HMRC using the accounting reference.
(3) Payment of the charge is due at the end of the 91 days beginning with the date of issue of the accounting reference.
3AH Assessments of unpaid overseas transfer charge on onward transfers
(1) Where the correct amount of overseas transfer charge due from a scheme manager under regulation 3AG on an onward transfer has not been paid by the time it is due, an officer of Revenue and Customs must issue an assessment to tax to the scheme manager.
(2) Tax assessed under this regulation is payable within 30 days after the issue of the notice of assessment.
3AI Interest on overdue overseas transfer charge
(1) Tax which—
(a) becomes due and payable in accordance with regulation 3AG, or
(b) is assessed under regulation 3AH,
carries interest at the prescribed rate from the due date under regulation 3AG until payment (“the interest period”).
(2) Paragraph (1) applies even if the due date is a non-business day as defined by section 92 of the Bills of Exchange Act 1882.
(3) The “prescribed rate” means the rate applicable under section 178 of the Finance Act 1989 for the purposes of section 86 of TMA.
(4) Any change made to the prescribed rate during the interest period applies to the unpaid amount from the date of the change.
3AJ Adjustments, repayments and interest on overpaid charge
(1) If the correct tax due under regulation 3AG has not been paid on or before the due date, an officer of Revenue and Customs may make such adjustments or repayments as may be required for securing that the resulting liabilities to tax (including interest on unpaid or overpaid tax) whether of the scheme manager or of any other person are the same as they would have been if the correct tax had been paid.
(2)Tax overpaid which is repaid to the scheme manager or any other person carries interest at the prescribed rate from the later of the due date and the date on which the tax was paid until the date of repayment (“the interest period”).
(3) The “prescribed rate” means the rate applicable under section 178 of the Finance Act 1989 for the purposes of section 824 of the Income and Corporation Taxes Act 1988.
(4) Any change to the prescribed rate during the interest period applies to the overpaid amount from the date of the change.”
(57) In regulation 3B (information on cessation of a QROPS), after “relevant transfer fund”, in both places, insert “, or ring-fenced transfer fund,”.
(58) In regulation 3C (correction of information)—
(a) in paragraph (3)(a)(i), after “existence” insert “or, where the information relates to a ring-fenced transfer fund in respect of the relevant member, more than 10 years has elapsed beginning with the date on which that ring-fenced transfer fund came into existence”, and
(b) in paragraph (3)(b), at the end insert “and there are no ring-fenced transfer funds”.
(59) In regulation 5(1) (application of provisions providing for penalties)—
(a) after “3(2),” insert “(2B) or (2C),”, and
(b) before “or 3C(1)” insert “, 3AE(6), 3AF”.
(60) The amendments made by paragraphs (47) to (59) of this Resolution—
(a) are, so far as they insert new regulation 3AE(1) to (5), to be treated as having been made by the Commissioners for Her Majesty’s Revenue and Customs under the powers to make regulations conferred by section 169(4ZA) of the Finance Act 2004,
(b) are, so far as they insert new regulations 3AE(6) and 3AF and amend regulations 3 to 3AD and 3B to 5, to be treated as having been made by the Commissioners under the powers to make regulations under section 169(4) of the Finance Act 2004 (see section 169(4), (4A), (4B) and (4C) of that Act), and
(c) are, so far as they insert new regulations 3AG to 3AJ, to be treated as having been made by the Commissioners under the applicable powers to make regulations conferred by section 244L of the Finance Act 2004.
(61) The Registered Pension Schemes (Transfers of Sums and Assets) Regulations 2006 (S.I. 2006/499) are amended as follows.
(62) In regulation 5, the existing text becomes paragraph (1), and after that paragraph insert—
“(2)In paragraph (1)(a) “administration costs” includes, in particular, payments of overseas transfer charge.”
(63) The amendments made by paragraph (62) of this Resolution are to be treated as made by the Commissioners for Her Majesty’s Customs and Revenue under the powers to make regulations conferred by paragraph 2(4)(h) of Schedule 28 to the Finance Act 2004.
(64) The Registered Pension Schemes (Provision of Information) Regulations 2006 (S.I. 2006/567) are amended as follows
(65) In regulation 3(1) (provision of information by scheme administrators to HMRC), in column 2 of the entry in the Table for reportable event 9—
(a) after paragraph (g) insert—
“(ga) whether or not overseas transfer charge arises on the transfer;
(gb) if the transfer is excluded from the charge, the reason why it is excluded;
(gc) if the charge arises on the transfer—
(i) the transferred value, and
(ii) the amount in respect of the charge deducted from the transfer;”, and
(b) after paragraph (h) insert—
“(ha) the reference number, if any, given by the Commissioners for the QROPS;”.
(66) In regulation 3(7) (deadline for event report for reportable event 9), at the end insert “but, if the scheme administrator applies before the end of those 60 days for a repayment of overseas transfer charge on the transfer, the report must be delivered before the administrator applies for the repayment.”
(67) In regulation 11BA(2) (information about transfer to be provided by member to scheme administrator)—
(a) in sub-paragraph (a), omit paragraphs (vi) and (vii), including the “and” at the end,
(b) after sub-paragraph (a) insert—
“(aa) the name and address of, and (if known) the reference number given by the Commissioners for, the qualifying recognised overseas pension scheme (“the QROPS”);
(ab) the country or territory under the law of which the QROPS is established and regulated;
(ac) whether the member knows for certain that the transfer would be excluded from the overseas transfer charge by one of sections 244D, 244E and 244F, and if the member does know that for certain—
(i) the section concerned (if known),
(ii) the name and address of the member’s employer whose connection with the QROPS gives rise to exclusion of the transfer from the charge,
(iii) the member’s job title as an employee of that employer,
(iv) the date the member’s employment with that employer began, and
(v) if known, that employer’s tax reference for that employment;”, and
(c) after sub-paragraph (b) insert “; and
(c) the member’s acknowledgement in writing that the member—
(i) is aware that a recognised transfer to a qualifying recognised overseas pension scheme may give rise to a liability to overseas transfer charge, and
(ii) is aware of the circumstances in which liability arises, in which liability is excluded from the outset and in which liability is excluded only if conditions continue to be met over a period of time.”
(68) After regulation 11BA insert—
“11BB Information provided by members to scheme administrators: potentially excluded transfers
(1) Paragraph (2) applies where—
(a) a recognised transfer is made by a registered pension scheme to a qualifying recognised overseas pension scheme, and
(b) the transfer is required by section 244B or 244C to be initially assumed to be excluded from the overseas transfer charge by that section
(2) Each time during the relevant period for the transfer that the member—
(a) becomes resident in a country or territory, or
(b) ceases to be resident in a country or territory,
the member must, within 60 days after the date that happens, inform the scheme administrator of the registered pension scheme that it has happened.”
(69) After regulation 12 insert—
“12A Provision of information about liability for overseas transfer charge
(1) If a recognised transfer is made by a registered pension scheme to a qualifying recognised overseas pension scheme and the overseas transfer charge arises on the transfer, the scheme administrator of the registered pension scheme must within 90 days after the date of the transfer provide the member with a notice stating—
(a) the date of the transfer,
(b) that overseas transfer charge arises on the transfer,
(c) the transferred value of the transfer,
(d) the amount of the charge on the transfer,
(e) whether, and to what extent, the scheme administrator has accounted, or intends to account, for the charge, and
(f) where the scheme administrator has accounted for the charge, the date the scheme administrator did so.
(2) If a recognised transfer is made by a registered pension scheme to a qualifying recognised overseas pension scheme and the transfer is excluded from the overseas transfer charge by or under sections 244B to 244H, the scheme administrator of the registered pension scheme must within 90 days after the date of the transfer provide the member with a notice stating—
(a) the date of the transfer,
(b) that the transfer is excluded from the overseas transfer charge,
(c) the provision by reason of which the transfer is excluded, and
(d) where that provision is section 244B or 244C, how the transfer may turn out not to be excluded as a result of the member changing country or territory of residence within the relevant period for the transfer.
(3) If overseas transfer charge on a transfer is repaid to the scheme administrator of a registered pension scheme, the scheme administrator must within 90 days after the date of the repayment provide the member with a notice stating—
(a) the date of the repayment,
(b) the amount of the repayment, and
(c) the reason for the repayment.”
(70) After regulation 14ZC insert—
“14ZCA Further information provided by scheme administrators on recognised transfers to overseas schemes
(1) This regulation applies if there is a recognised transfer from a registered pension scheme to a qualifying recognised overseas pensions scheme.
(2)The scheme administrator of the registered pension scheme must provide the scheme manager of the qualifying recognised overseas pension scheme with a statement—
(a) stating whether or not the overseas transfer charge arose on the transfer, and
(b) stating—
(i) if the charge arose, the amount of the charge, and
(ii) if the transfer is excluded from the charge, the reason why it is excluded.
(3) The requirement under paragraph (2) is to be complied with before the end of the 31 days beginning with the date of the transfer.
(4) Paragraph (5) applies if overseas transfer charge on the transfer is repaid to the scheme administrator of the registered pension scheme.
(5) The scheme administrator of the registered pension scheme must provide the scheme manager of the qualifying recognised overseas pension scheme with—
(a) a copy of the statement under paragraph (2),
(b) a statement that the original statement is inaccurate and that the overseas transfer charge on the transfer has been repaid to the scheme administrator, and
(c) the reason why the transfer is excluded from the charge.
(6) The requirement under paragraph (5) is to be complied with before the end of the 31 days beginning with the date of the repayment.”
(71) The amendments made by paragraphs (64) to (70) of this Resolution are to be treated as made by the Commissioners for Her Majesty’s Revenue and Customs under the applicable powers to make regulations conferred by section 251 of the Finance Act 2004.
(72) Subject to paragraphs (73) to (75) of this Resolution, the amendments made by paragraphs (29) to (70) of this Resolution have effect in relation to transfers made on or after 9 March 2017.
(73) The new section 169(2)(ba) of the Finance Act 2004—
(a) has effect on and after 9 March 2017 in the case of a recognised overseas pension scheme where—
(i) the notification mentioned in section 169(2)(a) of the Finance Act 2004 (notification that scheme is a recognised overseas pension scheme) is given on or after 9 March 2017, or
(ii) although that notification is given before 9 March 2017, the letter from the Commissioners for Her Majesty’s Revenue and Customs advising the scheme of the reference number allocated to the scheme is dated on or after 9 March 2017, and
(b) has effect on and after 14 April 2017 in the case of a recognised overseas pension scheme where that letter is dated before 9 March 2017.
(74) The other amendments in section 169 of the Finance Act 2004, and the amendment in section 255 of that Act, come into force on 9 March 2017.
(75) The amendments in regulation 3(2) of the Pension Schemes (Information Requirements for Qualifying Overseas Pension Schemes, Qualifying Recognised Overseas Pension Schemes and Corresponding Relief) Regulations 2006 have effect in relation to payments made on or after 9 March 2017; and the new regulation 3AE inserted into those Regulations, and the reference to the new regulation 3AE(6) inserted into regulation 5(1) of those Regulations, have effect in relation to requests made on or after 9 March 2017.
(76) Overseas transfer charge on transfers made in the period beginning with 9 March 2017 and ending with 30 June 2017 is, for the purposes of section 254 of the Finance Act 2004, to be treated as charged in the 3 months ending with 30 September 2017.
And it is declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.
13. Trade and property business profits
Resolved,
That provision may be made about the calculation of profits of trades, professions, vocations and property businesses for the purposes of income tax.
14. Deduction of income tax at source
Resolved,
That—
(1) In Chapter 3 of Part 15 of the Income Tax Act 2007 (deduction of tax from certain payments of yearly interest), after section 888A insert—
“888B Designated dividends of investment trusts
The duty to deduct a sum representing income tax under section 874 does not apply to a dividend so far as it is treated as a payment of yearly interest by regulations under section 45 of FA 2009 (dividends designated by investment trust or prospective investment trust).
888C Interest distributions of certain open-ended investment companies
The duty to deduct a sum representing income tax under section 874 does not apply to a payment of yearly interest under section 373 of ITTOIA 2005 (in the case of certain open-ended investment companies, payments of yearly interest treated as made where distributable amount shown in accounts as yearly interest).
888D Interest distribution of certain authorised unit trusts
The duty to deduct a sum representing income tax under section 874 does not apply to a payment of yearly interest under section 376 of ITTOIA 2005 (in the case of certain authorised unit trusts, payments of yearly interest treated as made where distributable amount shown in accounts as yearly interest).”
(2) In section 45(2) of the Finance Act 2009 (provision that regulations may make about dividends of investment trusts) omit paragraph (c) (power to disapply duty to deduct tax under section 874 of the Income Tax Act 2007).
(3) In Chapter 3 of Part 15 of the Income Tax Act 2007 (deduction of tax from certain payments of yearly interest), after section 888D (inserted by this Resolution) insert—
“888E Interest on certain peer-to-peer lending
(1) The duty to deduct a sum representing income tax under section 874 does not apply to a payment of interest on an amount of peer-to-peer lending.
(2) In subsection (1) “peer-to-peer lending” means credit in relation to which the condition in subsection (4) is met.
(3) In this section—
“original borrower”, in relation to any credit, means the person to whom the credit is originally provided,
“credit” includes a cash loan and any other form of financial accommodation, and
“original lender”, in relation to any credit, means the person who originally provides the credit.
(4) The condition is that—
(a) the original borrower and the original lender enter the agreement under which the credit is provided at the invitation of a person (“the operator”),
(b) the operator makes the invitation in the course of, or in connection with, operating an electronic system,
(c) the operator’s operation of the electronic system is an activity specified in article 36H(1) or (2D) of the Order (operating an electronic system in relation to lending), and
(d) the operator has permission under Part 4A of FISMA 2000 to carry on that activity.
(5) For the purposes of subsection (4), it does not matter if the agreement mentioned in subsection (4)(a) is not an article 36H agreement (as defined in article 36H of the Order).
(6) The Commissioners for Her Majesty’s Revenue and Customs may by regulations make such amendments of the preceding provisions of this section as they consider appropriate in consequence of—
(a) the Order, or any part of it, being replaced (or further replaced) by provision in another instrument, or
(b) any amendment of the Order or any such other instrument.
(7) In this section “the Order” means the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (S.I. 2001/544).”
(4) The new sections 888B to 888D of the Income Tax Act 2007, and the repeal of section 45(2)(c) of the Finance Act 2009, have effect in relation to amounts treated as payments of yearly interest made on or after 6 April 2017.
(5) The new section 888E of the Income Tax Act 2007 has effect in relation to payments of interest made on or after 6 April 2017.
And it is declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.
15. Gains from contracts for life insurance etc
Resolved,
That provision may be made amending Chapter 9 of Part 4 of the Income Tax (Trading and Other Income) Act 2005.
16. Venture capital trusts (exchange of non-qualifying shares and securities)
Resolved,
That provision may be made amending section 330 of the Income Tax Act 2007.
17. Social investment tax relief
Resolved,
That provision may be made about social investment tax relief.
18. The “no disqualifying arrangements requirement”
Resolved,
That provision may be made about the “no disqualifying arrangements requirement” for the purposes of the enterprise investment scheme, the seed enterprise investment scheme and venture capital trusts.
19. Business investment relief
Question put.
That provision may be made about business investment relief in Chapter A1 of Part 14 of the Income Tax Act 2007.
Mr Deputy Speaker (Mr Lindsay Hoyle)
Two things: I thank the hon. Lady for giving me notice of her point of order; and we actually have the relevant Minister, who wants to respond now, which may be helpful.
The Minister for Disabled People, Health and Work (Penny Mordaunt)
The Social Security Advisory Committee decided not to take the regulations on formal reference or to consult further. It made two recommendations, which we are considering and will respond to in due course. As the Secretary of State for Work and Pensions has said from the Dispatch Box, there is no change to our policy, our budget or the award amounts. We can be confident that no one’s award will be altered, all things being equal, if and when they are reassessed, because prior to the relevant case, the case law was conflated and confused, and therefore no assessment providers changed their scoring and no DWP decision makers altered or increased the award amounts. It is very important that we reassure people on that benefit that there is no change to the policy, to the budget or to the award amounts, and that if their condition is the same, they will continue to receive the award.
Debbie Abrahams
Further to that point of order, Mr Deputy Speaker. The Minister’s statement is in direct contradiction to the letter that she has received, and I seek further—[Interruption.]
Tuesday 18th April 2017
(7 years, 7 months ago)
Commons ChamberFinance Act 2017 Read Hansard Text
21:33 - The House divided: - Ayes: 54 / Noes: 314 - Question accordingly negatived.
21:47 - The House divided: - Ayes: 313 / Noes: 236 - Question accordingly agreed to.
This text is a record of ministerial contributions to a debate held as part of the Finance Act 2017 passage through Parliament.
In 1993, the House of Lords Pepper vs. Hart decision provided that statements made by Government Ministers may be taken as illustrative of legislative intent as to the interpretation of law.
This extract highlights statements made by Government Ministers along with contextual remarks by other members. The full debate can be read here
This information is provided by Parallel Parliament and does not comprise part of the offical record
The Financial Secretary to the Treasury (Jane Ellison)
I beg to move, That the Bill be now read a Second time.
This Government have long demonstrated that they can deliver a stronger, more secure economy. The economy is demonstrating robust growth, the employment rate is at a record high and the deficit has been brought down by almost two thirds since its pre-financial crisis peak.
We are in a much stronger position now than we were in 2010, but there is no room for complacency. Indeed, as we begin the formal process of exiting the European Union, we have an even greater incentive to provide a strong and stable platform for the future. Both the debt and the deficit are still too high, so we remain focused on getting the public finances in order, not continuing to endlessly borrow and jeopardise future generations, as some would have us do.
Jonathan Edwards (Carmarthen East and Dinefwr) (PC)
Will the Financial Secretary give way?
Jane Ellison
I will make a little more progress and then I will happily give way.
Before setting out the Bill’s contents in more detail, I should of course refer to the fact that the Prime Minister has today announced her intention to lay before this House a motion calling for an early general election.
Jane Ellison
Members should be paying more attention. Earlier today the Leader of the House updated right hon. and hon. Members on how that motion, if it is passed, will impact on the business of the House. We hope to hold constructive discussions with the Opposition, through the usual channels, on how this Bill will proceed.
Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op)
We are always here to help.
Jane Ellison
It is good to hear that Opposition Front Benchers are here to help.
To return to the matter under discussion, I will lay out the themes of the Bill and then I will allow the hon. Member for Carmarthen East and Dinefwr (Jonathan Edwards) to intervene. We are very clear that our taxes and the system underpinning them need to be fair and competitive and, critically, they must be paid. This Bill will take the next steps in helping to deliver a fairer and more sustainable tax system, one that can support our critical public services and get the country back to living within its means.
The Bill implements changes that respond to the challenges that our tax system and, indeed, our society face. It delivers on intergenerational fairness by tackling inequality of health outcomes across and within age groups, and it delivers changes that better reflect the different ways in which individuals choose to work, enabling people to earn money and create wealth, whatever their chosen business structure, but at the same time ensuring that those choices are not distorted. The Bill also delivers vital revenues to put our public finances on a sustainable footing, secure the future of public services that we all value and help to further bring down the deficit.
Jonathan Edwards
Will the Financial Secretary confirm that the Office for Budget Responsibility report that accompanied the most recent Budget downgrades growth forecasts for each year in the forecasting period, by comparison with that which accompanied last year’s Budget?
Jane Ellison
I do not know whether the hon. Gentleman was in the House earlier, but the International Monetary Fund has today upgraded its growth forecast. All the economic indicators are pointing to robust growth, despite the acknowledged challenges of the negotiating period ahead.
George Kerevan (East Lothian) (SNP)
In the interests of this potentially more consensual period in the run-up to Prorogation, as we try to work out what will remain in the Bill, could the Financial Secretary tell the House where the £2 billion per annum to replace the non-raising of the national insurance contribution is going to come from, if she is so wedded to balancing the books?
Jane Ellison
The Chancellor was clear at the time and in our statements about the Budget and subsequent decisions that we are looking to balance the budget across the period. Clearly, if we are going into a general election campaign, we will have more to say about that in the manifesto. We will lay that out there; this is not the place for that.
Jane Ellison
Well, there are measures in the Bill that are immediately and openly about revenue raising, and we will come to some of those. The Chancellor was very direct about that when he made his Budget statement and, indeed, at the time of the autumn statement.
Let me say a bit about what the Government have done to support fairness between the generations. An essential priority for this Government is that everyone should have access to our NHS when they need it, and that everyone should enjoy security and dignity in old age. That is why we announced in the spring Budget an additional £2 billion—that has just been referred to—in funding for adult social care. This means that councils in England will have access to, in total, £9.25 billion more dedicated funding for social care over the next three years as a result of changes introduced by this Government since 2015.
On top of that, in the last two fiscal events we have done much to help to build a better future for our younger generation by helping people to save more of the money they earn; by investing in education and skills, which was a key theme of the autumn statement and of the Budget; and by building more affordable homes. The Finance Bill will build on this work, particularly by helping to tackle childhood obesity and to deliver a healthier future for our children.
Kirsty Blackman (Aberdeen North) (SNP)
Recent studies have shown that the youngest people in our society who are working, those aged 22 to 29, are earning less than previous 22 to 29-year-olds have ever earned, or certainly less than they have earned in recent times. They are also less likely to own a home and are more likely to rent, and they are disadvantaged by comparison with previous generations. What is the Minister doing to ensure that that stops and is reversed now?
Jane Ellison
I have just talked about some of the things we are doing. Some of these long-term trends need to be addressed through things such as investing in people’s skill levels. Ultimately, if we want to have a low welfare, high wage, high skill economy, we need to invest in people right from the earliest days. The package on skills in particular, which was unveiled recently, is intended to make the generational step change to ensure that people can get high skill, well paid jobs. That is exactly what we are talking about in relation to things such as affordable housing: we acknowledge that there are challenges for younger people and, indeed, we are looking to address them.
Let me talk about the issue of childhood obesity—an issue close to my heart, as a former Minister for Public Health. The UK has one of the highest obesity rates among developed countries, with soft drinks still one of the biggest sources of sugar in children’s diets. That is a cost not only to the productivity of our economy but to the public purse; indeed, there is also a great cost to individuals. The direct cost to the NHS of treating ill health due to people being overweight and to obesity totals over £6 billion a year.
The Bill will legislate for a new soft drinks industry levy to encourage producers to reduce added sugar in their drinks. The levy is working already: there have been reformulation announcements by Tesco, by the makers of Lucozade and Ribena, and of course by A. G. Barr relatively recently. I have had discussions with several companies during recent months, and I understand the effort and investment they are putting into changing their product and portfolio mix.
Even though revenues from the levy will be lower as a result of the earlier than expected reformulations—unusually, we in that sense welcome the fact that predicted revenues will be lower, because the policy is working early—we will maintain the full £1 billion funding for the Department for Education during this Parliament that we pledged to make. That is further evidence that the Government are committed to tackling childhood obesity. It is part of a programme of work being carried on across Departments to deliver fairer outcomes for future generations.
Joanna Cherry (Edinburgh South West) (SNP)
Cancer Research UK ambassadors like my constituent Sue Spencer have helped to highlight the fact that obesity is the second highest risk factor for cancer after smoking, so I welcome what the Minister has said about the provisions in the Bill for a soft drinks levy. May I ask her to confirm that the provisions will be part of a package of measures to tackle childhood obesity, including help for parents to protect their children from junk food advertising and steps to tackle high-sugar milk-based drinks, which are at present excluded from the Bill?
Jane Ellison
The hon. and learned Lady tempts me to talk about a subject from a previous portfolio that is very close to my heart, but it is clearly a matter on which, for the most part, the Department of Health leads. We are committed to tackling this right across the Government. To take one aspect—she mentioned products that are not within the scope of the levy—Public Health England, working very closely with manufacturers, is leading a very ambitious programme of work, which is well under way, to set ambitious targets. When we look at the progress this country has made in our world-leading salt reduction programme, we can see that it was all done through such close working, as well as by being ambitious and by pushing the industry. Alongside the levy, which has turbo-charged that work, that is a very substantial element of the plans. The Department of Health is doing other things, in particular working with schools, and with the money from the levy more can be done.
Let me turn to another theme of the Finance Bill, which we have talked about as a strategic challenge not just for this country but for many developed countries: the different ways in which people are now working. The Bill takes important steps within the tax system to adjust to and reflect the changing ways in which people are choosing to work. For example, individuals who work through a company currently pay significantly less tax than individuals who are self-employed or work as employees. This is true even in many cases where individuals are doing very similar work. Indeed, the Office for Budget Responsibility estimates that the faster growth of new incorporations compared with the growth of employment would reduce tax receipts by an additional £3.5 billion in 2021-22. The Government are committed to helping all businesses, large and small, in all parts of the UK to succeed, but we are clear that the tax system must ensure fair treatment between individuals working in different ways, and of course it must be sustainable.
The Bill will take some initial steps to help to address this issue and deliver a tax system that is fair and works for everyone. First, the off-payroll working rules will be amended for public sector engagements, with responsibility for administering the relevant tax rules moving to the body for whom the individual is working. This change will help to tackle widespread non-compliance with the current rules, which costs more than £700 million each year across the economy. Secondly, from April 2018 the Bill will reduce the dividend allowance from £5,000 to £2,000. This change will help to reduce the tax differential between individuals working for their own company and those working as employees or self-employed. Crucially, it will raise much needed revenue to invest in our public services, including adult social care, as the Chancellor explained at the Budget.
I want to assure right hon. and hon. Members that there will still be a healthy environment for investors. The allowances that the Government have introduced or raised mean that a general investor will still be able to invest about £50,000 without paying any tax on the resulting dividend income. For example, we have increased the amount that individuals can save or invest tax-free through an ISA by the largest ever amount: up to £20,000 this tax year. This and other allowances mean that 80% of all general investors will still pay no dividend tax on their investments. As I have set out, this change will help to address the rising cost to the public finances of the growth in incorporation. It is in that context that the change to the dividend allowance should be considered.
The Bill will further modernise the tax system by legislating for making tax digital. Just as taxation must adjust to the world around it, so must the administration of the tax system. With millions of businesses already banking, paying bills and buying services online, making tax digital is a natural extension of this reality. The Government have brought large swathes of government services into the digital age, including within the tax system, and we need to go on to complete that journey. Businesses will feel the benefit too, being helped to get their tax right first time and cutting down on excessive administrative burdens over the long term. Simultaneously, making tax digital will help to tackle the tax gap, as error alone cost the Exchequer £8.7 billion in 2014-15.
Sammy Wilson (East Antrim) (DUP)
Does the Minister not accept that all the studies conducted so far indicate that this will present an additional cost burden to small businesses, which will have to give returns four times a year? In many parts of the country, small businesses do not even have good access to the digital economy to make those returns.
Jane Ellison
On the latter point, I looked at this matter in detail recently. On what would be required of people in terms of the digital uploading of data, the vast majority of people in the country—in percentage terms, in the high 90s—have access to the right broadband speed.
As for what the change will mean for the smallest businesses, we do not recognise some of the figures that have been put in the public domain by some representative bodies. The Treasury has conducted its own analysis and published it, including the methodology behind it. We acknowledge that this will be a big change for the smallest businesses, particularly for those below the VAT threshold, which is why the Chancellor announced plans to defer for an additional year those businesses coming into the system. Given that the pilot has now started, that means that the system will be piloted for two years before some of the smaller businesses enter it.
However, we cannot sustain the current level of error and the size of the SME tax gap in the long term; we must begin to tackle those problems. A number of developed countries are increasingly digitising their tax systems, and that will have long-term benefits for business. I accept that the transition may involve challenges, but we shall try to provide support during that period.
Nigel Mills (Amber Valley) (Con)
I fully accept the need to tackle the tax gap, but if the advantages for the very smallest businesses are as my hon. Friend has described them, would she be willing to consider allowing such businesses to opt into the system, rather than making it compulsory for those with very low levels of turnover? Might they be allowed to see how the system works over a period of, perhaps, five years?
Jane Ellison
My right hon. Friend the Chancellor has already announced that businesses with a turnover below the VAT registration threshold will have an additional year, until April 2019, before digital record-keeping quarterly updates are made mandatory. I am sure that we shall debate the issue in more detail later, so I will not be drawn into it too much now. Suffice it to say that some of the alternative proposals do not tackle the level of error and the tax gap. We need to address that, because it is part of the general challenge relating to the sustainability of the tax base.
We believe that this change will benefit more than 3 million small businesses in the United Kingdom, the vast majority of which are banking online. We are going with the flow and following the direction in which society is moving. As I have said, however, a package of support will be available to the smallest businesses. We may have a chance to explore that a little further, but it will depend on how much time we have to debate the Bill over the coming days. HMRC will ensure that the needs of businesses are best met by enabling them to learn from the ongoing pilot phase, which, as I said earlier, will now be longer for the smaller businesses. We want to make sure that these much needed reforms are implemented smoothly at the operational level.
I have talked about the way in which the Bill can support the health of the next generation and about how it can help us to adapt our tax system to the modern realities of working life, but I also want to talk about how we can create a fairer, more sustainable tax base and raise much-needed revenue in the process. As I have said, the Government remain committed to their fiscal mandate of reducing the deficit. That is why, for instance, they made the difficult decision to increase the standard rate of insurance premium tax from 10% to 12% in the autumn statement, thus raising vital revenues that were required to support public services. The Chancellor set out very directly the need to raise additional revenue.
As I have made clear, the Government recognise that taxes must be fair. They should also be competitive, which is particularly important as we enter the critical next phase of the negotiations on our exit from the European Union. We need to ensure that our economy retains its competitive edge, and remains an attractive place for both business start-ups and ongoing inward investment. Some excellent decisions in that regard have been made in recent months. However, taxes need to be paid. That should go without saying, but, although ours is one of the narrowest tax gaps in the developed world, and although we are, in my view, one of the most transparent countries when it comes to the way in which we measure and report on it, we need to tackle tax avoidance at all levels to ensure that everyone—big business, small business and individuals—pays the right amount at the right time.
The Bill provides for further action to ensure that we receive the tax revenues that are due by continuing our work to tackle tax avoidance and evasion. We already have a strong track record. Since 2010, HMRC has secured about £140 billion in additional tax revenue as a result of tackling avoidance, evasion and non-compliance. The UK has also shown international leadership: it is at the forefront of many of the international discussions about tackling those issues. Indeed, some of the thorniest avoidance and evasion issues that we face, particularly where they involve complex multinational structures and businesses, can be tackled only in international forums. We have worked closely through the OECD and other international bodies and we will continue to do so and to lead the discussions to tackle those issues. This Bill will build on that work by introducing more than 10 policies that are forecast to raise over £5.5 billion by 2021-22.
First, the Government will update the rules on how companies claim tax deductions for interest expenses and losses. From this month, large businesses will no longer be able to reduce their UK taxable profits by deducting a disproportionate amount of interest expense in the UK. Nor will they be able to offset all their tax liability with past losses in years when they make substantial profits. Taken together, those measures will raise nearly £7 billion from large companies over the next five years.
Secondly, the Bill will continue the Government’s crackdown on the use of artificial disguised remuneration schemes by putting beyond doubt the existing rules and by introducing a new charge on outstanding loans from 5 April 2019. Those changes will ensure that scheme users pay their fair share of tax and will bring in £2.5 billion by 2020-21.
Thirdly, to deter those who gain financially from enabling tax avoiders, the Government will introduce a new penalty for those who enable the use of tax avoidance schemes that are later defeated by HMRC. That is an area on which we have worked closely and where policy development has benefited from a focus on quality tax policy making. We have worked closely with representative bodies to ensure that all people working within the spirit of their professional guidelines have nothing to fear from the new rules. However, it is important that we tackle the enablers.
I think we have all as constituency Members of Parliament heard from people who feel that they were given advice that was later revealed to have been poor advice. However, we have not had a system whereby we were able to pursue in the way we wanted those people who enabled the tax avoidance. That cannot be right. Therefore, the Bill will mean that enablers of abusive arrangements can be held accountable for their activities, while ensuring, as I say, that the vast majority of professionals who provide advice on genuine commercial arrangements will not be impacted. The Bill will also bring an end to a long-standing imbalance in the tax system by abolishing permanent non-dom status. That will raise £400 million each year by the end of this Parliament.
As a package, those measures will ensure that our tax system remains fundamentally fair and that people and businesses pay the taxes they owe. We have introduced them not only because it is important to sustain the tax base—that is important for the revenue we need for vital public services—but because it is important that people feel that everyone is contributing as they should be and that we are asking everyone to work within the rules. The quid pro quo for having a competitive and fair tax system is that taxes should be paid.
The Bill will help to deliver a fairer and more sustainable tax system, one fit for the digital age and responsive to the different ways in which people choose to work. It will continue our work to tackle tax avoidance and evasion. It will help to deliver improvements to the nation’s finances, to pay for critical public services and, by taking a significant step to address the issue of child obesity, to deliver a better future for our younger generation. The Bill delivers on the Government’s plan for Britain, a stronger economy and a fairer society. I commend it to the House.
Peter Dowd
If that suggestion came from the Government side, I would say that I would listen to the representations, and we would listen to any representations, so to speak, that would help small businesses.
Moving on to alcohol duty, the Finance Bill will only further undermine our local pubs, which are already under threat, with 29 pubs closing every week. While we welcome plans to make tax digital, the Government’s plan will shift huge administrative burdens on to small businesses and the self-employed, who are just trying to pay the taxes they owe—so much for the Conservatives being the party of small business. There is no reason businesses should have to submit quarterly digital tax returns, particularly when they lack the time, resources and capacity to convert records into digital standards on a frequent basis. All that comes when they are under stress from business rates. That is why we support the view of the Treasury Committee and of small business owners and the self-employed that it is better to exempt the smallest taxpayers from quarterly reporting and to phase in making tax digital to ensure that implementation is right for all, rather than the Conservative party wasting taxpayers’ money and time by correcting mistakes further down the line.
Making tax digital will also place new burdens on HMRC, which is already teetering on the edge after the constant slashing of its resources over the past few years. Thousands of hard-working staff have already been dismissed, and taxpayers are waiting on the phone for hours, which costs far more than the cuts have saved. The closure of dozens of tax offices across the country is still to come, putting thousands of jobs at risk in my constituency alone. How will HMRC cope with the ever-increasing complexity of its responsibilities with just a skeleton staff? How will any of the “reduction in errors” expected from making tax digital actually come about? How will we ever close the tax gap when there are no tax inspectors left to help taxpayers get their returns right and when HMRC has been filched of the resources it needs to run a service? It is a total false economy.
Jane Ellison
I am sorry, but I rise to defend HMRC. What the shadow Minister just said is the most outrageous attack on the hard-working men and women of HMRC. Far from people hanging on the phone for hours and the various other exaggerations that we just heard, I suggest that he look at the publicly available figures for HMRC performance in a range of areas, where he will see that what he said is far from the truth. HMRC’s performance has been excellent in recent years in many areas, as shown not least by the £140 billion extra raised since 2010 from avoidance and evasion.
Peter Dowd
That attempt at plausibility has gone amiss yet again. The reality is that we are constantly contacted by people about HMRC. Those on the frontline, such as the thousands in my constituency, are doing a damn fine job. The idea that I would attack thousands of people from my constituency is complete nonsense. They are struggling against the odds, which have been stacked against them by this Government. That is the reality. The Finance Bill was a failure before it was even started. It is a busted flush.
The Minister referred earlier to helping homeowners. If the Government are setting aside resources to help homeowners, such as through lifetime ISAs, they should also tackle the threat to the stability of the housing market from organisations such as Bellway, which is tying people to their homes through its leaseholds. That is a scandal and an outrage. The housing market is in danger if such scams are allowed to continue. The Government are quite rightly putting in resources to fund the housing market, so if we are to deal with the issues in it, they should be calling those organisations in, getting a grip on them and telling them to stop ripping off the people who bought homes from them.
The Bill is making income tax payers, small and medium-sized businesses, and the self-employed pay the bill for the endless stream of tax cuts for corporations and the super-rich. It takes no serious action to tackle tax avoidance, putting in place get-outs and workarounds that mean it is just another smokescreen.
Nigel Mills
I welcome more funding to help children to be healthy and more funding for sports. I especially welcome the fact that the largest employer in my constituency, Thorntons, as part of the Ferrero group, gives big funding to school sports. More funding for healthy activities for children has to be a good thing. I am a little nervous about hypothecating taxes for individual spending, because there is a real risk that it would lead to a complicated tax system. It is a little like giving with one hand and taking away with the other. I welcome the fact that we are raising such spending, although I would not want to link it directly to a tax.
Jane Ellison
Just to clarify, one reason why the levy is on producers is that we want to drive the reformulation of products. Drawing on my previous role as public health Minister, every study that has ever been done across the world has shown that reformulating products at source is probably the most effective way of helping people to tackle obesity. I have spoken to supermarkets and producers for many months and, in their own research, they are getting the message back from consumers that tackling the problem at source through reformulation is what people want to see.
Steve McCabe
The hon. Gentleman may be reading from one of those notes that the Whips have been passing around, but I have not got around to mentioning the NHS yet. I will come to it.
I want to comment on the points made by the hon. Member for Vale of Clwyd. I agree that high-sugar diets are associated with a large number of serious conditions, including tooth decay, cardiovascular disease and type 2 diabetes. I will not repeat the figures, but I am grateful to him for giving the stats for five to nine-year-olds and for saying that such diets are the leading cause of hospital admissions for that age group. Of course, that imposes a considerable cost on our already overstretched NHS. He also rightly said that sugar is a leading cause of tooth decay for 15-year-olds, whose permanent teeth are being damaged. That is all preventable, as he said.
I think we are agreed that excessive sugar consumption is the main cause of tooth decay, so in principle I am in favour of a soft drinks levy. However, I am worried that it is an isolated policy and that it will fail to bring about the lasting change we hope for in the consumption habits of the public.
The hon. Gentleman gave the example of Mexico. If he looks carefully at what actually happened, however, he will see that, after an initial dip in sales of soft drinks, they subsequently rose and are now slightly higher than their pre-tax levels. The risk of such an isolated policy is that it may not have the long-lasting effect we seek. Indeed, it is debatable whether there is any robust evidence that an isolated levy on soft drinks will actually reduce the prevalence of any of the health conditions associated with high-sugar diets.
Jane Ellison
I am happy to comment on a couple of things. First, the provision is designed slightly differently from the Mexican initiative and others around the world. It is deliberately a producer levy, to drive reformulation of product. Secondly, to recap what I said in my opening speech, it is not happening in isolation. I entirely agree that it would not be enough in isolation, but it sits alongside a very ambitious body of work, not least in relation to reformulation across a range of different food groups, particularly those focused on children’s diets, on which Public Health England will lead over the next few years, working closely with manufacturers.
Steve McCabe
I am grateful to the Minister. Obviously, we cannot cite Mexico as evidence in favour of the policy and then dismiss it when there is contrary evidence. That was the point I was making. I do not disagree with some of the stuff for which she is arguing, but I and a lot of other people want a broader public health approach. We need to do a bit more to promote healthy eating and improve awareness of the risks associated with unhealthy diets.
I ask the Minister to think again about an industry comprehensive code, because that might be much better and enforceable. If that was to work in conjunction with a soft drinks levy, it might make a much more significant difference. The obesity strategy has been mentioned, but the truth is that most people were pretty disappointed with it when it came out. I remember her in her previous incarnation being much more optimistic about it than appears to be the case now.
With the NHS—this is for the benefit of the hon. Member for Peterborough—significantly extending waiting times for those needing operations for hip and knee replacements, and in the absence of any announcement of additional funding for the NHS, and with the Government continuing, as we have just heard, not to recognise that a funding crisis is engulfing the NHS, the need for a comprehensive set of preventive health measures to complement any soft drinks levy has become all the more pressing. I simply make the point that a tax to plug a hole in yet another failed Tory Budget simply will not be enough. We all know how we arrived at this tax, but it will not be enough by itself.
I do not know how much of this Bill will ever see the light of day, but I do know that it does not address the funding crisis in our schools and our NHS; the impact of cuts in policing, which are now resulting in predicted rises in crime; or the sense in my constituency of Selly Oak that, when it comes to fairness and those who are just about managing, this Government’s economic plans and other policies do not help them. With unemployment in Selly Oak at 4.5%, against 2.4% nationally, this Government simply are not working for Selly Oak.
Mr Rees-Mogg
There is indeed an advertising industry, but we live in a free country and people ought to be able to advertise products. We have a lot of misinformation, have we not? We now learn that fat is not as bad for people as it was said to be, and that people have put sugar into products from which they have removed the fat in order to make them taste nicer because fat-free products without sugar taste disgusting. Advice that turned out to be wrong has led to manufacturers doing things that then turn out to be unhealthy. I am suspicious of the advice that comes from Government and their ability to get it right. If they end up getting it wrong, force us to change our behaviour and tax us, we get the worst of all possible worlds.
A little bit of sugar does nobody any harm at all—only taking it to excess does so—and the only justification, which has indeed been made, is for children. However, I think that ignores the responsibility of parents, most of whom are responsible, and puts up the cost for responsible parents of giving their children what may, in many households, be an occasional treat rather than a regular habit. It is a tax that falls hardest on the poorest in society, who may occasionally be giving their children something that they like, because of the excesses of others. I do not really think that that is the job of the Government.
That leads me to the issue of hypothecated taxation. Ministers should write out 100 times a day, “Hypothecation is a bad idea.” That has been the Treasury orthodoxy for as long as there has been a Treasury. Hypothecated tax does not work because it produces the wrong amount of money for what it is seeking. We see that with the prospect of putting money from the sugar tax into schools. We now discover that not enough money is likely to come from the sugar tax to meet the obligations given to schools, and that money will therefore have to come out of general taxation.
If it were a good idea to put the money into schools in the first place, it ought to have come out of general taxation in the normal way. If it was not a good idea, but just a clever way of spending the money, taxpayers’ money should not have been used. If we get into the position that something is now being done that did not need to be done because it was promised as money from a tax that has not arisen, that is not a good way of carrying out Government policy. All hypothecation of taxation should be struck off: it simply leads to the wrong amounts.
That leads me to the broader point I want to make about this Finance Bill and the Budget that preceded it. It is very good news that an election has been called, because the Budget has become so hemmed in by the number of promises on taxation and revenue expenditure that have quite rightly been kept. Governments ought to keep their promises, and this Government have been absolutely rigorous in doing so, even ones that I do not like. For instance, I am not in favour of the 0.7% going on overseas aid, which I think has been a wasteful and extravagant promise when money is needed elsewhere. However, the justification was that it was in our manifesto, and in manifestos parties make a pact with the electorate that they ought to continue with except under the most extraordinary circumstances that have not arisen.
Such an approach has led to very many areas of expenditure being fixed, while taxation has been limited at the same time. The deficit has been brought down to a third of what it was when this Government came in—a very substantial achievement, of which this Government and their predecessor ought to be proud—but it has become very hard to take that any further because of the encapsulating commitments that are limiting the Chancellor’s freedom of action. That is why the Finance Bill, for all that it has 700 pages, will not lead to a great deal of fundamental reform. It is tweaking things at the edges—looking at little bits of money here and little bits there—rather than taking a fundamental or basic approach to our tax system.
Our tax system has become overly complex and, from the pressure of having to find little bits of money, it is becoming even more complex, which makes it difficult for taxpayers to pay the right amount of tax. We can see that more anti-avoidance legislation has come in to stop avoidance, because we have overcomplicated the tax system in the first place and a corrective measure has therefore had to be taken to try to prevent revenue from seeping away. A good example is the discussions we are having about perceived employment as opposed to self-employment. The Government were extremely proud of their achievement in making self-employment easier, but a constituent who came to see me explained that the £3,000 national insurance contributions exemption for small businesses had led to all the people working for him having to become individual companies, whereby it cost £3,000 a year less to pay them than if they were directly employed or were employed through one subsidiary company.
Very good ideas come into individual Budgets—particular tax breaks to encourage particular forms of behaviour to lead to certain outcomes that the Government wish to see—but they then have to be corrected by anti-avoidance measures because they get taken and used in a way that was not intended under the initial legislation. That is why the election will be a great opportunity to stand on a platform of tax simplification, and I hope we will achieve the sort of majority that will help to push that through. To achieve tax simplification, it will be necessary to ensure that avoidance is removed at source, rather than by anti-avoidance measures. That means taking away some of the existing exemptions and incentives that encourage people to set up more complex systems than they need to minimise the amount of tax they pay.
I am a defender of people taking such an approach. If Parliament legislates for tax to be collected in a certain way, with certain exemptions and thresholds, the individual taxpayer is completely and legitimately entitled to use them to their fullest extent. The approach is the fault not of the taxpayer, but of Parliament for putting exemptions into or leaving them in legislation. We should always be very careful to distinguish avoidance from evasion. Evasion is straightforwardly criminal—not paying the amount of tax that is, by law, due. Avoidance is looking at the tax system and saying, “I do not owe that tax, and I do not have to pay it because Parliament has not legislated for me to pay it.” As individual taxpayers, we are all entitled, as are all our constituents, to pay the tax Parliament requires, not a penny less or a penny more. If we had a system that was simpler overall, that would be hugely beneficial.
There is a lot about anti-avoidance in the Finance Bill, including the new rules for non-doms, about which I would be very careful. We live in a world where some very rich people want to come to the United Kingdom, and when they are here they employ people, spend money and pay taxes. We have a system that has barely changed since the days of Pitt the Younger—I cannot say I remember them, but I wish I did—and that broadly unchanged system was actually very beneficial for our economy because it brought into this country wealthy individuals who then provided economic activity. It is absolutely right to ensure that people who are obviously domiciled here in all normal senses of the word should be seen as being domiciled here, but we do not want such a difficult regime that people who might come here and contribute to our economy feel that they cannot do so.
Jane Ellison
I want to give my hon. Friend a degree of reassurance. A new measure in the regime advanced as part of the non-doms reforms will make it easier for anyone to invest in the real economy—business investment —which I hope he will welcome. I entirely take his point that we want to make sure that people can come to this country from anywhere and invest in the real economy.
Mr Rees-Mogg
Absolutely. That is an important part of the reforms, but there has perhaps been a tone—more from the previous Chancellor than from the current Chancellor—that the non-doms were using the system. A lot of them could actually go anywhere in the world, but they come here because of the great virtues of investing in the UK: we have clear rights of property; we have an effective rule of law; and we have had simple regulations that have allowed them to be here. However, we have now increased the charges on them and increased their eligibility for certain taxes, and I think we should be very cautious about that because one never knows, with these sorts of things, where the tipping point will come. It may be that the annual charges applied to non-doms seem quite small compared with their wealth, but when we consider that they have families—the charges have to be multiplied for the wife, the number of children and grandparents, or whoever—we may find that the charges become quite high. The people bringing such wealth into the country have enormous mobility: they can go elsewhere. I know that standing up for non-doms six weeks before an election is not necessarily going to be a great rallying call for North East Somerset, but ultimately I think good economics leads to good politics rather than the other way around. A lot of what was done with regard to non-doms was much more about politics and perception than the contribution non-doms make to this country. In the context of Brexit, we want to show that we are genuinely open to the rest of the world. We want people to come here to invest and to spend their money, because that is so important to our long-term economic prosperity.
There is a broad challenge with this Finance Bill, as there will be with its successor which will no doubt come. I have a feeling that this will be one of those happy years where we get more than one Finance Bill. Finance Bill debates are particularly enjoyable parliamentary occasions because they have no time limit. The hon. Member for Aberdeen North (Kirsty Blackman) said that we might go right through the night and not be able to have our debate tomorrow. I look forward to that happening at some point in the future, but I have a feeling it is not going to happen today. Finance Bill debates are the best debates because of their fluidity and flexibility.
When we get to the second Finance Bill, a fundamental choice will still have to be made. This relates to the answer we had from the hon. Member for Bootle (Peter Dowd) on the Opposition Front Bench. There is an absolutely key point at the heart of this Finance Bill, as there will be at the heart of any new Finance Bill. When I intervened on him and said that the tax rate as a percentage of GDP was at its highest since the days of Harold Wilson, his answer to me was that under Labour it would be even higher.
George Kerevan
I was very careful to say that I was not anticipating who would actually be in government. I was giving the present incumbents in the Treasury a chance to say what they might do should they be re-elected.
Let me move on now, because I think it important to analyse the contents of the Bill. I think that it contains two sets of structural weaknesses. The first reflects what I consider to be a change in the pulse of the economy, which has occurred since the end of 2016 and is embedded in all the latest data that we have—data that have emerged in the last month, since the start of the Easter break. I fully accept that the Government have presided over a period of economic growth since 2010. I do not want to dismiss the figures—in a number of years, our growth rate has been higher than those in other large industrialised countries—but what has underpinned that growth? All the figures suggest that it has been underpinned by consumer spending, largely funded by the rise in consumer debt.
I do not gainsay the growth, but, in her opening remarks, the Minister placed a great deal of emphasis on the Government’s success in that regard. If economic growth is founded merely on consumer spending, and that consumer spending is based on borrowing, it is not sustainable, and I think it entirely legitimate to question how long the Government can go on relying on consumer debt to fund growth. In fact, we are now approaching the end of that period. What worries me is that the fiscal plan embedded in the autumn statement and the March Budget assumes the continuation of growth that is beginning to falter.
Let me make a point that I raised after the autumn statement, and also during the Budget debate. It seems to me that the Chancellor gave himself plenty of fiscal fire power in the autumn statement through increased borrowing—or, at least, the removal of some of the more over-optimistic projections of the previous Chancellor, and some of his more egregious games with time limits in relation to when income would arrive. The current Chancellor, in the autumn statement, clearly borrowed sufficient money in order to give himself some fire power should the economy slow. The trouble is that in the autumn statement all that spending power was delayed until post-2019, which is when we will see what the Brexit deal actually is. If the economy slows between now and 2019, it will be too late to use the fiscal fire power. That was the criticism of the autumn statement that was made by me, and by other Opposition Members.
The March Budget was fiscally neutral, by and large, but it has run into some headwinds. If the incoming Government, whoever they are, post-8 June, do not make up the projected shortfall from the proposed rise in national insurance contributions by the self-employed, there is a hole of a couple of billion pounds to fill. That aside, as I have said, the March Budget was fiscally neutral. If we put together the autumn statement and the March Budget, the Chancellor has a nest egg that he can bring to bear on a slowing economy, but it is pencilled in for 2019. For the next two years, he is relying on economic growth funded by consumer debt. However, all the latest numbers show that that is no longer happening.
Jane Ellison
The hon. Gentleman is making an interesting speech and I welcome the consensual tone that he has struck on a number of measures. I have to push back on the charge that fiscal firepower will be delayed beyond 2019. The Chancellor was explicit in the autumn statement that we borrowed to invest in greater productivity and some of that is happening now. Some of the national productivity investment fund is for short-term investment. In addition, as the hon. Gentleman knows, Barnett consequentials of £800 million for the Scottish capital budget are there for the Scottish Government to spend as they see fit.
Jane Ellison
With the leave of the House, I will close today’s debate, and it is a pleasure to do so. It has been an interesting and wide-ranging debate, and I thank all hon. Members for their contributions. I will try to touch briefly on their contributions, but I suspect, with the time being rather against me, that I will not be able to answer all their questions. As I said in my opening speech, we no doubt have several discussions ahead of us about the next steps on the Finance Bill.
The Finance Bill takes the next steps in helping Britain to succeed both now and in the future. What was lacking from the rather opportunistic speech we have just heard was any willingness to face up to the economy’s strategic challenges. Many are touched on in the Bill and I will refer to some of them now. One theme that emerged—in the speech by the hon. Member for Bootle (Peter Dowd) at the beginning of the debate and in other speeches—was a focus on productivity. Nobody could have been clearer about facing up to the country’s productivity challenge than the Chancellor. I think everyone should be able to support the measures we have laid out to respond to the long-term challenge as a priority, and to take targeted action to invest in innovation and infrastructure.
We are also introducing measures on setting corporation tax to make our economy more competitive. I wholeheartedly reject the comments we hear from the Opposition that try to set small business against large business against medium-sized business. All businesses, over 1 million of them, large and small, will benefit from our cuts to corporation tax. We want to ensure that we offer SMEs enhanced research and development tax relief, and other measures that will help them to grow. I welcome the emphasis placed by my hon. Friend the Member for Richmond (Yorks) (Rishi Sunak) towards the end of the debate on that very issue of how we help businesses to grow. I find it extremely disappointing that the Labour party seeks to pass judgment. We want small businesses to become big businesses and we want to ensure that we help that to happen.
There have been a number of comments, not least from both Opposition Front-Bench spokesmen, about HMRC resourcing. I sprang to the defence of HMRC’s record. It has made sustainable cost savings of more than £1 billion over this Parliament while improving performance. Over the same period, it has collected a record level of tax revenue, reducing the tax gap to a historic low of 6.5% in 2014-15. Measures in the Bill will build on the measures already passed by both this Government and the coalition Government to close the tax gap. I would be very disappointed to think that Opposition Members are not supportive of those measures.
Turning to Back-Bench contributions, my hon. Friend the Member for Amber Valley (Nigel Mills) made an excellent and typically thoughtful speech. It was wide-ranging and I will not be able to respond to all the points he made, but he was supportive of the soft drinks industry levy. He rightly focused on measures to tackle the tax gap in VAT and important new steps we are bringing forward. He spoke about a number of other issues. He asked me about when we might look to turn on the power we took last year with regard to country-by-country reporting. We have always said that we want to make the case at various international forums to work through that in an international context. We will continue to raise the issue and pursue international agreement on public country-by-country reporting.
My hon. Friend also sought reassurance on the compressed interest restriction, a measure that, along with the loss relief measures in the Bill, stands to raise £7 billion across the period in question—very significant sums of money from large corporations. He wanted reassurance that that would not be a block on growth and investment. I think I can give him that reassurance. We have a very open and competitive economy, and we have a very competitive tax system, but we expect businesses to pay the right amount of tax. We are not the only country with an interest restriction: for example, Germany, Italy and Spain have similar rules, and other European countries will be introducing similar rules over the coming years. I hope that gives him a degree of reassurance.
My hon. Friend the Member for Vale of Clwyd (Dr Davies) gave a very thoughtful speech on the soft drinks industry levy. I very much welcome his support, drawn from his experience not just on the Health Committee but professionally. He gave a tour de force speech outlining the reasons for providing a prescription to tackle obesity. Obesity offers a considerable threat to the long-term finances of the NHS. I welcome his support for the levy.
The hon. Member for Dundee East (Stewart Hosie) expressed a degree of scepticism about the work that we have done to support the oil and gas industry. I do not think that that scepticism can be justified. We have worked very closely with the industry, and we now have one of the world’s most competitive fiscal regimes for oil and gas, although we intend to go further. At the time of the 2017 Budget, we published a discussion paper on how taxation could better support the transfer of older late-life assets—an important issue for the basin—and ensure that we could put them into the hands of companies that wished to invest. I have met industry stakeholders to discuss the issue, and I know that the announcement has been welcomed. I think it should also be welcomed by Members in all parts of the House, not least members of the Scottish National party—including the hon. Member for Aberdeen North (Kirsty Blackman), who raised similar issues.
The hon. Member for Dundee East also mentioned insurance premium tax. When we made announcements about the proposed new rate, the Chancellor made clear that it was intended to raise vital revenue to fund our public services. Those who oppose such a rise must themselves make clear where they would find the sizeable revenues that we need to invest in our front-line public services and generate income for our economy. I did not hear many answers to that question during today’s debate.
The hon. Member for Birmingham, Selly Oak (Steve McCabe) spoke mostly about the NHS. Let me respond by saying that a strong NHS needs a strong economy, and that is what we are trying to build.
The hon. Member for East Lothian (George Kerevan) made a thoughtful speech, and I agree with him about the need for long-term investment to address the productivity challenge. He gave a degree of support to the soft drinks industry levy, and sought a number of reassurances—not all of which I can give him tonight—about some of the steps that would be taken in the weeks ahead. I was glad to hear that he thought there was much to be commended in the measure. I expect that we shall return to the issue of the productive growth agenda, but let me repeat what I said to him in an intervention: £800 million of additional capital will flow, in Barnett consequentials, to the Scottish Government as a result of the announcements in the autumn statement about the national productivity infrastructure fund. The hon. Gentleman also talked about household debt. I merely note that the debt interest to income ratio is at a record low: it was 4.5% in 2016, compared to 10.1% in 2008.
Although I was not in the Chamber at the time, I believe that my hon. Friend the Member for North West Hampshire (Kit Malthouse) made a typically robust speech in which he supported all measures to promote investment. He talked about science, the need to encourage entrepreneurs, and the challenge of taxing the gig economy, which the Chancellor has acknowledged to be one of the strategic challenges facing not just our economy but developed economies throughout the OECD area. We are contributing to the international debate on that subject. There is more to be said about it, but measures in the Bill begin to address, for example, how some online trading platforms deliver in terms of VAT. That missing VAT represents one of the big parts of the tax gap, and we hope that there will be widespread support for our measures.
The hon. Member for Aberdeen North referred to the scrutiny of tax policy. I think that she and I can agree about many aspects of the announcement of the move to a single fiscal event. As for her other points, we have worked extremely closely with a number of industry stakeholders on some of the more complex measures in the Bill. I think that those measures have been greatly improved as a result, and the stakeholders have given the Government credit for that. We heard another rerun of the argument about VAT refunds for the Scottish police and fire and rescue services, and once again—
Madam Deputy Speaker (Mrs Eleanor Laing)
Order. It is a little impolite to make so much noise that the House cannot hear the Minister. While there may be other matters that Members need to discuss, there is nothing more important than the Minister’s summing up of a debate on the Finance Bill.
Jane Ellison
What could be more exciting and important to talk about? I wonder.
I reiterate that the Government warned Scottish Government officials at the time that the new funding model that they proposed would lead to the loss of eligibility for VAT refunds. I expect the SNP will raise the matter again, but it will continue to get that straightforward response to the issues that it has raised.
There was a cluster of pithy and important speeches towards the end of the debate. My hon. Friend the Member for Louth and Horncastle (Victoria Atkins) spoke about the need for sound finances and about reducing borrowing. She made a welcome contribution. My hon. Friend the Member for Fareham (Suella Fernandes) put a welcome emphasis on the increase in personal allowances. How little we heard about that from some Opposition Members. Since 2010, there has been a huge increase in what people can earn before they are taxed.
My hon. Friend the Member for Richmond (Yorks) (Rishi Sunak) drew on his experience and gave voice to the entrepreneurial spirit of Yorkshire. He focused on early-stage finance for growing businesses. He is right that there are things that are helpful in that regard in the Bill, but we are always happy to hear more ideas about how we can support entrepreneurs and businesses to grow.
Fittingly, my hon. Friend the Member for Taunton Deane (Rebecca Pow) ended with the message that we need to keep the economy on track to greater growth and stability. That brings me to my conclusion.
The changes that the Bill is introducing are significant in a number of regards. They will raise significant revenue to support the public services on which our nation depends by tackling tax avoidance and evasion. The Labour party has been a little opportunistic in some of the things it has said in the debate. In the coming weeks, it will have to answer questions about how it would close the tax gap and balance the books to gain any credibility in the eyes of the electorate. It will also have to address in the coming weeks questions on the strategic challenges that this Government have been prepared to face up to—the challenge to look at a tax system that works however people choose to work, and the challenge to address the erosion of the tax base in a serious, long-term, strategic way. The Government are prepared to face up to those challenges, and measures in the Bill begin to address some of those head on.
We are also addressing head on the critical issue of childhood obesity. We are tackling it with our game-changing soft drinks industry levy; that is just one of the measures being taken across Government to tackle childhood obesity. It was welcome to hear support on all sides for that measure. I hope that we are able to make good progress with that because it is a game changer.
The Bill demonstrates the Government’s commitment to a stronger, more secure, more productive economy. I am therefore delighted to commend it to the House.
Question put, That the amendment be made.
Tuesday 25th April 2017
(7 years, 7 months ago)
Commons ChamberFinance Act 2017 Read Hansard Text Amendment Paper: Committee of the whole House Amendments as at 25 April 2017 - (25 Apr 2017)
This text is a record of ministerial contributions to a debate held as part of the Finance Act 2017 passage through Parliament.
In 1993, the House of Lords Pepper vs. Hart decision provided that statements made by Government Ministers may be taken as illustrative of legislative intent as to the interpretation of law.
This extract highlights statements made by Government Ministers along with contextual remarks by other members. The full debate can be read here
This information is provided by Parallel Parliament and does not comprise part of the offical record
The Financial Secretary to the Treasury (Jane Ellison)
I will speak briefly, as we have a fair amount to get through this afternoon. Obviously, I shall attempt to address any points that are made during the debate.
The Bill is progressing on the basis of consensus and therefore, at the request of the Opposition, we are not proceeding with a number of clauses. However, there has been no policy change. These provisions will make a significant contribution to the public finances, and the Government will legislate for the remaining provisions at the earliest opportunity, at the start of the new Parliament. The Government remain committed to the digital future of the tax system, a principle widely accepted on both sides of the House. We recognise the need for the House to consider such measures properly, as called for by my right hon. Friend the Member for Chichester (Mr Tyrie) and his Treasury Committee. That is why we have decided to pursue those measures in a Finance Bill in the next Parliament, in the light of the pressures on time that currently apply.
Clauses 1 and 3 provide for the annual charging of income tax in the current financial year and maintain the basic, higher and additional rates at the current level. The annual charge legislated for in the Finance Bill is essential for its continued collection, and it will enable the funding of vital public services during the coming year. Maintaining these rates, while increasing the tax-free personal allowance and the point at which people pay the higher rate of tax, means that we are delivering on important manifesto commitments. On top of that, as of April this year, increases in the personal allowance since 2010 will have cut a typical basic-rate taxpayer’s income tax bill by more than £1,000, taking 1.3 million people out of income tax in this Parliament alone.
Clause 4 will maintain the starting-rate limit for savings income—applied to the savings of those with low earnings—at its current level of £5,000 for the 2017-18 tax year; clause 6 will charge corporation tax for the forthcoming financial year; and clauses 17 and 18 will make changes in the taxation of pensions. Clause 18 legislates for a significant anti-avoidance measure announced at the spring Budget. It will make changes to ensure that pension transfers to qualifying recognised overseas pension schemes requested on or after 9 March 2017 will be taxable. The charge will not apply if the individual and the pension savings are in the same country, if both are within the European economic area or if the pension scheme is provided by the individual’s employer.
Before the changes were announced in the spring Budget, an individual retiring abroad could transfer up to £1 million in pension savings, without facing a charge, to a pension scheme anywhere in the world provided that it met certain requirements. Overseas pension transfers had become increasingly marketed and used as a way to gain an unfair tax advantage on pension savings that had had UK tax relief. That was obviously contrary to the policy rationale for allowing transfers of UK tax-relieved pension savings to be made free of UK tax for overseas schemes. This charge will deter those who seek to gain an unfair tax advantage by transferring their pensions abroad. Exemptions allow those with a genuine need to transfer their pensions abroad to do so tax-free.
Clause 17 will make various changes in the tax treatment of specialist foreign pension schemes to make it more consistent with the taxation of domestic pensions.
Clause 21 will simplify the payment of distributions by some types of investment fund. Following the Government’s introduction of the personal savings allowance, 98% of adults have no tax to pay on savings income. In line with that, the clause will remove the requirement to deduct at source tax that must subsequently be reclaimed by the saver.
Clauses 45 to 47 provide for the removal of the tax advantages of employee shareholder status for arrangements entered into on or after 1 December 2016, in response to evidence suggesting that companies were not using the status for its intended purpose and that it therefore was not delivering value for money. The status was introduced to increase workforce flexibility by creating a new class of employee, but it became apparent that it was being widely used as a tax planning device, rather than for its intended purpose of helping businesses to recruit.
Evidence suggests that companies, particularly those owned by private equity funds, were using employee shareholder status as a tax-efficient way to reward senior staff. In many cases, contract provisions were used to replace the statutory rights that had been given up, which was undermining the purpose of the status. That continued to be the case despite the introduction of the £100,000 lifetime limit on capital gains tax-exempt gains in the 2016 Budget. The Government therefore announced in the 2016 autumn statement that they would remove the tax reliefs associated with the status and close the status itself to new arrangements at the next legislative opportunity. The action that we are taking tackles abuse and increases the fairness of the tax system.
Peter Dowd (Bootle) (Lab)
I thank the Minister for her opening remarks about consensus, with which I fully concur. We are here today to debate what is effectively a condensed version of the Bill for which my colleagues and, indeed, everyone else had been preparing, with a view to taking part in a number of Public Bill Committee sittings over a number of weeks to scrutinise properly the longest Finance Bill that has ever been produced. That is the context in which I shall make my comments.
The Prime Minister’s announcement outside No. 10 and the subsequent vote mean we do not have sufficient time in this Parliament to give the full Bill the proper parliamentary oversight it requires and deserves, as I am sure Members will understand. It is clear that the Treasury was unaware of the Prime Minister’s plans for a snap election—otherwise, it would not have introduced the longest ever Finance Bill—but the Opposition recognise the unique scenario we are in and the Government’s responsibility to levy taxes, and I am sure the Minister recognises our responsibility to scrutinise the Bill in as open and transparent a manner as we possibly can. That is why we have acted in good faith to ensure that a version of the Bill can pass before Parliament is dissolved.
Our approach to the pre-election process and the presentation of the condensed version of the Bill has been underlined by two concerns: fiscal responsibility balanced against parliamentary scrutiny. The Opposition have a responsibility to taxpayers to ensure as little economic disruption as possible; we will therefore not attempt to block any measure in the Bill that has to be passed to ensure business as usual for our public services, such as on income tax, and nor will we obstruct tax that is already in the process of collection. But of course we cannot give the Government carte blanche, as we have made clear.
There are many clauses in the Bill that we can and should wait to deal with until after the general election, as that would provide the opportunity for them to be properly scrutinised. The one exception is the soft drinks levy, which I will speak about later.
In relation to alcohol duty, the Bill includes measures that have already been implemented but that we opposed in the Budget resolutions. They include the Government’s decision to raise alcohol duty in line with inflation, raising the price of a pint of beer by 2p, a pint of cider by 1p and a bottle of Scotch whisky by 36p. As I said on Second Reading, rising business rates and rising inflation are creating a perfect storm for many small businesses. Therefore, the decision to raise this duty is a risk.
Another measure that we would have liked to avoid but that is included as a result of the necessity of the compressed process that this Bill is going through is the rise in insurance premium tax. It has already been doubled and this raises it further. Had there been a longer process, we would have sought to challenge that, as we did at the Budget resolution stage, so there is no surprise in this, but the reality is that the measure is already in effect due to the resolutions.
On tax avoidance, it is time for a wholesale shift in how we approach taxation and the treatment of self-employment given the rise of the gig economy in recent years. The Bill originally contained a number of initiatives, and no doubt we will come back to them in due course.
I welcome the Minister’s statement on the digitalisation of tax. It will be a great relief to many small businesses given the onerous requirements for quarterly reporting. No one is against a move to a digital tax system, but we do not agree with the rush to implement it.
A large portion of the Bill relates to the introduction of the soft drinks industry levy, which the Government have consulted on heavily and on which they have cross-party support in this House. The levy has popular public support, too, as a poll has indicated. I want to take this opportunity to pay particular tribute to Jamie Oliver and the Obesity Health Alliance, who have campaigned tirelessly on this issue and on the need for a joined-up Government obesity strategy, and I must compliment the Minister, who in her current and previous roles has been a strong advocate for the levy. We would like to see a review of the sugar tax levy in due course, if possible. The Minister might well wish to comment on that. I am sure that a range of issues, such as in relation to multi-buy discounts, could form part of this.
In conclusion, as a responsible Opposition, we will not stand in the way of passing a Finance Bill before the election, as that is a necessity. There are some measures that a Labour Government would bring back, and we will have an opportunity to scrutinise them in due course, but we need to get this through and we need to be responsible, and we will support the Government where required.
The Chairman of Ways and Means (Mr Lindsay Hoyle)
With this it will be convenient to discuss the following:
Clauses 8 to 15 stand part.
Government amendment 4.
Clauses 48 to 51 and 124 to 127 stand part.
Government motion to transfer clause 127.
Clauses 128 and 129 stand part.
Government amendment 10.
That schedule 1 be the First schedule to the Bill.
Government amendments 11 and 12.
That schedule 2 be the Second schedule to the Bill.
Government amendment 57.
That schedules 16 to 18 and 27 to 29 be schedules to the Bill.
New clause 1—Review of international best practice in relation to tax avoidance and tax evasion—
‘(1) The Chancellor of the Exchequer must, within two months of the passing of this Act, commission a review of international best practice by Governments and tax collection authorities in relation to—
(a) the prevention and reduction of tax avoidance arrangements, and
(b) combatting tax evasion.
(2) A report of the review under subsection (1) must be laid before the House of Commons within six months of the passing of this Act.
(3) In this section, “tax avoidance arrangements” mean arrangements broadly comparable in their effect to arrangements in the United Kingdom which have the obtaining of a tax advantage as the main purpose, or one of the main purposes, of the arrangements.”
Jane Ellison
Before I say something about this group, I wish to comment on the maiden speech and on the retirement speech that we just heard. It was a real honour to be here in the Chamber for the maiden speech by my hon. Friend the Member for Copeland (Trudy Harrison). She told us what inspired her, but she also reminded many Conservative Members of how she inspired us to make the journey up to her beautiful constituency in the knowledge that we were supporting an outstanding woman who is rooted in and passionate about her community. She was generous about her predecessor, which was nice to hear. I had many friendly dealings with Jamie Reed when he was a Labour shadow Health Minister and I was in the Department of Health, so I welcome her comments. It was a wonderful maiden speech and I look forward to many more speeches from her in the future, and I wish her and her long-suffering family well for the weeks ahead. She spoke with conviction about the contribution of nuclear power, but I think that in the forthcoming campaign it will be girl power to the fore.
It is always nice to hear Members reflect on their time in this House and the way they have served. As the right hon. Member for Oxford East (Mr Smith) noted, he has had a nice bookending, with a Finance Bill debate at the start and a final contribution on Treasury matters. Of course, he also paid tribute to his constituents. I am sure that in these circumstances one has a bit less time than one thought to do a round of goodbyes, but I am sure he will continue to be active in his community. I congratulate him on his speech and thank him, on behalf of all hon. Members, for his service to the House.
This group deals with the taxation of employment income, and contains some clauses addressing tax avoidance and evasion. There are a number of clauses and schedules in this group, including a new clause from the hon. Member for Aberdeen North (Kirsty Blackman), but I am going to focus my remarks on clause 7 and schedule 1, which refer to workers’ services provided to the public sector through intermediaries and which might be of interest to Members. I will, of course, address any other areas in the course of the debate.
Clause 7 and schedule 1 reform the off-payroll working rules—also known as the intermediaries legislation, or IR35—for individuals working in the public sector. The tax system needs to keep pace with the different ways in which people are working. As the Chancellor set out at both the autumn statement and the spring Budget, the public finances face a growing risk from the cost of incorporations. Indeed, the Government estimate that by 2021-22 the cost to the Exchequer from people choosing to work through a company will be more than £6 billion. A not insignificant part of that cost comes from people who are working through their own personal service company but who would be classed as employees if it were not for that company. The off-payroll working rules are designed to ensure that where individuals work in a similar way to employees, they pay broadly the same taxes as employees. However, non-compliance with these rules is widespread, and Her Majesty’s Revenue and Customs estimates that less than 10% of those who should operate these rules actually do so. As a result, more than £700 million is lost each year across the economy, of which about 20% relates to non-compliance in the public sector. This is neither sustainable nor fair, and we believe that public authorities, in particular, have a responsibility to taxpayers to ensure that the people working for them are paying the right amount of tax.
Kirsty Blackman
People have told me that no matter what information they have put in, they have always been told that they have to pay more tax than they were expecting. Concerns have been raised with me about that online tool and its shortcomings, and about the fact that HMRC is always asking people to pay a level of tax that they think is wrong or too high.
Jane Ellison
Given where we are in this Parliament, the best thing the hon. Lady can do is to send details on that, immediately and before Dissolution, so that HMRC can look at the factual issues. I am surprised by what she says, but let us ask HMRC to look at the practical issues she raises—while we are off doing other things, it can perhaps look at those if she supplies the information in the next few days. HMRC has worked with the Cabinet Office Crown Commercial Service to produce guidance for public authorities and has supported them to implement the changes.
Government amendment 10 is a technical one to ensure that the reform only applies to the public sector, as set out in the Government’s original announcement.
In conclusion, the Government believe it is essential to ensure that public funds are used correctly and that those in receipt of them are paying the correct amount of tax. The changes being made by clause 7 and schedule 1 will improve compliance with the tax rules, raising a substantial amount of revenue by 2021-22. I therefore ask Members to support this clause and schedule, along with clause 8, schedule 2, clauses 11 and 48, schedule 16 and clause 127.
Kirsty Blackman
I wish to discuss the issues raised in this group, including by my new clause 1. The Minister has covered the IR35 issues in some detail, but the Scottish National party still has real concerns about these changes. Just the other day somebody told me that they are no longer bidding for public sector contracts as a result of the tax changes made on IR35. That is a real concern, which we have raised before, particularly in the context of rural communities. In some of our most rural communities, people such as teachers, doctors and nurses are employed through intermediaries, and for very good reasons: it is sometimes difficult to get people to come to some of the most rural parts of Scotland. We are concerned that this move is going to have a real disadvantageous effect, particularly for rural communities that rely on teachers, doctors and other individuals working in the public sector who are employed through intermediaries. I understand that it is already having an effect, but it would be interesting, and I would very much appreciate it, if the Government let us know what difference it has made, not only to the tax take, but to our communities. Having read through the Government’s document on the impact of the tax changes, called OOTLAR—the overview of tax legislation and rates—I do not think they have recognised the impact the changes could have on communities, so it would be interesting to see what that impact is. The change has already been made and people are now working under it, so I imagine that within six months or so we will be able to see the outcomes and whether or not there is a disadvantage.
New clause 1 is on tax avoidance, which the Scottish National party has spoken about at length in this Parliament, and about which we will continue to speak at length. Tax avoidance is a real concern and contributes to the UK tax gap, which is £36 billion. Back in 2014, Credit Suisse published a report suggesting that larger countries such as the United Kingdom struggle to get people not to avoid tax. Smaller countries are much better at it—I am just pointing that out. The new clause would require the Chancellor of the Exchequer to review within two months international best practice in relation to the prevention and reduction of tax avoidance arrangements and combating tax evasion, and to publish a report of the review. We are asking for that because we do not think that the United Kingdom is the best place in the world at tackling tax avoidance. It is certainly not the best place in the world at all the different ways of tackling tax avoidance; we could learn a huge amount from what different countries are doing. The new clause would be a sensible way forward, so I hope the Government are keen to accept it.
Something else we have mentioned in relation to tax avoidance is the protection of whistleblowers. Some whistleblowers tend towards having poor health as result of their whistleblowing. It is really important that people are encouraged to come forward if they see problems, and that we are making it as easy as possible for them to do so, because we need people to be whistleblowers. We need them to tell us where practice is going wrong and where tax dodging is happening. We would support the Government in any action they take to encourage whistleblowers and to create a better environment in which they can come forward.
Lastly, there has been talk of the possibility of the United Kingdom becoming a tax haven after Brexit. We absolutely reject the notion that after Brexit the United Kingdom should reduce all taxes to nearly nothing. For a start, that just does not work if we want to have public services such as the NHS—
The Chairman of Ways and Means (Mr Lindsay Hoyle)
With this it will be convenient to discuss the following:
That schedule 19 be a schedule to the Bill.
New clause 2—Review of VAT treatment of the Scottish Police Authority and the Scottish Fire and Rescue Service—
“(1) The Chancellor of the Exchequer must, within two months of the passing of this Act, commission a review of the VAT treatment of the Scottish Police Authority and the Scottish Fire and Rescue Service, including but not limited to—
(a) an analysis of the impact on the financial position of Police Scotland and the Scottish Fire and Rescue Service arising from their VAT treatment, and
(b) an estimate of the change to their financial position were they eligible for a refund of VAT under section 33 of the VAT Act 1994.
(2) A report of the review under subsection (1) must be laid before the House of Commons within six months of the passing of this Act.”
Jane Ellison
No VAT is charged for the buying of an adapted vehicle by or on behalf of a disabled wheelchair user. Unfortunately, this scheme, which supports disabled wheelchair users to live independently, has been fraudulently abused by unscrupulous individuals who make purchases under this relief and then sell the vehicles on for additional profit. For example, HMRC discovered that one person purchased 30 BMWs under the scheme in one day, while another individual bought 100 vehicles that I would describe as high-performance sports cars and the like in under two years. This is clear abuse of the scheme, and its integrity is being brought into question by such behaviour.
Clause 57 will tackle abuse of the relief, while ensuring that it remains available for those with disabilities. The changes made by clause 57 will restrict the number of vehicles that an individual, or someone on behalf of that individual, may purchase under the scheme to one every three years. That will stop fraudsters from purchasing multiple vehicles in one day, or over a prolonged period. The legislation recognises that, in some circumstances, a replacement vehicle may genuinely need to be purchased within the three-year period. In addition, the clause makes it mandatory for vehicle dealers to submit a declaration of eligibility for each car purchased under the scheme to HMRC and applies penalties to those found to abuse the scheme.
Jane Ellison
Let me just complete the exposition of why these bodies do not qualify.
Both those new bodies are funded centrally rather than through local taxation and therefore do not meet the eligibility criteria for section 33 VAT refunds. The Treasury warned the Scottish Government in advance that making these changes would result in the loss of VAT refunds. In deciding to go ahead, the Scottish Government fully considered the costs and benefits of doing so, including the loss of VAT refunds. Therefore, there is no additional benefit to be had from the Government committing resource and time to produce a report on this issue. I therefore urge the Committee to reject new clause 2.
Kirsty Blackman
Just on that, can the Financial Secretary tell us how London Legacy and Highways England are funded?
Jane Ellison
Again, those are matters that have been covered before. I refer the hon. Lady to comments that I have made previously in response to very similar interventions. These measures have been discussed not just in Finance Bills, but during the passage of the Scotland Bill. Again, the message was the same that this was a decision taken in the full knowledge of the VAT consequences. Once again, I urge the House to reject the new clause that calls for a review.
Kirsty Blackman
If the Minister changes the VAT treatment of the Scottish police and the fire and rescue service, I promise not to raise the matter again in the House. I can see that she is fed up with discussing it, but, frankly, so am I. If the Government were to move on this, we would not have to raise it again.
The Chairman of Ways and Means (Mr Lindsay Hoyle)
With this it will be convenient to consider clause 59 stand part.
Jane Ellison
Clause 58 legislates for the increase in the standard rate of insurance premium tax from 10% to 12% as the Chancellor announced in the autumn statement 2016. This change will be effective from 1 June this year. Clause 59 will make minor changes to anti-forestalling provisions, so that insurers cannot artificially avoid paying the new rate of insurance premium tax by adjusting contract dates.
The Government remain committed to our fiscal mandate of eliminating the deficit. Much has already been achieved. The Government are forecast to reduce the deficit by more than two thirds by the end of this year, and in 2018-19, debt will fall for the first time in 16 years. However, we cannot be complacent. The Office for Budget Responsibility’s recent fiscal sustainability report highlights the challenges posed by an ageing population, projecting debt almost trebling to 234% over the next 50 years, if no further action is taken.
Stephen Pound
I am so sorry to interrupt the hon. Lady, but I speak on behalf of the 4th Perivale scout group, which is most concerned about the impact that insurance premium tax increases are having on not just scout groups but other charities. Has she considered this matter since my hon. Friend the Member for Bootle (Peter Dowd) raised it, and does she have any good news if not for the whole charity sector, at least for the 4th Perivale scout group?
Jane Ellison
I am delighted that the hon. Gentleman has had the opportunity to put his local scout group on the record. These issues have been discussed in general terms. In particular, I spoke at the Charity Tax Group conference recently. The point that I made there was that although we are not making exceptions for a number of reasons—some of them logistical—there are many different ways in which the Government exempt tax for charities and try to support them in other ways. The existing tax reliefs that go to charities and community groups in this country are worth many billions, and many are not taken up as much as they should be. In particular, the issue of scout groups got a very thorough airing during the passage of the gift aid small donation scheme measures that we took through the House last autumn. Those measures are designed to help such groups that do a lot of their fundraising outside their headquarters. Although I cannot give him comfort on this issue, I draw his attention to the fact that there are many other ways in which we help to relieve worthy groups. In particular, I refer to that recent change, which I encourage him to discuss with the Perivale scout group, because, as I have said, that was made very much with it in mind, especially with regard to how it collects donations.
George Kerevan
Essentially, this is one of the taxes that the Government are keeping in. It is the third insurance premium tax rise in 18 months. Will the Minister justify why the Government are proposing this third increase, which actually increases the rate by 20%—well above the rate of inflation?
Jane Ellison
I am coming to that, but the Chancellor was admirably clear when he laid the change out for the House when it was announced.
The Government have worked to eliminate the deficit and to invest in Britain’s future. We want to ensure that the public finances remain sustainable and to build resilience to future shocks. We have prioritised tax changes to help ordinary working families, and encouraged businesses to invest in the UK. We are supporting jobs and helping people’s money to go further through increases to the personal allowance and the national living wage. We have committed to investing £23 billion for infrastructure in the national productivity investment fund and an extra £2 billion for social care, which will ease pressures on the national health service.
By increasing insurance premium tax, we will ensure that we can maintain the balance between that investment and controlling the deficit. The additional revenue gives the Government the flexibility to invest. IPT is a tax on insurers. They are not in any way obliged to pass on the tax through higher premiums. However, if insurers do choose to pass on the increase, it will be spread thinly across a wide range of people and businesses. In line with the informal agreement between the Government and the Association of British Insurers, firms have been given more than six months’ notice, which gives time to implement the change. The agreement aims to give insurers proper warning of a rate change and to ensure that the correct rate of tax on a policy is known when the policy is arranged.
The changes made by clause 58 will raise approximately £840 million each year to reduce the deficit, while ensuring that we can fund spending commitments. That really is the answer to the intervention by the hon. Member for East Lothian (George Kerevan). Insurance premium tax is a tax on insurers, not consumers. It will be insurance companies’ choice whether to pass on the 2% rate increase. Even if the increases were passed on in full, the impact would be modest, costing households less than 35p a week on average.
The changes made by clause 59 will protect revenue by ensuring that insurers cannot artificially avoid paying the new rate of IPT by adjusting contract dates. As I have said, the Government are committed to reducing the deficit, while still investing in the UK. This requires some difficult decisions, including this 2% increase to the standard rate of IPT. The change will be invaluable in funding vital public spending, such as the additional £2 billion committed to social care.
Kirsty Blackman
It is really interesting to hear the Minister say that the change will only cost an average of 35p a week. That is quite a lot, particularly for people who do not have an extra 35p a week. The director general of the ABI said:
“UK consumers and businesses already pay relatively high levels of IPT… It cannot be right that people are being forced to pay an increasingly high price for doing the responsible thing”.
As my hon. Friend the Member for East Lothian (George Kerevan) said, this is the third increase. At the start of this Parliament, IPT was at something like 3%. It was then increased to 6.5% and then to 9.5% during this Parliament. This is a tax on people doing the right thing by insuring their homes and properties. I agree with the hon. Member for Ealing North (Stephen Pound), who spoke about a scout group, that this is also a tax on charities and organisations providing a brilliant experience for young boys and girls going through scouting. The change has not been considered in the round; the Government have seen another opportunity to get a few extra pennies in.
The Chairman of Ways and Means (Mr Lindsay Hoyle)
With this it will be convenient to consider the following:
Clauses 61 to 64 stand part.
Amendment 1, in clause 65, page 73, line 4, leave out subsection (2).
Clauses 65 to 70 stand part.
New clause 3—Review of oil and gas corporation tax rates and investment allowances—
“(1) The Chancellor of the Exchequer must, within two months of the passing of this Act, commission a review of the corporation tax rates and investment allowances applicable to companies producing oil and gas in the UK or on the UK continental shelf.
(2) A report of the review under subsection (1) must be laid before the House of Commons within six months of the passing of this Act.”
New clause 4—Review of tax regime relating to decommissioning of oil and gas infrastructure—
“(1) The Chancellor of the Exchequer must, within two months of the passing of this Act, commission a review of the ways in which the tax regime could be changed to increase the competitiveness of UK-registered companies in bidding for supply chain contracts associated with the decommissioning of oil and gas infrastructure or the development of new fields in the UK continental shelf.
(2) In undertaking the review under subsection (1), the Chancellor of the Exchequer must consult—
(a) the Department for Business, Energy and Industrial Strategy;
(b) the Oil and Gas Authority;
(c) Scottish Ministers; and
(d) such other stakeholders as the Chancellor of the Exchequer thinks appropriate.
(3) A report of the review under subsection (1) must be laid before the House of Commons within six months of the passing of this Act.”
Jane Ellison
I plan to focus my comments in this part of the debate on alcohol duties, which I anticipate will be of greatest interest to hon. Members. Other clauses within the group provide for other duty changes, and a new clause has been tabled by the hon. Member for Aberdeen North (Kirsty Blackman) on the oil and gas decommissioning regime, which we may come to.
Clause 65 sets out changes to alcohol duty rates that took effect on 13 March 2017. We announced in the 2017 Budget that the duty rates on beer, cider, wine and spirits will be kept flat in real terms, uprating by retail price index inflation. This is in line with policy and previous forecasts. As hon. Members will probably be aware, the public finances assume that alcohol duties rise by RPI inflation each year, so there is a cost to the Exchequer from freezing or cutting alcohol duty rates. If alcohol duty rates had been frozen or cut at Budget 2017, the Government would instead have had to raise taxes in other areas of the economy, to cut public spending or to increase the public deficit. Consumers and businesses continue to benefit from the previous alcohol duty changes, which initial estimates suggest will save them around £3 billion in duty between fiscal years 2013 and 2017. I will now briefly set out how past duty changes and other Government policies have affected different drinks and the sector.
I will start with spirits duty. The Government recognise the important contribution that Scotch whisky makes to the economy and local communities. The Scotch Whisky Association, which I had a meeting with and had the chance to hear from directly, estimates that Scotch whisky adds over £5 billion overall to the UK economy and supports more than 40,000 jobs, some 7,000 of which are in the rural economy. Distilleries provide an important source of employment in rural communities. The Scotch Whisky Association estimates that exports to nearly 200 countries in every continent were worth nearly £4 billion last year and accounted for about 20% of all UK food and drink exports. Single malt Scotch whisky exports exceeded £1 billion for the first time last year, and more Scotch whisky is sold in France in just one month than cognac in an entire year.
The Government are committed to supporting this great British success story. Scotch whisky was one of the first food and drink products to feature in the GREAT campaign, giving it high visibility internationally in key markets. More recently, the Scotch Whisky Association joined my right hon. Friend the Prime Minister on her trade mission to India last year. Scotch whisky is currently just 1% of the Indian spirits market, but it has the potential to grow to 5% with the right trade agreement. That would be equivalent to a 10% increase in the current global trade in Scotch.
The spirits duty escalator was ended in 2014, and the tax on a bottle of Scotch whisky is now 90p lower than it would otherwise have been. The hon. Member for Aberdeen North has tabled an amendment to reverse the uprating as applied to spirits. To be clear, that would not help exports, because the £4 billion of exports a year are unaffected by the duty change, as no duty is paid on exported spirits. Instead, it would help those selling in the UK market. The amendment would cost the Exchequer, and so increase the deficit by, around £100 million this year. For the reasons I have indicated—not least the bottom line scorecard cost—the Government reject the amendment, which would not help exporters of whisky or other spirits and which is unfunded. Clause 65 will keep spirit duty rates flat in real terms, so consumers will continue to benefit from the previous change to spirit duty rates.
While we are on spirits, I should touch on another great British success: the UK gin industry. When I met the Wine and Spirit Trade Association, it informed me that, in 2016, gin sales exceeded £1 billion for the first time in the UK. I suspect that many of us will be partaking of a number of these products in the weeks ahead. [Interruption.] I said many of us. We will be partaking perhaps in celebration or perhaps for sustenance —who knows what reason. It is good that we put these British success stories on record.
I was also told that the number of gin brands has more than doubled since 2010. [Interruption.] Yes, doubles all round. The price of a typical bottle of gin remains 84p lower than it would have been now that we have ended the spirits duty escalator. As with Scotch whisky, no UK duty is payable on exported gin.
As well as ending the spirits duty escalator, we also ended the beer duty escalator to help pubs. Pubs play an important role in promoting responsible drinking, providing employment and contributing to community life—that sentiment is expressed regularly on both sides of the House. Brewers also make an important contribution to local economies. The increase in the number of small breweries in recent years has increased diversity and choice in the beer market. By promoting interest in a larger range of beers, that has benefited all brewers.
The clause will not undo the previous beer duty cuts or freezes. The Government cut the tax on a typical pint by one penny at Budgets 2013, 2014 and 2015 and then froze duty rates last year. As a result, drinkers are paying 11p less in tax on a typical pint this year than they otherwise would have paid.
On wine duty, the Government are committed to supporting the UK wine industry. The first joint industry and Department for Environment, Food and Rural Affairs wine roundtable last year resulted in a set of industry targets, including to increase wine exports tenfold and to double production to 10 million bottles by 2020. The wine sector will continue to benefit from the previous changes to wine duty rates.
Cider makers, too, play an important role in rural economies, using over half the apples grown in the UK. The duty on a typical pint of cider remains around half the duty on a typical pint of beer. The tax on a typical pint remains 3p lower than it would otherwise have been, as a result of the Government’s changes to cider duty rates since Budget 2014.
To conclude, we fully recognise the importance of the alcohol industry to the economy and local communities. I have talked with and met various representatives from across the industry, and I will, of course, continue to engage with them. The cuts and freezes in duty rates since the ending of the alcohol duty escalators continue to deliver great benefits. They will save consumers and businesses around £3 billion in duty between fiscal years 2013 and 2017. However, allowing alcohol duties to fall every year in real terms would be unsustainable in the long term. If alcohol duties had been frozen or cut at Budget 2017, the Government would instead have had to raise taxes in other areas of the economy, cut public spending or increase the public deficit. The clause simply increases duties in line with inflation, as assumed in the fiscal forecasts. This is not a return to the real-terms increases year after year imposed by the alcohol duty escalator. I therefore suggest that the clause stand part of the Bill.
Kirsty Blackman
I will start by talking about alcohol and whisky, and then I will move on to talk about oil and gas. Specifically on whisky, I appreciate the Minister taking the time to talk about the contribution of the Scotch whisky industry. It does, indeed, contribute to our economy; of particular note are the 40,000 jobs it provides, including the 7,000 in the rural economy, which are really important for Scotland’s rural communities.
The positive changes the UK Government previously made to spirit duty meant there was confidence in the industry again, and we have seen a real change in the industry over the last couple of years, with a dozen new distilleries opening and 14 in various stages of planning, but the changes that have been made this year will put 36p on a bottle of whisky and mean that £4 of every £5 spent on whisky goes to the UK Government’s coffers.
My hon. Friend the Member for Argyll and Bute (Brendan O'Hara), who is the chair of the all-party group on Scotch whisky, spoke about this issue on Second Reading, although not at enough length—he got only four minutes. He is really concerned about distilleries. I appreciate the Minister talking about the success story that the gin industry has been for new distilleries—it takes a long time to mature Scotch whisky but not to mature gin, so distilleries can be up and running pretty quickly. The issue is the context in which things are seen. I understand that, as the Minister said, the change will not affect those selling abroad, but given that most producers sell whisky in the domestic market, it will obviously have an effect on those who also sell abroad.
In the wider context of Brexit, where the trade deals we currently have will no longer exist and we will have to negotiate new trade deals, including with the EU, if we are to sell whisky to France, as the Minister mentioned, we will need to have a trade deal. We will need to have trade deals with all the countries we trade with under the EU’s free trade agreements.
A major concern for those of us who represent constituencies involved with whisky is the protected geographical indication. The EU has protected geographical indication status, so people are not allowed to bottle whisky somewhere else and call it Scotch whisky. We are set to lose that protection when the UK leaves the EU, and it is important that the UK Government do what they can to ensure that the Scotch whisky industry can continue to trade and protect its brand—but I do not see that coming through. If the Government had not raised duty in this Budget on spirits and on whisky in particular, the industry would have known that it had the confidence of the UK Government and been in a much better position to take decisions.
Moving on to oil and gas, we have two new clauses on the amendment paper. New clauses 3 and 4 on behalf of the SNP are in my name, and I particularly thank my hon. Friend the Member for Aberdeen South (Callum McCaig) for his input into them. New clause 3 is about investment allowances. This Tory Government have come up with a line that we are one of the most competitive fiscal regimes for oil and gas, which is all well and good, but we also have one of the most mature fields in the world. In the North sea and on the UK continental shelf, we are also having to do things and implement technologies we have never seen before. A huge amount of innovation from our companies is having to go on in order for them to be able to achieve the UK Government’s and Sir Ian Wood’s maximising economic recovery strategy.
New clause 3 is about investment allowances and corporation tax rates on companies producing oil and gas. The UK Government have put the tax up and put it down, but they have not at any stage sat down and looked at the entire taxation regime for the oil and gas industry and said, “We are operating in a new scenario.” They have kept the level of taxes that we have had since oil and gas began to be taken out of the North sea. It is time for the UK Government to look at that tax structure and those tax regimes to see how they can incentivise companies to ensure that they are getting the best out of the North sea and securing jobs in the north-east of Scotland, and beyond, for as long term a future as possible.
The Chairman of Ways and Means (Mr Lindsay Hoyle)
With this it will be convenient to discuss the following:
Clauses 72 to 75 stand part.
Amendment 2, in clause 76, page 81, line 15, leave out paragraph (a).
Amendment 3, page 81, line 20, leave out subsection (2).
Clauses 76 to 107 stand part.
That schedules 20 to 23 be schedules to the Bill.
Jane Ellison
Clauses 71 to 107 contain provisions for a new tax called the soft drinks industry levy to be introduced from April 2018. This is a key pillar in the Government’s childhood obesity plan, and it has been welcomed by a wide range of public health experts and campaigners. Tackling obesity is a national challenge—indeed, an international challenge. The UK has one of the highest obesity rates in the developed world, and childhood obesity in particular is a major concern. Today nearly a third of children aged two to 15 are overweight or obese, and we know that many of these children will go on to become obese adults. Obesity drives disease, as we are reminded at the moment as we come through Westminster underground station by the Cancer Research UK posters. It increases the risk of heart disease, type 2 diabetes, stroke, and some cancers. The NHS spends over £6 billion a year across the UK in dealing with obesity-related costs, and the overall costs to our economy are estimated at between £27 billion and £46 billion a year. This cannot go on.
Health experts have identified sugary drinks as one of the biggest contributors to childhood obesity and a source of empty calories. A 330 ml can of full-sugar cola typically contains nine teaspoons of sugar. Some popular drinks have as many as 13 teaspoons. This can be more than double a child’s daily recommended added sugar intake in just a single can of drink. The Government recognise that this is a problem, and so have many others, with over 60 public health organisations calling for a tax on sugary drinks and many thousands signing a petition in favour. I am delighted that this issue has also received a high level of cross-party support.
Indeed, some soft drinks producers had recognised that sugar levels in their drinks were a problem too, and had started to reduce the sugar content, move consumers towards diet and sugar-free variants, and reduce portion sizes for high-sugar beverages. Nevertheless, reducing the added sugar in soft drinks is now a public health priority, and this new levy is needed to speed up the process. It is specifically designed to encourage the industry to move faster. We gave the industry two years to make progress on this before the levy begins, and we can see that it is already working. Since the Government announced the levy last March, a number of major producers have accelerated their work to reformulate sugar out of their soft drinks and escape the charge. These include Tesco, which has already reformulated its whole range of own-brand soft drinks so that they will not pay the levy. Similar commitments have come from the makers of Lucozade and Ribena, and the maker of Irn-Bru, A. G. Barr. In fact, we now expect more than 40% of all drinks that would otherwise have been in scope to have been reformulated by the introduction of the levy. We see international action too. In recent months, countries such as Ireland, Spain, Portugal, Estonia and South Africa have brought forward similar proposals to our own.
As a result of such reformulation before the levy begins, we now expect the levy to raise around £385 million per year, which is less than the £520 million originally forecast—but we are clear that this is a success. The Government will still fund the Department for Education’s budget with the £1 billion that the levy was originally expected to raise over this Parliament, including money to double the primary schools sports premium and deliver additional funding for school breakfast clubs, and £415 million to be invested in a new healthy pupils capital programme. The devolved Administrations will receive Barnett funding in the usual way. The Secretary of State for Education has made recent announcements about how some of the money will be spent, particularly on the healthy pupils capital programme.
The levy has shown that the Government mean business when it comes to reducing hidden sugar in everyday food. That willingness to take bold action underpins another major part of our childhood obesity plan, namely Public Health England’s sugar reduction programme, which is a groundbreaking programme of work with industry to achieve 20% cuts in sugar by 2020 across the top nine food categories that contribute the most to children’s sugar intake. It has been acknowledged, not least by industry, that that is a challenging target, but one that industry is committed to working with Government to achieve. The sugar reduction programme will cover some of the drinks products that are not part of the levy, such as milk-based drinks. The programme is already bearing fruit: there have been announcements and commitments to reduce the levels of sugar in some of the products.
I know that some would like the levy to go further. In particular, the hon. Member for Aberdeen North (Kirsty Blackman) has tabled amendments 2 and 3, which would remove the exclusion from the levy of high milk content drinks containing at least 75% milk. We oppose those amendments. Milk and milk products are a source of protein, calcium, potassium, phosphorous and iodine, as well as vitamins B2 and B12. One in five teenage girls do not get enough calcium in their diet, and the same is true for one in 10 teenage boys. It is essential for children’s health that they consume the required amount of those nutrients, which aid bone formation and promote healthy growth as part of a balanced diet. Health experts agree that the naturally occurring sugars in milk are not a concern from an obesity perspective, and they are not included in the definition of free sugars, which Public Health England now applies.
Of course, we want milk-based drinks to contain less added sugar, so they will be part of Public Health England’s sugar reduction programme. Producers of the drinks will be challenged and supported to reduce added sugar content by 20% by 2020. Public Health England has committed to publishing a detailed assessment of the food and drink industry’s progress against the 20% target in March 2020, and today I make a commitment to the House that we will also review the exclusion of milk-based drinks in 2020, based on the evidence from Public Health England’s assessment of producers’ progress against their sugar reduction targets. In the light of that assurance, I urge hon. Members to reject amendments 2 and 3, and allow us to review the evidence in 2020, two years after the levy has begun, and to decide at that point whether milk-based drinks should be brought within scope.
Obesity is a problem that has been decades in the making and we are not going to solve it overnight. The soft drinks levy is not a silver bullet, but it is an important part of the solution. This Government’s childhood obesity plan, with the levy as its flagship policy, is the start of a journey and it marks a major step towards dealing with our national obesity crisis.
Kirsty Blackman
The Minister is absolutely correct about the huge amount of cross-party support for the general thrust of the soft drinks industry levy and the move towards tackling obesity, particularly childhood obesity. However, we are concerned that the levy does not go far enough and that the Government could have chosen to close certain loopholes when drafting the Bill.
The single biggest cause of preventable cancer is obesity. More than 18,100 cancers a year are associated with excess weight. Cancer Research says that sugary drinks are the No. 1 source of sugar for 11 to 18-year-olds, which is a pretty terrifying statistic, and I appreciate that the Government have chosen to take action.
I am concerned about the Government’s response on milk-based drinks and about the fact that they are excluded from the levy.
The Temporary Chair (Sir David Amess)
With this it will be convenient to discuss the following:
Clauses 109 to 123 and 130 to 133 stand part.
Government amendments 5 to 9.
Clauses 134 and 135 stand part.
That schedules 24 to 26 be schedules to the Bill.
Jane Ellison
These are consequential amendments and I want to move them formally.
Kirsty Blackman
I appreciate the Government withdrawing the making tax digital provisions. I understand their commitment to making tax digital, but the changes are reasonable.
The Temporary Chair
That is certainly news to me, but the hon. Gentleman’s tribute is most appropriate and I thank him for it.
Jane Ellison
On a point of clarity, may I make it clear that the Government do not support clause 108? I apologise for not making that clear before. On making tax digital, I refer colleagues to my statement at the beginning of our debate on the first group.
Question put and negatived.
Clause 108 accordingly disagreed to.
Clauses 109 to 126 disagreed to.
Clause 127 ordered to stand part of the Bill.
Ordered,
That clause 127 be transferred to the end of clause 69.—(Jane Ellison.)
Clauses 128 to 133 disagreed to.
Clause 134
Interpretation
Amendments made: 5, page 126, leave out line 17.
Amendment 6, page 126, leave out line 20.
Amendment 7, page 126, leave out lines 22 to 24.
Amendment 8, page 126, leave out line 30.
Amendment 9, page 127, leave out lines 1 and 2.—(Jane Ellison.)
Clause 134, as amended, ordered to stand part of the Bill.
Clause 135 ordered to stand part of the Bill.
Schedule 1
Workers’ services provided to public sector through intermediaries
Amendment made: 10, page 129, line 32 , at end insert—
‘(3) Subsection (1) is subject to subsection (4).
(4) A primary-healthcare provider is a public authority for the purposes of this Chapter only if the primary-healthcare provider—
(a) has a registered patient list for the purposes of relevant medical-services regulations,
(b) is within paragraph 43A in Part 3 of Schedule 1 to the Freedom of Information Act 2000 (providers of primary healthcare services in England and Wales) by reason of being a person providing primary dental services,
(c) is within paragraph 51 in that Part of that Schedule (providers of healthcare services in Northern Ireland) by reason of being a person providing general dental services, or
(d) is within paragraph 33 in Part 4 of Schedule 1 to the Freedom of Information (Scotland) Act 2002 (providers of healthcare services in Scotland) by reason of being a person providing general dental services.
(5) In this section—
“primary-healthcare provider” means an authority that is within subsection (1)(a) or (b) only because it is within a relevant paragraph,
“relevant paragraph” means—
(a) any of paragraphs 43A to 45A and 51 in Part 3 of Schedule 1 to the Freedom of Information Act 2000, or
(b) any of paragraphs 33 to 35 in Part 4 of Schedule 1 to the Freedom of Information (Scotland) Act 2002, and
“relevant medical-services regulations” means any of the following—
(a) the Primary Medical Services (Sale of Goodwill and Restrictions on Sub-contracting) Regulations 2004 (S.I. 2004/906),
(b) the Primary Medical Services (Sale of Goodwill and Restrictions on Sub-contracting) (Wales) Regulations 2004 (S.I. 2004/1017),
(c) the Primary Medical Services (Sale of Goodwill and Restrictions on Sub-contracting) (Scotland) Regulations 2004 (S.S.I. 2004/162), and
(d) the Primary Medical Services (Sale of Goodwill and Restrictions on Sub-contracting) Regulations (Northern Ireland) 2004 (S.R. (N.I.) 2004 No. 477).
(6) The Commissioners for Her Majesty’s Revenue and Customs may by regulations amend this section in consequence of—
(a) any amendment or revocation of any regulations for the time being referred to in this section,
(b) any amendment in Part 3 of Schedule 1 to the Freedom of Information Act 2000, or
(c) any amendment in Part 4 of Schedule 1 to the Freedom of Information (Scotland) Act 2002.’—(Jane Ellison.)
Schedule 1, as amended, agreed to.
Schedule 2
Optional remuneration arrangements
Amendments made: 11, page 160, line 14, at end insert—
“() section 307 (death or retirement provision), so far as relating to provision made for retirement benefits;”
Amendment 12, page 160, line 26, at end insert—
‘( ) In subsection (5) “retirement benefit” has the meaning that would be given by subsection (2) of section 307 if “or death” were omitted in both places where it occurs in that subsection.”—(Jane Ellison.)
Schedule 2, as amended, agreed to.
Schedule 3
Overseas pensions
Amendments made: 13, page 166, line 18, leave out from beginning to “in” in line 23 and insert—
“(a) that, in the case of any money purchase arrangement relating to a member of the fund that is not a cash balance arrangement, no contributions are made under the arrangement on or after 6 April 2017;
(aa) that, in the case of any cash balance arrangement relating to a member of the fund, there is no increase on or after 6 April 2017 in the value of any person’s rights under the arrangement;
(b) that, in the case of any defined benefits arrangement relating to a member of the fund, there is no increase on or after 6 April 2017 in the value of any person’s rights under the arrangement; and
(c) that, in the case of any arrangement relating to a member of the fund that is neither a money purchase arrangement nor a defined benefits arrangement—
(i) no contributions are made under the arrangement on or after 6 April 2017, and
(ii) there is no increase on or after 6 April 2017.”
Amendment 14, page 166, line 24, at end insert—
‘(6AA) For the purposes of subsection (6A)(aa)—
(a) whether there is an increase in the value of a person’s rights is to be determined by reference to whether there is an increase in the amount that would, on the valuation assumptions, be available for the provision of benefits under the arrangement to or in respect of the person (and, if there is, the amount of the increase), but
(b) in the case of rights that accrued to a person before 6 April 2017, ignore increases in the value of the rights if in no tax year do they exceed the relevant percentage.’
Amendment 15, page 166, line 30, leave out
“ignore increases in the value of a person’s”
and insert
“in the case of rights that accrued to a person before 6 April 2017, ignore increases in the value of the”.
Amendment 16, page 166, line 31, at end insert—
‘(6BA) For the purposes of subsection (6A)(c)(ii), regulations made by the Commissioners for Her Majesty’s Revenue and Customs may make provision—
(a) for determining whether there is an increase in the value of a person’s rights,
(b) for determining the amount of any increase, and
(c) for ignoring the whole or part of any increase;
and regulations under this subsection may make provision having effect in relation to times before the regulations are made.’
Amendment 17, page 166, line 32, leave out “subsection (6B)(b)” and insert “this section”.
Amendment 18, page 167, leave out lines 5 to 7.
Amendment 19, page 167, line 8, after “subsection” insert “(6BA) or”.
Amendment 20, page 167, line 10 , leave out from “(7)” to end of line 16 and insert—
‘(a) for “In this section—” substitute “For the purposes of this section—
‘arrangement’, in relation to a member of a superannuation fund, means an arrangement relating to the member under the fund;
a money purchase arrangement relating to a member of a superannuation fund is a ‘cash balance arrangement’ at any time if, at that time, all the benefits that may be provided to or in respect of the member under the arrangement are cash balance benefits;
an arrangement relating to a member of a superannuation fund is a ‘defined benefits arrangement’ at any time if, at that time, all the benefits that may be provided to or in respect of the member under the arrangement are defined benefits;
an arrangement relating to a member of a superannuation fund is a ‘money purchase arrangement’ at any time if, at that time, all the benefits that may be provided to or in respect of the member under the arrangement are money purchase benefits;
‘cash balance benefits’, ‘defined benefits’ and ‘money purchase benefits’ have the meaning given by section 152 of the Finance Act 2004, but for this purpose reading references in that section to a pension scheme as references to a superannuation fund;
‘member’, in relation to a superannuation fund, has the meaning given by section 151 of the Finance Act 2004, but for this purpose reading references in that section to a pension scheme as references to a superannuation fund;”;
(b) at the end insert—
“‘the valuation assumptions’ has the meaning given by section 277 of the Finance Act 2004.”’
Amendment 21, page 167, line 16, at end insert—
‘( ) After subsection (10) insert—
(11) Where the conditions in subsection (6)(a) to (c) are met in the case of a superannuation fund (“the actual fund”)—
(a) any disqualifying contributions made under an arrangement relating to a member of the actual fund are treated for the purposes of the Income Tax Acts as instead made under an arrangement relating to the member under a separate superannuation fund (“the shadow fund” for the actual fund),
(b) any disqualifying increase in the value of a person’s rights under an arrangement relating to a member of the actual fund is treated for the purposes of the Income Tax Acts as instead being an increase under an arrangement relating to the member under the shadow fund for the actual fund, and
(c) any reference in this or any other Act (including the reference in subsection (3) and any reference enacted after the coming into force of this subsection) to a fund, or superannuation fund, to which subsection (3) applies does not include so much of the actual fund as—
(i) represents any contribution treated as made under, or any increase in the value of any rights treated as an increase under, the shadow fund of the actual fund or the shadow fund of any other superannuation fund, or
(ii) arises, or (directly or indirectly) derives, from anything within sub-paragraph (i) or this sub-paragraph.
(12) For the purposes of subsection (11) a contribution, or an increase in the value of any rights, is “disqualifying” if it would (ignoring that subsection) cause the benefit accrual condition not to be met in the case of the actual fund.
(13) For the purposes of the provisions of this section relating to the benefit accrual condition, where there is a recognised transfer—
(a) any transfer of sums or assets to the recipient fund by the recognised transfer is to be categorised as not being “a contribution” to the recipient fund, and
(b) any increase in the value of rights under the recipient fund that occurs at the time of the recognised transfer is to be treated as not being an increase in that value if the increase is solely a result of the transfer effected by the recognised transfer.
(14) For the purposes of subsection (13), where there is a transfer such that sums or assets held for the purposes of, or representing accrued rights under, an arrangement relating to a member of a superannuation fund (“the transferor fund”) are transferred so as to become held for the purposes of, or to represent rights under, an arrangement relating to that person as a member of another superannuation fund, the transfer is a “recognised transfer” if—
(a) the conditions in subsection (6)(a) to (c) are met in the case of each of the funds, and
(b) none of the sums and assets transferred—
(i) represents any contribution treated as made under, or any increase in the value of any rights treated as an increase under, the shadow fund of the transferor fund or the shadow fund of any other superannuation fund, or
(ii) arises, or (directly or indirectly) derives, from anything within sub-paragraph (i) or this sub-paragraph.’
Amendment 22, page 167, line 19, leave out sub-paragraphs (6) to (8).
Amendment 23, page 169, line 13, leave out “Subsection (4) does not” and insert “Subsections (7A) and (7B)”.
Amendment 24, page 169, line 20, at end insert—
‘(7A) If the lump sum is wholly in respect of rights which have accrued on or after 6 April 2017, there is no reduction under subsection (4).
(7B) If the lump sum is wholly or partly in respect of rights which accrued before 6 April 2017, the amount of any reduction under subsection (4) is given by—
R x A/LS
where—
A is so much of the lump sum as is in respect of rights which accrued before 6 April 2017,
LS is the amount of the lump sum, and
R is the amount which (ignoring this subsection) is given by subsection (4) as the amount of the reduction.’
Amendment 25, page 170, line 22, at beginning insert—
“Where the lump sum is paid under a pension scheme that was an employer-financed retirement benefits scheme immediately before 6 April 2017, deduct so much of the lump sum left after Step 1 as is deductible in accordance with subsection (5A).
Where the lump sum is paid otherwise than under such a scheme,”
Amendment 26, page 170, line 23, leave out
“rights, which accrued before 6 April 2017,”
and insert—
“the value immediately before 6 April 2017 of rights, accrued by then,”.
Amendment 27, page 170, line 39, at end insert—
‘(5A) These rules apply for the purposes of the first sentence of Step 2—
(a) “the post-Step 1 amount” means so much of the lump sum as is left after Step 1;
(b) “the relevant amount” means so much of the post-Step 1 amount as is paid in respect of rights specifically to receive benefits by way of lump sum payments;
(c) “reckonable service” means service in respect of which the rights to receive the relevant amount accrued (whether or not service in the same employment or with the same employer, and even if the rights originally accrued under a different employer-financed retirement benefits scheme established in or outside the United Kingdom);
(d) “pre-6 April 2017 reckonable service” means reckonable service that is service before 6 April 2017;
(e) “pre-6 April 2017 reckonable foreign service” means pre-6 April 2017 reckonable service that is foreign service;
(f) the deductible amount is the value immediately before 6 April 2017 of the rights then accrued to payment of so much of the relevant amount as is paid in respect of pre-6 April 2017 reckonable service if—
(i) at least 75% of pre-6 April 2017 reckonable service is made up of foreign service, or
(ii) the period of pre-6 April 2017 reckonable service exceeds 10 years and the whole of the last 10 years of that period is made up of foreign service, or
(iii) the period of pre-6 April 2017 reckonable service exceeds 20 years and at least 50% of that period, including any 10 of the last 20 years, is made up of foreign service;
(g) otherwise, the deductible amount is the appropriate fraction of the value immediately before 6 April 2017 of the rights then accrued to payment of so much of the relevant amount as is paid in respect of pre-6 April 2017 reckonable service;
(h) “the appropriate fraction” is given by—
F/R
where—
F is the period of pre-6 April 2017 reckonable foreign service, and
R is the period of pre-6 April 2017 reckonable service.’
Amendment 28, page 170, line 42, at end insert—
‘“foreign service” has the meaning given by section 395C,’
Amendment 29, page 171, line 17, at end insert—
‘Relief from tax under Part 9 of ITEPA 2003 not to give rise to tax under other provisions
13 (1) In section 393B(2)(a) of ITEPA 2003 (tax on benefits under employer-financed retirement benefit schemes: “relevant benefits” do not include benefits charged to tax under Part 9), after “646E” insert “or any deductions under section 574A(3)”.
(2) The amendment made by this paragraph has effect in relation to benefits by way of lump sums paid on or after 6 April 2017.’—(Jane Ellison.)
Schedule 3, as amended, agreed to.
Schedule 4
Pensions: offshore transfers
Amendments made: 30, page 172, line 23, after “sub-paragraph” insert “(6C) or”.
Amendment 31, page 174, line 21, at end insert—
‘(4A) In sub-paragraph (4) (power to specify whether payments by scheme are referable to relevant transfer fund), after “payments or transfers made (or treated as made) by” insert “, or other things done by or to or under or in respect of or in the case of,”.’
Amendment 32, page 176, line 28, leave out “with the next 5” and insert—“immediately before the next 6”.
Amendment 33, page 177, line 1, leave out “with the next 5” and insert—
“immediately before the next 6”.
Amendment 34, page 178, line 8, leave out
“for the purposes of sections 244L and 254”.
Amendment 35, page 178, line 28, leave out
“for the purposes of sections 244L and 254”.
Amendment 36, page 178, line 48, leave out
“for the purposes of sections 244L and 254”.
Amendment 37, page 179, line 18, leave out
“for the purposes of sections 244L and 254”.
Amendment 38, page 180, line 19, leave out “was” and insert “has been”.
Amendment 39, page 180, line 21, leave out “was” and insert “has been”.
Amendment 40, page 183, line 17, leave out from beginning to fourth “the”.
Amendment 41, page 184, leave out lines 30 to 38.
Amendment 42, page 188, line 8, at end insert—
“17A In Schedule 32 (benefit crystallisation events: supplementary provision), after paragraph 2 insert—
‘Avoiding double counting of refunded amounts of overseas transfer charge
2A (1) This paragraph applies where an amount of overseas transfer charge is repaid (whether or not under section 244M) to the scheme administrator of one of the relevant pension schemes.
(2) The amount crystallised by the first benefit crystallisation event that occurs in respect of the individual and a benefited scheme after receipt of the repayment is to be reduced (but not below nil) by the amount of the repayment.
(3) If the amount of the repayment exceeds the reduction under sub-paragraph (2), the excess is to be set sequentially until exhausted against the amounts crystallised by subsequent benefit crystallisation events occurring in respect of the individual and a benefited scheme.
(4) In sub-paragraphs (2) and (3) “benefited scheme” means—
(a) the scheme to which the repayment is made, and
(b) any other pension scheme if as a result of a recognised transfer, or a chain of two or more recognised transfers, sums or assets representing the repayment are held for the purposes of, or represent rights under, that other scheme.’”
Amendment 43, page 188, line 38, at end insert—
‘(1A) In those Regulations, after regulation 13 insert—
“14 Claims for repayments of overseas transfer charge
(1) This regulation applies where the scheme administrator of a registered pension scheme becomes aware that the scheme administrator may be entitled to a repayment under section 244M of the Act in respect of overseas transfer charge on a transfer.
(2) The scheme administrator must, no later than 60 days after the date on which the scheme administrator becomes aware of that, make a claim for the repayment to the Commissioners for Her Majesty’s Revenue and Customs.
(3) The claim must provide the following information—
(a) the member’s name, date of birth and principal residential address,
(b) the date of the transfer and, if different, the date of the event triggering payability of the charge on the transfer,
(c) the date on which the scheme manager accounted for the charge on the transfer,
(d) why the charge on the transfer has become repayable, and
(e) the amount in respect of which the claim is made.
(4) In a case where the 60 days mentioned in paragraph (2) ends with a day earlier than 14 November 2017, paragraph (2) is to be treated as requiring the claim to be made no later than 14 November 2017.”’
Amendment 44, page 188, line 39, leave out “this paragraph” and insert “sub-paragraph (1)”.
Amendment 45, page 188, line 42, at end insert—
“( ) The amendment made by sub-paragraph (1A) is to be treated as having been made by the Commissioners for Her Majesty’s Revenue and Customs under the powers to make regulations conferred by section 244M(8) of FA 2004.”
Amendment 46, page 190, line 3, at end insert—
‘(4A) In regulation 3(3)(a) (reporting duty under regulation 3(2) expires after 10 years from creation of relevant transfer fund), after “beginning” insert “—
(i) if the payment is in respect of one or more of the relevant member’s ring-fenced transfer funds (whether or not it is also in respect of anything else), with the key date for that fund or (as the case may be) the later or latest of the key dates for those funds, and
(ii) if the payment is not to any extent in respect of the relevant member’s ring-fenced transfer funds,”.’
Amendment 47, page 191, line 26, after “take” insert “place”.
Amendment 48, page 192, line 26, at end insert—
“3AEA Information provided by member to QROPS: inward and outward transfers
(1) Paragraph (2) applies where—
(a) a recognised transfer or onward transfer is made to a QROPS, or an onward transfer is made by a QROPS or former QROPS, and
(b) either—
(i) the overseas transfer charge arises in the case of the transfer, or
(ii) the transfer is required by section 244B or 244C to be initially assumed to be excluded from the overseas transfer charge by that section.
(2) Each time during the relevant period for the transfer that the member—
(a) becomes resident in a country or territory, or
(b) ceases to be resident in a country or territory,
the member must, within 60 days after the date that happens, inform the scheme manager of the QROPS or former QROPS that it has happened.
(3) In a case where the 60 days mentioned in paragraph (2) ends with a day earlier than 30 June 2017, paragraph (2) is to be treated as requiring the information to be given no later than 30 June 2017.”
Amendment 49, page 194, line 23, at end insert—
“3AK Claims for repayments of charge on subsequent excluding events
(1) Repayment under section 244M (repayments of overseas transfer charge) to the scheme manager of a QROPS or former QROPS is conditional on making a claim to HMRC.
(2) Such a claim in respect of overseas transfer charge on a transfer—
(a) must be in writing,
(b) must be made no later than 12 months after the end of the relevant period for the transfer, and
(c) must provide the following information—
(i) the member’s name, date of birth and principal residential address,
(ii) the date of the transfer and, if different, the date of the event triggering payability of the charge on the transfer,
(iii) the date on which the scheme manager accounted for the charge on the transfer,
(iv) why the charge on the transfer has become repayable, and
(v) the amount in respect of which the claim is made.”
Amendment 50, page 194, line 38, leave out “regulation 3AE(1) to (5)” and insert—
“regulations 3AE(1) to (5) and 3AEA”.
Amendment 51, page 195, line 3, at end insert
“, and
( ) are, so far as they insert new regulation 3AK, to be treated as having been made by the Commissioners under the powers to make regulations conferred by section 244M(8) of FA 2004.”
Amendment 52, page 196, line 28, leave out “potentially excluded” and insert “overseas”.
Amendment 53, page 196, line 32, at beginning insert
“either—
(i) the overseas transfer charge arises in the case of the transfer, or
(ii) ”
Amendment 54, page 196, line 4, at end insert—
‘(3) In a case where the 60 days mentioned in paragraph (2) ends with a day earlier than 30 June 2017, paragraph (2) is to be treated as requiring the information to be given no later than 30 June 2017.’
Amendment 55, page 198, line 41, after “Regulations,” insert—
“and the amendments in regulation 11BA of the Registered Pension Schemes (Provision of Information) Regulations 2006,”
Amendment 56, page 198, line 46, at end insert—
“if it would otherwise be considered for those purposes as charged in an earlier period.”—(Jane Ellison.)
Schedule 4, as amended, agreed to.
Schedules 5 and 6 disagreed to.
Schedule 7 agreed to.
Schedules 8 to 15 disagreed to.
Schedule 16
Employment income provided through third parties
Amendment made: 57, page 607, line 18, leave out from ‘“step”)’ to ‘insert’ in line 19 and insert ‘at the end’.—(Jane Ellison.)
Schedule 16, as amended, agreed to.
Schedules 17 and 18 disagreed to.
Schedule 19 to 23 agreed to.
Schedules 24 to 29 disagreed to.
The Deputy Speaker resumed the Chair.
Bill, as amended, reported.
Bill, as amended in the Committee, considered.
Madam Deputy Speaker (Mrs Eleanor Laing)
Order. Under the Order of the House of yesterday, we shall now move to the remaining stages, with no amendments on consideration. I shall now suspend the House for no more than five minutes in order to make a decision about certification. The Division bells will be rung two minutes before the House resumes. Following my certification, the Government will table the appropriate consent motion, copies of which will be made available in the Vote Office and distributed by the Doorkeepers.
Madam Deputy Speaker (Mrs Eleanor Laing)
I can now inform the House of my decision about certification. For the purposes of Standing Order No. 83L(2), I have certified clause 2 of the Finance (No. 2) Bill as relating exclusively to England, Wales and Northern Ireland and within devolved legislative competence. Under Standing Order No. 83L(4), I have also certified the following amendment as relating exclusively to England, Wales and Northern Ireland—the omission of clause 60 of the Bill in Committee of the whole House. Copies of my certificate are available in the Vote Office and on the parliamentary website.
Under Standing Order Nos. 83M and 83S, a consent motion is therefore required for the Bill to proceed. Copies of the motion are available in the Vote Office and have been made available to Members in the Chamber. Does the Minister intend to move the consent motion?
Jane Ellison
indicated assent.
The House forthwith resolved itself into the Legislative Grand Committee (England, Wales and Northern Ireland) (Standing Order No. 83M).
[Mrs Eleanor Laing in the Chair]
The First Deputy Chairman of Ways and Means (Mrs Eleanor Laing)
The consent motion for England, Wales and Northern Ireland will now be considered. I remind hon. Members that all Members may speak in the debate, but if there is a Division, only Members representing constituencies in England, Wales and Northern Ireland may vote on the consent motion.
Resolved,
That the Committee consents to the following certified clauses of the Finance (No. 2) Bill and certified amendments made by the House to the Bill—
Clauses certified under Standing Order No. 83L(2) (as modified in it is application by Standing Order No. 83S(4)) as relating exclusively to England, Wales and Northern Ireland and being within devolved legislative competence
Clause 2 of the Bill (Bill 156).
Amendment certified under Standing Order No. 83L(4) (as modified in it is application by Standing Order No. 83S(4)) as relating exclusively to England, Wales and Northern Ireland
The omission in Committee of Clause 60 of the Bill (Bill 156).—(Jane Ellison.)
Question agreed to.
The occupant of the Chair left the Chair to report the decision of the Committee (Standing Order No. 83M(6)).
The Deputy Speaker resumed the Chair; decision reported.
Third Reading
Jane Ellison
I beg to move, That the Bill be now read the Third time.
Before I briefly comment in summary of the Bill, may I beg your indulgence, Madam Deputy Speaker, in making some remarks about a couple of colleagues?
The right hon. Member for Oxford East (Mr Smith) was present earlier and made a valedictory speech. I referred to that in my subsequent speech, but I was not then in a position to mention his record of service to the country. Not only has he been a parliamentarian since 1987, but he was a Minister of State for Education and Employment between 1997 and 1999, Chief Secretary to the Treasury between 1999 and 2002 and, indeed, Secretary of State for Work and Pensions between 2002 and 2004. He is no longer in his place, but I ask his party’s Front-Bench spokesman to confer my sentiments to him and to draw to his attention the fact that I—on behalf of the Government and, I am sure, of all colleagues—have placed on record our thanks for his service to the country as a Minister during that period.
With the House’s indulgence, I will pay tribute to a second Member. I have very recently been informed that my right hon. Friend the Member for Chichester (Mr Tyrie) is not seeking re-selection at this election, so I want to make a few comments about him. He has been the MP for Chichester since 1997. He is a former adviser to Nigel Lawson—Lord Lawson—when he was Chancellor, as he was to John Major when he was Chancellor. Members may be aware that my right hon. Friend was a senior economist at the European Bank for Reconstruction and Development before he entered Parliament. He is of course a very senior parliamentarian, and when we moved to electing our Select Committee Chairs, it was no surprise that he was elected overwhelmingly by the House with cross-party support. In recent times, he has served in one of the most senior positions in Parliament, if not the most senior position, as Chairman of the Liaison Committee. In all those roles across his life of public service, governmental service and service to this House, he has been enormously distinguished, and I think I speak for everyone in saying that he is very well liked. I have known him during the years I have been in Parliament, but as a Treasury Minister, I have of course come to know him better in recent months. Indeed, I have responded to his letters on many occasions, and discussed them with him on the sidelines on many other occasions. Throughout those dealings, I have seen all his experience and qualities being brought to bear. I just want to say that to me, as a Minister, he has been kind and wise, and I will miss him enormously.
To move on to my Third Reading speech, the economy is fundamentally strong, and with this Finance Bill we are taking yet another step forward in building a stronger economy and a healthier society. As we have discussed, the Bill is proceeding on the basis of consensus. A number of key policy changes to the tax system, such as measures to tackle tax avoidance, are not being proceeded with now, but will be brought forward in a Finance Bill at the first opportunity after the election.
Even in its shortened form, the Bill takes action in three areas that have been consistent priorities for us in making changes to the tax system. First, the measures in this Bill take further action to reduce the deficit and secure the nation’s public finances, and the Bill raises much-needed revenue to fund the public services we all value. Secondly, the Bill takes the next steps to achieve this Government’s aim of a fairer and more sustainable tax system. It makes it clear that the tax system must keep pace with the different ways in which people choose to work, and ensure fair treatment between individuals. It also demonstrates our continued commitment to tackling tax avoidance and evasion to level the playing field for the honest majority of businesses and individuals who pay the tax they owe. Finally—this cause is particularly close to my heart, as a former Minister for Public Health—the Bill marks an important step in tackling childhood obesity by legislating for the soft drinks industry levy. As I noted earlier, we have achieved a great deal of cross-party consensus on the levy, which will help to deliver a brighter and healthier future for our children. I am delighted that we will be able to put it on the statute book.
In conclusion, this Finance Bill supports our commitment to a fair and sustainable tax system, one that offers support for our critical public services and will get the country back to living within its means. In that regard, it sits with this Government’s long-term commitment to improving the strength of our economy, and I commend it to the House.
Madam Deputy Speaker (Mrs Eleanor Laing)
Before I call the Opposition spokesman, may I echo on behalf of the whole House the Minister’s kind words about the right hon. Members for Oxford East (Mr Smith) and for Chichester (Mr Tyrie)? We extend those kind words to all other hon. Members who are present this afternoon, who have taken part in the debates on this Bill and many similar Bills assiduously and brilliantly on behalf of their constituents, and who will not be here during the next Parliament. The whole House wishes them all very well indeed.
Wednesday 26th April 2017
(7 years, 6 months ago)
Lords ChamberFinance Act 2017 Read Hansard Text Amendment Paper: Committee of the whole House Amendments as at 25 April 2017 - (25 Apr 2017)
This text is a record of ministerial contributions to a debate held as part of the Finance Act 2017 passage through Parliament.
In 1993, the House of Lords Pepper vs. Hart decision provided that statements made by Government Ministers may be taken as illustrative of legislative intent as to the interpretation of law.
This extract highlights statements made by Government Ministers along with contextual remarks by other members. The full debate can be read here
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The Commercial Secretary to the Treasury (Baroness Neville-Rolfe) (Con)
My Lords, this Government have long demonstrated that we can deliver a stronger, more secure economy. The economy continues to grow robustly, employment is at a record high and the deficit has been brought down by almost two-thirds. Following discussions, the Bill before us is shorter than on its introduction in the other place. None the less, the changes it will make take significant steps in helping to create a fairer and more sustainable tax system.
Following the parliamentary vote on the general election, the Finance Bill is proceeding on the basis of consensus. At the request of the Opposition, the Bill has been amended to take out a number of measures originally included. There has been no policy change. The provisions before the House will make a significant contribution to the public finances and the Government will legislate for the remaining provisions at the earliest opportunity at the start of the new Parliament. These include: corporation tax restrictions on interest expense and on loss relief; the reduction in the dividends allowance; changes to the tax treatment of the non-domiciled; anti-avoidance changes, such as the new penalty for enablers of tax avoidance; and the primary legislation for the Making Tax Digital programme. The Government remain committed to the digital future of the tax system, a principle which has been widely accepted in extensive consultation. I want, in passing, to acknowledge the work that the Economic Affairs Finance Bill Sub-Committee has done on the tax administration aspects of the programme. The Government have decided to pursue this measure in a Finance Bill in the next Parliament, in the light of the restrictions on time which now apply.
I now turn briefly to the main provisions included in the Bill before us. The UK has one of the highest rates of obesity among developed countries. Soft drinks are a major source of sugar in children’s diets. Obesity drives disease and it costs our economy. The NHS incurs direct costs of over £6 billion each year from treating ill health related to obesity. The Bill legislates for a soft drinks industry levy to encourage producers to reduce added sugar in their drinks. I am pleased that this change has gathered a wide degree of support here and elsewhere. I am even more pleased that the levy is already working, with Tesco—once my employer, so that is good to hear—and the manufacturers of Lucozade, Ribena and Irn-Bru among those already committing to reformulate their drinks and reduce added sugar. That is good news for our children’s health and, although revenues will be lower, we will maintain the full £1 billion funding committed to the Department for Education to give children a better and healthier future.
There has been debate as to whether the levy should go further and, in particular, whether it should apply to milk-based drinks. Milk and milk products are a source of calcium and other nutrients. One in five teenage girls do not get enough calcium in their diet, and the same is true for one in 10 teenage boys. However, we want milk-based drinks to contain less added sugar, so Public Health England will challenge and support producers to reduce added sugar content by 20% by 2020, and will publish a detailed assessment of progress in that year. Yesterday, in the other place, my honourable friend the Financial Secretary, Jane Ellison, committed to review the exclusion for milk-based drinks in 2020, based on the evidence from Public Health England’s assessment of producers’ progress against their sugar reduction targets. I am happy to reaffirm that today.
The Finance Bill also legislates for increases in duty rates as announced in the Spring Budget and that took effect shortly afterwards. These increase tobacco duty rates by 2% above RPI inflation for all tobacco products, which also makes an important contribution to the Government’s wider health agenda to reduce smoking prevalence. A minimum excise tax on cigarettes ensures that the cheapest cigarettes will pay a minimum level of duty, making it less profitable to sell cigarette packs below this level. Alcohol duties will be uprated in line with RPI inflation, while producers will continue to benefit from the effect of freezes and reductions in recent years.
The Finance Bill makes an important contribution to securing the nation’s public finances, reducing the deficit while allowing the Government to support our critical public services. For that reason, we announced in the Autumn Statement an increase in the rate of insurance premium tax from 10% to 12%. The Bill provides for this increase, which will take effect from 1 June and is expected to contribute over £800 million annually to the public finances.
Turning now to personal tax, the tax system needs to keep pace with the different ways in which people are working. As the Chancellor set out in both the Autumn Statement and in the Spring Budget, the public finances face a growing risk from the cost of incorporations. Indeed, the Government estimate that by 2021-22 the cost to the Exchequer from people choosing to work through a company will be over £6 billion. Part of this arises from people choosing to work through their own personal services company who would otherwise be classed as employees. The off-payroll working rules, also known as IR35, are designed to ensure that, where individuals work in a similar way to employees, they pay broadly the same taxes. However, non-compliance is high, costing an estimated £700 million each year. The Finance Bill therefore addresses this by transferring the liability for compliance with the rules in the public sector to the body for which the individual is working. We expect it to improve compliance significantly, raising revenue, while simply ensuring that the correct amount of tax is paid under the existing rules.
Finally, while some changes to address tax avoidance and evasion originally included in the Bill have been omitted and will be legislated for at the next available opportunity, the Bill includes a number of changes that advance the Government’s aims in this area. This Government are committed to tackling tax avoidance and evasion at all levels in order to ensure that everyone, no matter who they are, pays the right amount of tax at the right time. Since 2010, we have invested more than £1.8 billion in HMRC to tackle evasion, avoidance and non-compliance, helping to secure more than £140 billion in additional tax revenues. This includes more than £45 billion from large businesses and more than £2.5 billion from the very wealthiest. The UK also has one of the lowest tax gaps in the world, and the Government have announced more than 35 policies in this Parliament which are forecast to raise more than £18.5 billion by 2021-22. The Finance Bill extends that record by making changes to ensure that those who promote tax avoidance schemes cannot circumvent the rules by reorganising their business while continuing to use high-risk tactics in promoting avoidance schemes. It tackles abuse of the VAT relief for adapted motor vehicles and introduces a new charge on loans from disguised remuneration schemes that have allowed beneficiaries to avoid paying the tax that should have been due on their employment. The Government’s record on tackling avoidance and evasion and making sure that tax is paid fairly is one of which I am proud.
So to conclude, this Finance Bill supports our commitment to a fair and sustainable tax system, one that can support our critical public services and gets the country back to living within its means. I beg to move.
Baroness Neville-Rolfe
My Lords, I thank noble Lords for their valuable contributions to this select debate. In his wide-ranging speech, the noble Lord, Lord Haskel, mentioned the importance of social measures and, as usual, made a number of interesting suggestions, including the point he often rightly makes about the importance of digital. On this occasion he not only referenced the workplace generally but the importance of getting it right in Whitehall.
On care and the NHS, to which he referred and which was also tackled by the noble Lord, Lord Davies of Oldham, we announced at the spring Budget an additional £2 billion for social care. This will help to ease pressures on the NHS by supporting more people to be discharged from hospital and into care as soon as they are ready. We are giving the NHS the funding that it needs. The Five Year Forward View plan asked for annual funding to rise by a minimum of £8 billion above inflation by 2020-21 and for investment to be frontloaded. The Government have delivered what the NHS asked for on both counts: the NHS’s annual funding will increase by £10 billion above inflation by 2020-21 and £6 billion of this £10 billion will be delivered by the end of 2016-17, which is particularly important. I was pleased that to help manage demand on A&E we have committed to provide £100 million of new capital investment in A&E departments because that will help to ensure that patients access the most appropriate care as quickly as possible by improving the space for assessing patients and providing on-site GP facilities. This can help with bed blockers and is a good example of how things can be improved through management and efficiency, which I always regard as extremely important.
The noble Lord, Lord Haskel, talked about business investment and growing consumer debt. The OBR forecast business investment to grow by 15% over the forecast horizon period to 2021 and to rise as a share of GDP. Households’ financial positions are certainly stronger than they were before the financial crisis, and debt interest as a proportion of income is at a record low.
The noble Lord also talked about productivity, a subject that we have often debated here. At the Autumn Statement, we announced £23 billion of extra investment through the national productivity investment fund, and tackling the UK’s productivity challenge is a priority. To respond to the noble Lord, Lord Davies: the Chancellor mentions it often, it has pride of place in the Prime Minister’s industrial strategy consultation and I agree that it is important. The Government are taking targeted action to invest in important things such as innovation, infrastructure and digital, to promote skills, to improve management and—I see my noble friend the Minister for Trade here—to encourage firms to export, which always tends to be associated with strong productivity growth. There is work to do, as has been said, but productivity as measured by output per hour grew by 0.4% in Q3 of 2016 and by 0.4% in Q4 of 2016.
The noble Lord, Lord Haskel, asked about Brexit resourcing. The Treasury is working with all departments to understand the work required to prepare for a successful exit from the EU. Although aggregate spending plans for this review period remain in place, I can assure the noble Lord that the Treasury continues to engage with departments to ensure the right resources are allocated to the right places. I would add that I know from my own experience in dealing with Brexit for financial services that there is very high-quality Civil Service and external support, both in the Treasury and in DExEU.
The noble Lord, Lord Davies, asked about HMRC resourcing. The Government have always ensured that HMRC has the resources it needs. It makes sense to do so, and since 2010 we have invested over £1.8 billion in HMRC, and steps have again been taken to improve its effectiveness and efficiency.
I, too, was grateful to the noble Lord, Lord Kerr of Kinlochard, for joining us in the gap to share his view on making tax digital and for referring to the two recent parliamentary reports on the subject—particularly the one that was done in this House by the Finance Bill Sub-Committee, which I mentioned in my opening remarks. I am always very grateful for the work that is done on Treasury areas in the House. It really helps us to improve policy formation. Although there has been no change of policy, I entirely accept that time is needed for proper debate and scrutiny of the provisions for making tax digital. The Government remain committed to the digital future of the tax system—it was good to hear support for that from the Opposition Benches—and it was of course, in principle, accepted in the extensive consultation we held. But more time is needed for parliamentary scrutiny, and that will be made available at the earliest opportunity in the next Parliament.
I am grateful to noble colleagues for their contributions. We will debate some of the wider issues in the country, when we will demonstrate that we have a programme for a stronger, more secure and more productive economy under a Prime Minister who is also determined to lead a country which works for all people and for all regions.
I have this evening outlined the benefits that the finance Bill, in this form, will bring in advancing our aims for a fair and sustainable tax system. I take this opportunity to thank Treasury officials for their high-quality support on the Bill and for getting it quickly into a state in which it could be considered today. On that basis, I invite the House to give the Bill a second reading.