The Financial Secretary to the Treasury (Nigel Huddleston)

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I beg to move, That the Bill be now read a Second time.

Before I start the debate, I should declare, to avoid any potential conflict or perception of conflict, that, with reference to my previously published entry in the Register of Members’ Financial Interests and my ministerial interests, I have recused myself from making ministerial decisions on issues relating to pillar two, which will be dealt with more than ably by the Exchequer Secretary to the Treasury, my hon. Friend the Member for Grantham and Stamford (Gareth Davies).

My right hon. Friend the Chancellor of the Exchequer delivered an autumn statement with a clear intention to strengthen the economy now and for the future. The Government proposed to do that by putting money back in people’s pockets and cutting taxes. The Finance Bill that we are debating today does just that. First, it supports British businesses by allowing them to invest for less, which will encourage innovation and enhance productivity. Secondly, its measures will improve and simplify our tax system, which will ensure that it is fit for purpose.

The Bill covers 36 different measures in total, some of which are more complex than others. Madam Deputy Speaker, you will be pleased—or perhaps displeased—to know that I do not intend to cover every one in detail in this opening speech. I would like to focus on some of the key themes and measures.

I will first detail the Bill’s measures to support British business. The Government understand the simple truth that a strong private sector drives economic growth. That growth in turn serves the public good by allowing the Government to invest in public services. Perhaps most importantly, it allows the Government to support the most vulnerable. That understanding has shaped our approach. That is why we are lowering business taxes: because it will incentivise investment and boost private sector growth.

The Bill’s first measure to achieve that will make full expensing permanent, allowing businesses to invest for less. As a result, the UK’s plant and machinery capital allowances will increase. It is effectively a tax cut to companies of over £10 billion a year—the most generous of any major economy. The benefits to the economy of the policy—just this measure alone—are that it will drive 0.1% GDP growth over the next five years, increasing to almost 0.2% in the long run, and it will unlock an additional £3 billion of investment per year. That is only one of many Government policies backing British businesses.

The Government also recognise the important role of research and development in driving both innovation and economic growth as well as the benefits it can bring to society as a whole. Therefore, we will merge two Government programmes: the research and development expenditure credit scheme and the small or medium enterprises scheme. That will have two key impacts: it will simplify the system and provide greater support for UK firms to drive innovation. Those changes will apply from April 2024 onwards.

The support does not stop there. The Government will also introduce greater support for loss-making R&D-intensive SMEs. We will also lower the R&D intensity threshold required to access that to 30%. That will help about 5,000 extra SMEs, and they will receive £27 per £100 of qualifying R&D invested. Let us be in no doubt that this is a major boost for innovators across the UK. These measures significantly increase support to R&D firms to about £280 million a year by 2028-29, and overall they will ensure the success of UK plc.

I will now outline the next measure to back British businesses. The Government will extend the sunset clause for two more programmes: the enterprise investment scheme and the venture capital trust scheme. Both will be extended to 6 April 2035. That will support young companies to raise capital for successful growth.

The Government applaud our world-leading creative sector—after all, it grew 1.5 times faster than GDP between 2010 and 2019. In response, a new measure to back British business will go even further through reforming tax reliefs to refundable expenditure credits for the film, TV and video games industries.

Nigel Huddleston

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Yes. My hon. Friend makes an important point. The jobs and economic activity are hugely important, but we are known throughout the world for excelling in the creative sectors—we always have, and we always will. We can all be proud of the incredible creative talent in the UK. He is also right to highlight how it is spread right across the UK.

Nigel Huddleston

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The hon. Lady makes an important point about the success of our creative industries, and particularly the music industry and orchestras. She will be well aware, though, that we are not in the European Union any more, so some of the EEA measures no longer apply. Instead, we have to be World Trade Organisation-compliant. That bring some challenges, but we are certainly there to support the industry across a whole range of measures. I have already mentioned some of them, but we are doing even more with targeted measures to support the sector, because we want to boost investment in three other areas: animated film, animated TV and children’s TV programmes. As a result, those will be eligible for a 5% uplift to a 39% credit rate.

Nigel Huddleston

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As I outlined, I think the hon. Lady is hoping for measures to turn back the clock to when we were in the EU. We are not in the EU any more, and therefore the world is a different place. However, we are always keen to support and engage with the creative industries, and orchestras in particular. When I was at the Department for Digital, Culture, Media and Sport, we raised those issues again and again—actually, with considerable success—to enable orchestras and tourers to get across Europe, often by doing individual deals with individual countries, which we sometimes have to do now that we are no longer in the European Union.

I will now outline measures to support our employment-boosting agenda. The path to achieve this is clear: we must remove both barriers to work and incentives not to work. Perhaps most of all, though, we must ensure that hard work is rewarded. That is why our spring Budget announcements were so important. Let us take the abolition of the lifetime allowance. The Office for Budget Responsibility estimates that that will retain 15,000 workers annually and the Bill completes that change by removing the lifetime allowance from the statute book completely.

I now turn to the measures to simplify our tax system. Complex and inefficient taxes are one of the biggest restrictions on businesses. They often come at a high cost in terms of both time and capital. It is the Government’s duty to deliver a modern, simpler tax system and the measures in the Bill will help to do just that. Making full expensing permanent is a huge simplification for larger firms, but we are going further by expanding the cash basis for over 4 million smaller growing traders. This will simplify the process to calculate their profits and pay income tax. We have also listened closely to feedback from businesses and, as a result of that consultation, some of the main restrictions on using the cash basis will be removed. The simpler cash basis will be the default method for calculating profit, and businesses will therefore start on the simpler regime as standard. We will also be taking forward other technical small measures. Those will include improving the data that His Majesty’s Revenue and Customs collects from its customers. These measures will result in a trusted modern tax administration system.

We must also build a tax system that is fair and works for everyone. We cannot understate the role of tax in supporting our public services. Taxes pay for them directly and, through attracting investment, indirectly. We must all fairly play our part. The Bill will make promoting tax avoidance a crime in circumstances where persons continue to promote a scheme after the receipt of a stop notice. It will also enable HMRC to act more quickly to tackle promoters of tax avoidance by introducing a new power for HMRC to bring disqualification action against the directors of companies involved in promoting tax avoidance. We will also reduce the scope for tax fraud in the construction industry by amending the construction industry scheme. The amendment will add VAT to the gross payment status test. This means two things: that compliance will now be checked as part of this process, and that HMRC powers to remove gross payment status will be enhanced.

Of course, it is only fair that we also guard against over-collection of tax. The Bill addresses a concern here, too. It will do so by enabling HMRC to reduce the off-payroll working PAYE liability of a deemed employer who is responsible for ensuring that PAYE is calculated and sent to HMRC correctly. This will apply where that engagement is incorrectly treated as self-employed for tax purposes.

It also remains important that we are in lockstep with our international partners during such unprecedented times. In spring, we legislated to implement OECD pillar two in the UK, building on the historic agreement built by the Prime Minister, to a two-pillar solution to the tax challenges of a globalised digital economy. In the Bill, we are making technical amendments to the main pillar two rules identified from stakeholder consultation. That is to ensure that the UK remains consistent with the latest internationally agreed guidance.

The Bill builds on the autumn statement that focused on the long-term growth of the UK economy and sound economic policy. What a contrast to Labour’s fantasy economics, including £28 billion per year of additional spending without any idea where that money will come from—although we all know at heart that it will be taxpayers or through more debt, which is, of course, just deferred taxation. In contrast, this Finance Bill backs British businesses, rewards hard work, and supports a modern and simpler tax system. In doing so, it delivers on the Government’s commitments to prioritise economic growth, encourage business investment, nurture innovation and simplify our tax system to combat tax avoidance. For those reasons, I commend the Bill to the House.

The Exchequer Secretary to the Treasury (Gareth Davies)

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What a great pleasure it is to close this debate on the Finance Bill on behalf of the Government. I want to thank my hon. Friend the Financial Secretary, who is new in post, and to recognise the work of his predecessor and my constituency neighbour in Lincolnshire, my right hon. Friend the Member for Louth and Horncastle (Victoria Atkins), who carried out a great deal of work on this Finance Bill in the run-up to the autumn statement.

I will address a number of the points raised in this very good debate—it was lacking on quantity, but high on quality from a number of sources—but before I reflect on the comments, let me reflect on the Bill. Be in no doubt but that this Finance Bill will mean that companies will pay less tax if they invest more. It will simplify and strengthen tax reliefs to bolster innovation, and it makes the tax system fairer and more secure. Taken together, the measures contained in it will strengthen our economy and create more opportunities for more rewarding work in every corner of this country.

I will now turn to the comments made by a number of colleagues. I will start with my hon. Friend the Member for West Worcestershire (Harriett Baldwin), the Chair of the Treasury Committee, who has carried out significant work on the tax simplification programme with her Committee. The Government are clear that we want the tax system to be simpler and fairer, and to support growth. As she mentioned, the Financial Secretary has written to her just this week setting out the progress we are making on simplification. This autumn statement, and the Finance Bill in particular, has a number of measures, not least the capital allowances and the R&D expenditure credit consolidation. This a step in the right direction, but we are not complacent and we will continue to go further.

I was heartened to hear cross-party support for full expensing. That is in the context of the lowest headline rate of corporation tax in the G7, but the autumn statement announcement, and the provision in the Bill, is a £10 billion-a-year effective tax cut, called for by the IFS, the CBI, the IOD, Make UK, and many other businesses across the country. It is also in conjunction—this is not in the Bill—with a business rates package that will see a freeze for more than 90% of rate payers in this country.

The hon. Member for Richmond Park (Sarah Olney) made a comment about the oil and gas sector. Let me be clear: this Government have resolute support for our domestic oil and gas sector, and its 210,000 jobs. She called for a “proper tax” on oil and gas companies, and I can tell her that we already have one of the highest rates of windfall tax in the world. The energy price levy strikes the right balance between providing support for families and businesses through an energy crisis—namely through the energy price guarantee, which effectively paid 50% of people’s energy bills—while also encouraging investment to bolster our energy security. Conservative Members want to see the sector’s profits reinvested to support our domestic economy, our jobs, and our domestic energy security. Investment allowances within the EPL help to do that, and the energy security investment mechanism, which I announced in June, will help to provide banks with certainty in their modelling as they provide financing to the oil and gas sector, and as they are part of the transition to net zero.

Along with SNP Members, the hon. Member also said that she would like an increase in tax on banks, but she failed to mention that tax on banks has increased in recent times from 27% to 28%. She failed to mention that the tax revenue contribution from banks has increased significantly from £17 billion in 2010, to more than £33 billion today. That helps to pay for our NHS, our education, our defence, and many other public services that we all rely on. We want our banking system to be internationally competitive, and to keep the 1 million jobs that it employs stable and secure.

Many Opposition colleagues have mentioned living standards, and they are right. Conservative Members care deeply about that issue. That is why as part of the autumn statement, we increased the state pension by 8.5% as part of the triple lock which, by the way, has brought 200,000 pensioners out of poverty since it was introduced by a Conservative Prime Minister. We have also uprated benefits by 6.7%, and uprated the local housing allowance, which will benefit 1.6 million households across the country. That was on the back of a £289 billion welfare budget. Under this Government 400,000 children have been brought out of absolute poverty, and we have seen the Government step in with significant support through two global shocks of covid and the energy price spike, with £500 billion of support to get people through.

Gareth Davies

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I will not give way. We are going to proceed I’m afraid; the hon. Gentleman has had his chance.

I pay tribute to my right hon. Friend the Member for Witham (Priti Patel) who has great consistency when it comes to reducing the tax burden. She has made clear her views on our tax system, and we agree with her. We have a keenness to bring taxes down, but we will do it in a responsible way that is in line with sustainable public finances. She also made clear her consistent campaign on pillar 2, and we are very alive to her concerns. I am pleased that the Chancellor recently met and wrote to her, following the two fiscal statements. I understand her concerns about sovereignty, and I assure her that the pillar 2 provisions do not impact on sovereignty or indeed on competitiveness. The provisions in the Bill are technical amendments that we will discuss in more detail as it goes into Committee.

Finally I thank, as always, my hon. Friend the Member for Poole (Sir Robert Syms) for his positivity about our economy, which does not always get reported. For me, his critical point was about looking at the long-term performance of the economy, not just at the provisions we are putting in place. Instead of looking month by month by month, we should look at long-term provision.

In conclusion, in January this year, the Prime Minister set out his priorities for the Government. Three of them were economic and, since then, we have seen our inflation cut in half and our economy is expected to grow in every year of the OBR’s forecast period. That is half a decade of uninterrupted growth. Because we are reducing borrowing, debt is now forecast to fall. Put simply, we have turned a corner, and it is because of the actions of this Government, this Prime Minister and this Chancellor.

This is a Conservative approach through supply-side reform, and it is in stark contrast to the Labour party’s debt-driven ambitions. We know that its plans to borrow some £28 billion every year for green initiatives will put at risk the great progress that we and the British public have achieved. The independent Institute for Fiscal Studies has issued a stark warning for Labour’s plans. It said they will increase inflation and drive up interest rates, leading to more debt, higher rates, higher inflation, fewer jobs and more tax. That is the Labour party’s playbook. We cannot let that happen, and we will not.

We want an economy driven by enterprise, and by workers and by businesses throughout this country who push and strive, making us more competitive abroad and resilient at home. We want a tax system that pushes up businesses and workers who want to succeed, not that pulls them down when they do succeed. The autumn statement was a statement for growth, investment, work and reward. The measures in the Bill will deliver much of that, so I strongly commend the Bill to the House.

Question put, That the amendment be made.

The Financial Secretary to the Treasury (Nigel Huddleston)

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This Government’s aim is to grow the economy for the good of everyone by removing barriers to private sector investment and delivering a tax system that is supportive of business. At the spring Budget 2023, the Chancellor set out his approach for a highly competitive tax regime. By announcing a package of generous tax incentives, combined with a rate of corporation tax that remains the lowest in the G7, this Government have ensured that the UK continues to be one of the best places in the world for businesses to grow and invest.

The Bill marks our next step in making the UK one of the most competitive tax systems among major economies by enhancing the support that the corporation tax system provides to businesses that drive growth by making long-term investments. It meets the Government’s commitment to introduce permanent full expensing, as announced at the autumn statement, solidifying our international competitiveness and creating the certainty that businesses have told us they need in order to confidently invest. The Bill will also drive UK business innovation by merging the existing research and development expenditure credit scheme with the small and medium enterprise scheme. Merging those schemes will simplify and improve the system for supporting cutting-edge research and development.

Turning first to clause 1, at spring Budget 2023, the Government introduced two new temporary first-year capital allowances for qualifying expenditure on plant or machinery. The first was a 100% first-year allowance for so-called main rate expenditure, known as full expensing, which allows companies to write off the full cost of plant and machinery in the year that the cost is incurred. The second was a 50% first-year allowance for expenditure on special-rate assets such as lighting systems, thermal insulation and long-life assets, allowing companies to write off half the cost of an asset in the year that it is incurred, with the remaining balance written down at 6% in every year afterwards.

The Chancellor was clear that his long-term ambition was to make those new reliefs permanent once the fiscal and economic conditions allowed, and at the autumn statement he confirmed that he was able to do just that. Clause 1 delivers that ambition, making both full expensing and the 50% first-year allowance permanent by removing the end date of 31 March 2026. That means that companies will be able to permanently benefit from full expensing. It solidifies our position as joint top of the rankings of OECD countries with regard to plant and machinery capital allowances, and means we are the only major economy with permanent full expensing.

The change will give companies the certainty they need to make long-term investments, and responds to calls from the CBI, Make UK, Energy UK and 200 other business groups and leaders, and from companies including BT Openreach, Siemens and Bosch, which have said that making the policy permanent would be the single most transformational thing the Government could do for business investment and growth. According to the Office for Budget Responsibility, it will generate almost £3 billion of additional business investment each year and £14 billion over the course of the next five years. The forecast is that GDP will be 0.1% higher by the end of the forecast period and slightly below 0.2% higher in the long term as a result.

Nigel Huddleston

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My hon. Friend is incredibly knowledgeable about this area through some of his previous business and ministerial experience, and that is a question I am intrigued to hear answered by the Opposition shortly. I believe it is vitally important, because the whole point is to give businesses the confidence to invest in the long term, and certainty is key to the investment decisions being made.

Nigel Huddleston

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I think my hon. Friend is kicking off what is likely to be a long debate over the course of the next year, but an important one for our constituents and businesses. The economy will play a pivotal part in discussions this year. It is very clear what we are doing: we are implementing vital changes, asked for by business and in response to business, to provide that business certainty and an environment in which they and therefore our constituents can thrive. I do not think any of us want to put that at risk. However, without the clarification and confidence from the Opposition about what they might do, these issues will be raised and the uncertainty can persist. We on the Government side of the House are committed to this, and my hon. Friend is right to make that clear.

Nigel Huddleston

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My hon. Friend is right to point out the timing element with both full expensing and R&D; I will come on to R&D in a moment, because I think that is the £55 billion figure he mentions, but these measures, particularly the full expensing, will of course have a long-term impact over a long period of time. The cost is up-fronted, but the benefit is over a long period, and anyone who has worked in business understands that. He is right to point out the anomaly, and it is a very important point because a lot of people probably would not understand it, but the fact that the OBR has highlighted the incremental impact on the economy overall shows that there is a clear and transparent net benefit. The timing of the impact changes, but we are talking about additional investment right away, because we will be giving businesses the confidence to be able to make those decisions and invest immediately.

Nigel Huddleston

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I agree that certainty for business is pivotal, but with both full expensing and R&D the Government, the Chancellor and others have been indicating the direction of travel for some time and therefore giving increased certainty. As I have said, it was mentioned a while ago that we intended to pursue the policy of full expensing when the economic circumstances allowed, and now they do. R&D, which I will come to in a minute, has been discussed for quite a long time and is the result of extensive co-operation with industry.

It is also the reality, though, that Government policy needs to change in response to the nature of a changing economy and to things such as digital, the cloud and so on. When it comes to other investments, we need to make sure that new and emerging policy areas are covered as well. We have seen today, as we saw in the autumn statement, a very clear direction of travel from the Conservative side of the Chamber, which is about incentivising businesses and cutting taxes. Permanent full expensing also simplifies the capital allowances regime overall, as companies can claim the full cost in year one, reducing the need to claim writing-down allowances year on year.

Turning to clause 2 and schedule 1, the Government have also announced the closure of the R&D tax relief review launched in 2021—the point I was just making to the hon. Member for Reading East (Matt Rodda)—alongside a set of changes to simplify and improve the system. Clause 2 makes changes to merge the current R&D expenditure credit and SME schemes for expenditure in accounting periods beginning on or after 1 April 2024, simplifying the system and providing greater support for UK companies to drive innovation.

The merged scheme will have an above-the-line mechanism similar to the R&D expenditure credit, with a rate of 20%. That will make the benefit more visible and easier for companies to factor into their investment decisions. Additionally, small and medium enterprise lossmakers will now be able to carry forward their losses rather than having to surrender them, which will give a total benefit of up to £45 per £100 of R&D expenditure.

There will also be a reduction in the rate at which the merged scheme credit is taxed for lossmakers, from 25% to 19%. That is worth around £120 million per annum to non-intensive lossmakers and will increase the up-front cash benefit for lossmakers. Subcontracting rules in the merged scheme will allow the company taking the decision to do R&D to claim relief on contracted-out R&D. That approach is based on the current SME scheme, which was identified as the best option in the consultation we delivered, and has been refined further following engagement with industry last summer.

Subsidy rules will also be removed, allowing SMEs to claim relief for work for which they receive a grant of a subsidy. This represents an increase in generosity for SMEs as well as being a major tax simplification.

The Government are also legislating for enhanced support for loss-making R&D-intensive SMEs. That was announced at spring Budget 2023 and will benefit 23,000 SMEs a year by providing further support to the most R&D-intensive SMEs while merging the current schemes. The Government are promoting the conditions for enterprise to succeed. Companies claiming the existing SME tax relief will be eligible for a higher payable credit rate of 14.5% if they meet the definition for R&D intensity.

At the summer statement, the Government announced several improvements being made to that enhanced support. The R&D intensity threshold is being lowered to 30% from 40% from April 2024, meaning that around 5,000 more companies will benefit from the support. A one-year grace period is being introduced, providing greater certainty by ensuring that companies that dip under the 30% threshold will continue receiving relief for one year. The same subcontracting rules as the merged scheme will apply to this enhanced support, further helping to simplify the system with one set of rules that both SMEs and larger companies will follow.

Overall, R&D reliefs will support an estimated £55 billion of business R&D expenditure in 2028-29—a 25% increase from £44 billion in 2021-22. Expenditure on R&D reliefs is forecast to increase in every year of the scorecard period. We will also restrict nominations and assignments for R&D relief payment. That measure ensures that genuine businesses get the payment for their R&D claim directly, rather than receiving it through an agent, and is designed to benefit genuine claimants and reduce non-compliance.

Subject to limited exceptions, no R&D tax credit payments will be made to nominee bank accounts, and any R&D tax credit payments must be paid directly to the company that claims for the R&D, so claimants will now receive their payments directly, giving them more control. That will ensure that the person claiming the relief has better oversight of the claim and receives the money into their account quicker. Claimants will also be clearer on exactly how much money is being charged by their agents, rather than just receiving a net amount after fees have been deducted. That builds on previously announced measures and policy changes to help to ensure greater company control over R&D claims.

The Government are committed to making the UK the best place in the world to do business. Full expensing and R&D tax relief support businesses to grow and invest, which will boost productivity and economic growth. That remains the key way to raise everybody’s living standards and to fund high-quality public services throughout the UK. I commend clauses 1 and 2 and schedule 1 to the Committee.

Nigel Huddleston

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I thank hon. Members for their contributions. I will take a few moments to respond to quite a few questions raised during the debate. First, I reassure hon. Members that further guidance will be provided on these schemes. Of course, we do not want all the schemes just to exist; we want them to be used so that they have a real-world impact. More information will therefore be coming out about a variety of areas over a period of time.

I gently remind the hon. Member for Ealing North (James Murray), who yet again took the opportunity to talk the UK economy down—the Opposition always do—that every single Labour Government have ended with unemployment higher than what they inherited from the Conservatives. I think the public are well aware of that pattern.

I turn to the many questions raised. I thank my hon. Friends the Members for Amber Valley (Nigel Mills) and for Erewash (Maggie Throup), and indeed Opposition Members for their contributions. On timing, the Government have been clear since the merged scheme consultation was published in January last year that the intended implementation date for the scheme is April 2024. Importantly, in response to that consultation and in recognition of comments, the merged scheme will apply to accounting periods starting on or after 1 April 2024 rather than to expenditure incurred from that date. Again, we will provide further guidance on that.

Nigel Huddleston

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All taxes are kept under review, as are their impacts, so some of the calls for further analysis are not necessary because we do that as a matter of course. It is important to stress that many external studies have found that when full expensing has been introduced in other countries, it has been very effective in supporting investment. Of course, the OBR forecasts predict a boost of £3 billion each year. The analysis of the impact of the super-deduction is already taking place, but companies have 12 months from the end of their accounting period to amend their tax returns, so HMRC will not have complete data on the impact of the super-deduction until 2024. However, we will provide further analysis in due course.

My hon. Friend the Member for Erewash mentioned a whole range of real-world impacts from these measures and the previous measures, including the super-deduction, as well as, importantly, the annual investment allowance of £1 million, which affects the 99% of smaller businesses that can effectively benefit from full expensing. In the autumn statement, we announced full expensing for larger businesses: the top 1%, who conduct about 80% of full investment.

I am aware of time, but will cover a couple of other key points that were raised. My hon. Friend the Member for Erewash raised subcontracting. Again, we engaged extensively with stakeholders on this issue over the summer, and the Government have developed an approach that will allow the person taking the decision to do R&D to claim that relief. That was the preferred result of the consultation. However, an exception will apply in the important area that she mentioned of companies doing R&D—such as in a clinical trial—in the UK for another company that is ineligible for relief because, for example, it is an overseas customer. That is to make sure that the impact is there for everyone to benefit from. The hon. Member for Ealing North also mentioned partnerships; a corporate partner is eligible for full expensing, but an unincorporated partner is not. Again, the annual investment allowance of £1 million covers the investment needs of almost all unincorporated partnerships.

The hon. Member keeps harping on about taxes rising. I strongly advise him to look at his December payslip and compare it to the one he will get shortly. Maybe he will have the decency to come to me and tell me whether his tax is lower or higher. Each fiscal event needs to be taken separately. At the last one, the autumn statement, we cut taxes—national insurance is down 2p. [Interruption.] If the hon. Member does not believe me, I pose this challenge to him: if his payslip shows that his taxes are lower, perhaps he will do me the courtesy of coming to me and apologising, or give the difference to a charity, to put his money where his mouth is.

We do not believe that new clause 1 is necessary because the information has already been published in the tax impact and information notes alongside each change, which give a clear explanation of the policy objectives, along with details of the implementation costs for both HMRC and businesses. Therefore, the new clause is not necessary. I urge the House to reject it, and I commend clauses 1 and 2 and schedule 1 to the Committee.

Question put and agreed to.

Clause 1 accordingly ordered to stand part of the Bill.

Clause 2 ordered to stand part of the Bill.

Schedule 1 agreed to.

New Clause 1

Review of reliefs for research and development

“(1) The Chancellor of the Exchequer must, within three months of this Act being passed, publish a review of the implementation costs of the measures in section 2 incurred by—

(a) HMRC, and

(b) businesses.

(2) The review under subsection (1) must include details of the implementation costs of all measures related to credit or relief for research and development that have been introduced since December 2019.”—(James Murray)

Brought up and read the First time.

Question put, That the clause be read a Second time.

The Exchequer Secretary to the Treasury (Gareth Davies)

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Clauses 21 and 31 to 34 and schedules 12 and 13 cover technical changes to pillar 2 of the international tax agreement—doubling the maximum sentence for the most egregious forms of tax fraud—the introduction of new powers to tackle the promotion of tax avoidance, and action against fraud in the construction industry scheme.

The UK’s tax gap is currently at an all-time low, at 4.8% of total tax liabilities. That is due to strong Government action to tackle all forms of non-compliance in the tax system, but we are never complacent. That is why we have introduced more than 200 measures since 2010, including 40 since 2021, to reduce the tax gap even further. The Government are taking action to ensure that individuals and companies pay the taxes that are due in the UK. We want to deter individuals from committing fraud in the first place. That is why we are doubling the maximum sentence for tax fraud.

The Government are also taking action against tax avoidance by introducing a new criminal offence of the promotion of tax avoidance and by expediting the disqualification of directors of companies that promote tax avoidance. The measures are designed to protect tax revenues, which are important for funding our vital public services.

It is also important to protect tax revenues from companies shifting profits offshore. That is why the UK implemented pillar 2 on 31 December 2023. We are updating existing legislation with technical amendments today to ensure that UK legislation is consistent with newly agreed guidance, to address further stakeholder comments to clarify terms, and to avoid unintended consequences.

Clause 31 strengthens our enforcement powers when it comes to tax offences. It doubles the maximum prison term, from seven years to 14 years, for individuals convicted of the most egregious cases of tax fraud. This applies to all taxes and duties administered by HMRC. It also increases the maximum penalty for counterfeiting from 10 years to 14 years. These measures demonstrate, I hope, the Government’s intent to crack down on tax fraud and to deter criminal actions that damage the public purse.

Clauses 32 and 33 and schedule 13 seek to target the promotion of tax avoidance, in order to protect taxpayers and reduce the damage inflicted on the public finances. Recent powers such as HMRC’s power to name promoters and their schemes, and its power to issue stop notices, are effectively disrupting promoters’ activities. None the less, a small number of promoters persist in attempting to sidestep the rules, so clause 32 and schedule 13 enable HMRC to act swiftly to seek the disqualification of directors and other individuals who control or exercise influence over companies involved in the promotion of tax avoidance. They enable the removal of those individuals from the avoidance market and will deter others from becoming directors of companies that promote avoidance.

In the Finance Act 2021, the Government introduced rules that allow HMRC to issue stop notices that require promoters to stop promoting specified tax avoidance schemes. Stop notices are an important deterrent tool, as failing to comply with a stop notice can lead to a substantial civil penalty. Clause 33 increases the consequences of failing to comply by introducing a new criminal offence, which will apply to promoters who continue to promote an avoidance scheme after receiving a stop notice. Creating a criminal offence signals the severity of this issue and reinforces the importance of complying with a stop notice.

Finally, clause 34 tackles serious non-compliance in the construction industry. The construction industry scheme requires contractors to withhold tax unless a subcontractor holds gross payment status. Most gross payment status holders are legitimate and compliant construction businesses but, in recent years, gross payment status has been used by organised crime organisations to facilitate fraud. This allows unscrupulous actors to compete unfairly against legitimate businesses. Clause 34 therefore strengthens the tests for gross payment status by adding VAT to the taxes with which subcontractors must demonstrate compliance. This measure is predicted to raise around £300 million over the next five years.

Each of these clauses helps to protect vital tax revenue used to fund our public services. They seek to deter taxpayers from knowingly defrauding the Government and encourage them to act against the promotion of tax avoidance. I therefore ask that clause 21, clauses 31 to 34 and schedules 12 and 13 stand part of the Bill.

Gareth Davies

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I thank hon. Members from across the House for their contributions. I will speak relatively briefly but will try to address some of the points raised. I will deal last with the new clauses, and in the meantime address some of the questions from the hon. Member for Ealing North (James Murray) from the official Opposition. He asked about pillar 1 and the progress being made. This Government fully support pillar 1 and are keen to maintain momentum on its progress as soon as possible. He should take comfort from the recent publication of the substantially agreed text of the multilateral convention. That demonstrates progress, but as I say, we are not complacent on that and are keen to see further progress as soon as possible.

The hon. Gentleman very reasonably asked for more information on sentencing and the action taken by HMRC. I will give him some data. Last year, there were 240 prosecutions. Within that, there were 218 convictions, and 130 of those were custodial sentences and 110 were suspended sentences. That equates to a 90% success rate for HMRC. The hon. Gentleman is right that the average length of a custodial sentence is 24 months. We want to extend a maximum sentence for two reasons: first, to make it clear that we consider fraud and all fraudulent activity some of the most serious crime possible because of its impact on public finances; and secondly, because if the maximum sentence increases, we expect all sentences to rise, as sentences are judged relative to the maximum sentence. However, I stress that it is the Sentencing Council that issues the guidance to judges and it is ultimately judges and the courts who rightly decide what sentences are given to those found guilty.

The hon. Gentleman asked about safeguards for stop notices, and he is right to highlight that that is an important measure for HMRC. I can tell him there have already been 20 stop notices issued since HMRC started issuing them just a year ago, but there are robust governance processes and safeguards in place, including review and appeal rights. However, any criminal sentences are decided by the courts and it is the Sentencing Council that will decide on that. I will look carefully at the other questions he has raised and ask for a written response. If we have that data, I commit to writing to him with that information.

My hon. Friend the Member for North East Bedfordshire (Richard Fuller) has rightly and consistently raised his questions and concerns on pillar 2. I can tell him that the UK is implementing pillar 2 in time and alongside EU member states, Japan and Canada, which I think he would agree are all peers. He asked about China. China has not announced implementation plans for pillar 2, but it is a member of the inclusive framework of countries that are in negotiations right now on pillar 2 and we are monitoring that very carefully, as he would expect. The US Administration have always supported both pillars 1 and 2 and have been one of the strongest advocates for them; as he will know, in 2017, the United States introduced its own domestic version of pillar 2, requiring those companies with foreign income to pay a minimum level of taxation.

The punchline, to answer my hon. Friend’s ultimate question, is that already the agreement has been put in place to ensure that, by 2025, 90% of multinationals will be in play, so we are confident in the robustness of that agreement. He asked about the loan charge; I do not believe that is in scope for this debate, but the Financial Secretary to the Treasury will follow up with him and engage with him and the loan charge and taxpayer fairness all-party parliamentary group in due course.

I will briefly address the new clauses that have been laid down. I will deal with new clauses 2, 5 and 7 together, as they all relate to tax avoidance and evasion, and then I will address new clause 4. New clause 2 would require the Chancellor to provide a report on the average sentence and range of sentences given to offences being amended in clause 31, the number of stop notices issued that clause 33 would apply to and the impact of those clauses on tax revenues. New clause 5 would require the Chancellor to carry out an assessment of the impact of clauses 31 to 34 and schedule 13 on HMRC’s compliance activities and new clause 7 would require the Chancellor to review the effectiveness of the provisions of clause 31 in combating fraud involving taxpayers money.

Let me say straight out of the gate that I agree it is important that we regularly review and evaluate policy. However, the new clauses are unnecessary, as HMRC already publishes detailed information about its compliance and performance on a regular basis. As I have said, the UK tax gap is already at an all-time low of 4.8% and will remain low and stable, given the measures that we are implementing. Every year, HMRC publishes information on the number of custodial sentences received for tax compliance offences and the average sentence length in HMRC’s annual report and accounts. The 2023-24 annual report and accounts will be published this summer, providing a full overview of HMRC’s performance. As most of that information is already publicly available in routine HMRC publications, the assessments legislated for by the new clauses are unnecessary, in our humble view.

New clause 4 would require the Government to report an assessment of the technical changes to pillar 2 introduced in clause 21 and schedule 12. It would consider the efficacy of the technical changes and their impact on multinational profit shifting and tax competition between jurisdictions. The Government consider that such a report is not necessary because the amendments in the Bill are technical changes to enhance the pillar 2 legislation that received Royal Assent just last year. Those amendments simply help to ensure that the policy objectives of the legislation are met fairly and effectively, reflecting both new international guidance and stakeholder comments. Ultimately, it is about avoiding unintended consequences in legislation that has already been passed. Of course, the Government will monitor pillar 2’s overall impact as businesses begin to respond to its implementation around the world—130 countries are privy to it.

I hope to have reassured Members that the additions in new clauses 2, 4, 5 and 7 are not necessary. For the reasons that I have set out, I urge the Committee to reject them. I commend clauses 21 and 31 to 34, and schedules 12 and 13, to the Committee.

Question put and agreed to.

Clause 21 accordingly ordered to stand part of the Bill.

Schedule 12 agreed to.

Clauses 31 and 32 ordered to stand part of the Bill.

Schedule 13 agreed to.

Clauses 33 and 34 ordered to stand part of the Bill.

New Clause 2

Review of measures to tackle evasion and avoidance

“(1) The Chancellor of the Exchequer must, within three months of this Act being passed, publish a review of the measures in sections 31 to 33 to tackle evasion and avoidance.

(2) The review under subsection (1) must include details of—

(a) the average sentence handed down in each of the last five years for the offences listed in section 31;

(b) the range of sentences handed down in each of the last five years for the offences listed in section 31;

(c) the number of stop notices issued in each of the last five years to which the measures in section 33 would apply; and

(d) the estimated impact on revenue collected in each of the next five financial years resulting from the introduction of the measures in sections 31 to 33.”—(James Murray.)

This new clause would require the Chancellor to publish details of the sentences given and stop notices issued in each of the last five years to tackle evasion and avoidance, as well as the revenue expected to be generated from the measures to tackle evasion and avoidance in this Act in each of the next five years.

Brought up and read the First time.

Question put, That the clause be read a Second time.

Nigel Huddleston

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I will take clause 27 first. The changes that it makes clarify how VAT and excise legislation should be interpreted in the light of changes made by the Retained EU (Revocation and Reform) Act 2023, which came into effect on 1 January. The Act ends the supremacy and special status afforded to retained EU law in the UK. As we made clear when it was introduced, the Government are taking a bespoke approach to UK VAT and excise law. In line with the 2023 Act, clause 27 confirms that, for VAT and excise, it will no longer be possible for any part of any UK Act of Parliament or domestic subordinate legislation to be quashed or disapplied on the basis that it is incompatible with EU law. In other words, it will no longer be possible for businesses to rely on EU law where it is in conflict with domestic law. The measure also provides that UK VAT and excise law continues to be interpreted as Parliament intended, drawing on rights and principles that currently apply in interpreting UK law.

Nigel Huddleston

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I think some hon. Members may have tried to expand the debate strictly beyond the scope of the measures we are debating; for understandable reasons, I will stick strictly to the clauses.

My right hon. Friend the Member for Hemel Hempstead (Sir Mike Penning) made some important points about ensuring that we take full advantage of the benefits of leaving the European Union. Of course, we have already made progress in that area by removing, replacing and improving retained EU law, including revoking all direct EU regulations in relation to customs duty, introducing a UK tariff and domestic customs regime, introducing VAT relief for women’s period products and for the installation of energy-saving materials, and so on. On the points he made regarding potential future changes to VAT, we of course always keep tax under review. He will forgive me for not making tax policy at the Dispatch Box this evening, tempted as I am; that is the purpose of key fiscal events. I will absolutely commit to meeting my right hon. Friend, as I am always willing to listen and hear comments.

Comments were made about encouraging the use of greener fuels. The Government encourage the use of renewable fuels through the renewable transport fuel obligation, which incentivises the use of low-carbon fuels and reduces emissions from fuels supplied for use in transport and non-road mobile machinery. On the point about the Court of Justice, the European Union (Withdrawal) Act 2018 provides that Court of Justice of the European Union judgments issued since the end of the implementation period are not binding on UK courts. On the point about codifying everything, trying to codify all interpretative effects into black and white UK law would of course be a huge endeavour and would require a complete review of all that legislation, taking many years and still leaving significant tax revenue at risk.

Question put and agreed to.

Clause 25 accordingly ordered to stand part of the Bill.

Clause 27 ordered to stand part of the Bill.

The Deputy Speaker resumed the Chair.

Bill (Clauses 1 and 2, schedule 1, clause 21, schedule 12, clauses 25, 27 and 31 to 34, and schedule 13) reported, without amendment, and ordered to lie on the Table.

The Financial Secretary to the Treasury (Nigel Huddleston)

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I beg to move, That the clause be read a Second time.

Nigel Huddleston

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The Government’s aim is to grow the economy for the good of everyone, and our tax system is a key part of that. For households, higher taxes mean less financial freedom and less choice in how they spend their money. For businesses, they can mean less growth and investment, and that means fewer jobs for workers. That is why we need to grow our economy to create jobs and give ourselves the financial headroom to reduce taxes and remove the barriers to private sector investment. We must have a tax system that is supportive of business.

At spring Budget 2023, the Chancellor set out his approach for a highly competitive business tax regime. By announcing generous tax incentives combined with a rate of corporation tax that remains the lowest in the G7, the Government ensured that the UK is one of the best places in the world for businesses to grow and invest, but we should not be satisfied with simply being one of the best. This Bill therefore marks our next step in making the UK the best place in the world to do business.

We are taking huge, ambitious steps to make that a reality in the autumn statement and in the Bill. For example, no other major economy has made full expensing permanent. That is a major step in encouraging more investment by giving a huge tax relief to those who invest. Alongside that, we have introduced a generous new regime for research and development carried out by companies. We are now going further to encourage even more investment by introducing new clause 5, which will exempt receipts from new electricity generating projects from the electricity generator levy.

I will address each amendment in turn, looking first at the details of new clause 5. The electricity generator levy was introduced following the energy crisis to ensure that energy companies with extraordinary returns contribute more towards vital public services and support for households. However, we must balance that against ensuring that the UK remains a brilliant place to invest in renewables. The new clause makes changes to the EGL that will exempt receipts from new electricity generating projects from the levy. It will ensure that all generators in scope of the levy will benefit from the exemption if they choose to proceed with investments in new generation capacity and make a substantive decision to go ahead with a project on or after 22 November 2023—the date of the autumn statement. That will help support continued investment in the UK’s renewable generation capacity by removing new investments from the tax and providing businesses with the confidence to make such new investments.

I turn to Government amendments 1 to 3. To ensure that the research and development tax relief clauses in the Bill work as intended, the Government are proposing technical amendments to the R&D clauses. The Bill introduces a new enhanced support for R&D-intensive small and medium-sized enterprises, such as those in our vital life sciences sector. From April 2024, the R&D intensity threshold will be reduced from 40% to 30%.

Amendments 1 and 2 make changes to ensure that R&D-intensive companies get the relief as intended. Amendment 1 removes two situations where a company would appear less R&D-intensive than it actually is. These issues were raised with us by an industry stakeholder, for which I am grateful. To avoid abuse and to protect the scheme for genuinely R&D-intensive companies, the ratio is worked out at a group level. Currently in the legislation, companies within groups that charge each other for services could have costs double counted and therefore reduce their R&D intensity. The amendment will fix that. The Government do not want to exclude companies from relief because of legitimate commercial arrangements that do not affect the underlying true R&D intensity of the business.

On top of providing more support for R&D-intensive companies, the Bill will simplify and improve our R&D reliefs by merging the R&D SMEs scheme with the R&D expenditure credit. To ensure that those clauses work as intended, the Government propose technical amendments to the R&D clauses. Companies and accountants wanted the merged scheme to be implemented on an accountancy period basis as that makes claims simpler and delays the merged scheme for the majority of current R&D expenditure credit claimants. It therefore gives them a bit more time to prepare.

The new rules for contracted-out R&D will ensure that the company making the decision to do the R&D and bearing the risk is the one that gets the relief. However, that means that, as currently drafted, there could be temporary situations when two companies are in a contractual relationship and one moves into the new R&D tax credit system ahead of the other. For a limited period of time, that could result in situations where both parties could claim on the same R&D or neither could claim, as was raised by stakeholders. Amendment 3 ensures that the legislation works as intended. For temporary double claims, the R&D credit will go to the claimant in the old system until both have started new accounting periods. To avoid a temporary gap where no company can claim, the legislation will be amended to ensure that subcontractors can claim where their customer is still in the old system.

Nigel Huddleston

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Thank you, Mr Deputy Speaker. May I join you, Mr Speaker and the whole House in wishing His Majesty a speedy recovery following the announcement this evening?

I wish to thank right hon. and hon. Members for contributing to this debate. I shall respond to as many of the points as I can, and also talk to the amendments that have been moved. On new clause 1, I agree that we must prevent fraud and ensure that all taxpayers pay their fair share. To help achieve that, the new maximum sentences for the most egregious examples of tax fraud, the new criminal offence on the promoters of tax avoidance, and enhanced director disqualification powers will come into force on Royal Assent of this Bill. That will all help.

At 4.8% of total liabilities, the UK’s tax gap is at the joint lowest rate ever recorded and has remained low and stable. The UK’s tax gap compares favourably with that of our international partners. HMRC has already published performance updates that provide information on its compliance performance every quarter, so we believe that this new clause is not necessary.

New clause 2 is pretty much the same as the new clause 1 rejected in Committee of the whole House. As I have said previously, we believe that the provision is unnecessary, as the information has been published in the tax information and impact notes alongside each policy change. That gives a clear explanation of the policy objective together with details of the implementation costs for both HMRC and businesses.

New clause 3 would require the Government to publish details of sentences given and stop notices issued to tackle evasion and avoidance in the past five years, as well as revenue expected to be generated by measures in this Bill to tackle evasion and avoidance in each of the next five years. However, HMRC publishes information on the number of custodial sentences received for tax compliance offences and the average sentence length in its annual reports and accounts. The 2023-24 annual report and accounts will be published this summer, providing a full overview of HMRC’s performance. The Government also publish a list of tax avoidance schemes subject to a stop notice on gov.uk, with the most recent report published on 7 December. HMRC has issued more than 20 stop notices since issuing the first one in 2022. The Government also published revenue estimates for the next five years of the clauses in this Bill in the tax information and impact notes. Therefore, as the information requested by new clause 3 is publicly available in routine HMRC publications, the publication requested by new clause 3 is unnecessary.

New clause 4 would require the Government to report on the likely impact of the measures in the Bill on public health, inequality and poverty—matters that concern us all and that we discussed in Committee. Existing mechanisms already effectively monitor and assess Government policies in those areas, rendering the amendment redundant. Departments such as the Department of Health and Social Care and its arm’s length bodies diligently evaluate policies to enhance health up and down the country. Through the Office for Health Improvement and Disparities and the National Institute for Health and Care Research, they address health inequalities and provide robust evidence for policy development. Various Government units, such as the Cabinet Office equality hub, contribute to levelling-up opportunities and ensuring fairness. The Government Equalities Office, the Race Disparity Unit, the Disability Unit and the Social Mobility Commission all focus on different equality dimensions to guide and support inclusive policy development across the country. We therefore do not believe that new clause 4 is necessary.

On new clause 6, I agree that it is important to regularly review and evaluate policy, and to be transparent, which my right hon. Friend the Member for Wokingham (John Redwood) also highlighted. His Majesty’s Revenue and Customs has published a tax information and impact note setting out the impact of the measure, including the economic impact, and the Office for Budget Responsibility has already conducted and published extensive analysis on the investment and growth impact of full expensing. That is available in its “Economic and fiscal outlook—November 2023”, which therefore negates the need to publish a separate assessment in six months’ time. The impact of permanent full expensing will be monitored through information collected from tax returns, and through regular communication with businesses and representative bodies.

Nigel Huddleston

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We always try to act; I cannot do everything, though. I note the hon. Gentleman’s comments. In a similar vein, my hon. Friend the Member for Totnes (Anthony Mangnall) raised the importance more broadly of the tourism, hospitality and leisure sector, and of the creative sector. He is absolutely right. Measures in the Bill and elsewhere will support all those sectors. Of course, business rates relief is vital to the tourism, retail, hospitality and leisure sector. My right hon. Friend the Member for Wokingham made a range of comments, some outside of my direct remit. I assure him that I will raise his points, which ranged from bonds to public sector efficiency—a vital area—with colleagues in the Department.

I was somewhat entertained by the comments of the Labour spokesman, the hon. Member for Ealing North, who was effectively asking me to commit to Conservative party policies as enthusiastically as he does, which is quite a turn up for the books. Of course, we welcome Labour’s support for the policies that we have announced, but there is clear blue water between the Labour party and the Conservative party in terms of principles about the size and scale of Government and the level of taxation. We have seen Labour’s flip-flopping over the £28 billion. I am not sure what the policy is today. It was rather rich of him to ask for commitments from me, given the flip-flopping that is so prevalent in every area of Labour policy.

At one point, the Labour party was supportive of Brexit. Now I do not know. Are Labour Members against it? Were they supportive of the right hon. Member for Islington North (Jeremy Corbyn) being Prime Minister, or do they not want him in the party? Are they in favour of nationalisation, or against it? Are they in favour of private sector involvement in the NHS, or against it? In a whole host of policy areas, we have seen persistent, perennial flip-flopping from the Opposition. I literally have goldfish whose commitments I would trust more than those from the Labour Front Bench. On those points, we will have to respectfully agree to disagree.

As I said, new clause 5 and the six amendments that the Government have tabled will help to ensure that the changes in the Bill apply as intended, and deliver a vital policy to protect renewable investment. They will make the tax environment more easily understood by business and protect vital tax revenue used to fund our public services. I therefore urge that they be added to the Bill. The six new clauses tabled by the Opposition seek to get the Government to publish data and information that is already being published through other sources, as I have outlined. I therefore urge the House to reject them.

Question put and agreed to.

New clause 5 accordingly read a Second time, and added to the Bill.

New Clause 6

Assessment of the impact of permanent full expensing

“(1) The Chancellor of the Exchequer must, within six months of this Act being passed, publish an assessment of the impact of the measures in clause 1 of this Act on—

(a) business investment, and

(b) economic growth.

(2) The review under subsection (1) must—

(a) assess the impact of full expensing being made permanent, and

(b) consider what other policies would support the effectiveness of the measures in clause 1 of this Act.”—(James Murray.)

This new clause would require the Chancellor to publish an assessment of the impact on investment and growth of the measures in this Act to make full expensing permanent, and to consider what other policies could support the effectiveness of permanent full expensing.

Brought up, and read the First time.

Question put, That the clause be read a Second time.

Nigel Huddleston

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I beg to move, That the Bill be now read the Third time.

This Government are backing British business, supporting employment, and creating a simpler and fairer tax system. My right hon. Friend the Chancellor delivered an autumn statement with the clear intention of strengthening the economy, now and for the future. This Finance Bill, which Members of the House have had the opportunity to scrutinise and debate over the past few months, does exactly that. It takes forward important tax measures to help businesses invest for less; encourages innovation and supports our creative industries by elevating rates and simplifying credits; and improves and simplifies our tax system to ensure it remains fit for purpose.

Mr Deputy Speaker, allow me to remind Members of the Bill’s key aims. Our first aim is to support British industry, so that we can solidify our position as world leaders in key sectors. Making full expensing permanent allows UK businesses to invest for less. We have moved to make the UK’s plant and machinery capital allowances the most generous of any major economy. Permanent full expensing has been called the single most transformational thing we could do for investment, and it was welcomed by more than 200 companies and trade associations.

The Bill also merges two significant Government schemes: the SME scheme and the R&D expenditure scheme. In doing that, we are meeting our aim of simplifying the system while providing greater support to British businesses, so that they can spend less time on administration and more time on innovation. The Bill also introduces greater support for loss-making R&D-intensive SMEs and lowers the intensity threshold required to access that support to 30%, helping around 5,000 extra SMEs. To further support investment in renewable energy, we have introduced a new assets exemption for the electricity generator levy, a measure that will continue to drive growth in both our renewables sector and the wider economy. We also continue to support our world-leading creative industries with tax measures that reform the film, TV and video game tax reliefs, turning them into refundable expenditure credits that are easier for business.

Our second aim is to support employment. We must remove barriers to work and incentives to not work, and most of all, must ensure that hard work and expertise are rewarded. That is why the Bill makes changes to encourage people to stay in work and use their expertise for longer. The Bill will complete the abolition of the lifetime allowance, amending pension tax rules so that employees with valuable, hard-earned expertise are no longer encouraged to reduce their hours or retire early. The Office for Budget Responsibility estimates that this will retain 15,000 workers annually, keeping many high-skilled employees and experienced individuals in our labour market while ensuring that they receive their rightful benefits for working.

Our third aim is to create a simpler, fairer and more modern tax system—an aim that the Bill also supports. Making full expensing permanent is a huge simplification for larger firms, but we are a nation of millions of small businesses. In the Bill, we are expanding the cash basis—a simplified way for over 4 million smaller and growing traders to calculate their profits and pay their income tax. While we remain focused on reducing the tax burden, we cannot overstate the role of tax in supporting public services, so we must all do our part. Everyone must pay their fair share, which is why the Bill introduces a new criminal offence for those who promote tax avoidance schemes and continue to promote them after receiving a stop notice. Alongside this, His Majesty’s Revenue and Customs will for the first time be able to bring disqualification action against the directors of companies involved in promoting tax avoidance, including those who control or exercise influence over a company. These are vital steps in ensuring that the system is fair for all, and that those who try to undermine it face the consequences.

I thank right hon. and hon. Members from across the House for their helpful and insightful contributions to the debate on the Bill. I also thank the many stakeholders who have provided their views on the issues raised, the Treasury, HMRC officials and House Clerks who have helped the Bill to get to this point. This Bill backs British business, rewards hard work, nurtures innovation, and supports our leading industries while solidifying long-term economic growth. For those reasons, I commend it to the House.