Finance (No. 2) Bill (First sitting)

Alison Thewliss Excerpts

Tuesday 14th December 2021 Public Bill Committees

James Murray

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As we have heard, clause 10 relates to the increase of the normal pension age to 57 from 6 April 2028. The stated intention of the clause is to protect members of the registered pension schemes who, before 4 November 2021, had a right to take their entitlement to benefit under those schemes at or before the existing normal minimum pension age. It exempts members of certain uniformed service pension schemes from the increase, and it introduces new block and individual transfer rules specific to the new protection framework in order to reduce the restrictions on retaining a protected pension age following a transfer. The UK has a long tradition of protecting and rewarding those who have served their country. It is therefore right that we support clause 10, as it provides that protection by safeguarding recipients’ right to retain entitlement to benefits when transferring schemes.

We note, however, that the Low Incomes Tax Reform Group has concerns about the transitional arrangements relating to the clause. Paragraph 28 of the Government’s explanatory note regarding this clause states:

“There may be some transitional issues. For example, an individual who does not have a protected pension age and at 5 April 2028 will have reached age 55 and has started but not completed the process of taking pension savings before the change in normal minimum pension age. The government will provide further advice on the proposed transitional arrangements and provisions in due course.”

That raises concerns about when further advice on the proposed transitional arrangements will be made available, as well as questions about the extent to which that advice will be effectively communicated to the people concerned.

It is vital that people have full detail of any transitional provisions well before the increase to age 57 comes into effect; otherwise, there is a risk that people reaching age 55 in the run-up to 6 April 2028 will make decisions without knowing all they need to know. For example, an individual could cash in a pension in full and put the money in the bank so as to crystallise access to those funds, which may well leave them worse off in the long term, having likely incurred a large tax liability on the encashment and potentially affected their means-tested benefit entitlement. They might also have triggered the money purchase annual allowance, therefore restricting—perhaps unwittingly—their ability to make further contributions. In light of this, will the Minister clarify precisely when “due course” is, in relation to the Government’s further advice regarding the proposed transitional arrangement for the provisions? Will she also confirm what measures the Government will take to make sure that people are aware of the advice when it is finalised?

Alison Thewliss (Glasgow Central) (SNP)

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This issue speaks to what I and my colleagues have often asked for in Finance Bills—that is, to be able to take evidence. We have received some very good written evidence from different organisations—I thank Scottish Widows, the Low Incomes Tax Reform Group and the Chartered Institute of Taxation for sending evidence to the Committee—but some of the detail requires a bit more interrogation. It would be useful if Finance Bill Committees were able to take evidence on the detail.

I agree with much of what the hon. Member for Ealing North said. Saying that something will happen in due course is not a great reassurance to many people. We have seen the terrible mess that the Government left for the WASPI women—the Women Against State Pension Inequality—who did not receive enough notice of state pension age changes. As a result, many have lost out on what they expected to happen when they reached retirement.

In its evidence, Scottish Widows makes the point well:

“Simplicity is a key driver of engagement with pensions… The average person has 11 jobs in their lifetime—with auto enrolment that could mean them having at least 11 pension pots. Some of these will now be accessible at age 55, others at 57.”

It also notes that

“some customers may have different pension ages within the same pension pot.”

That is not the simplicity that people really need when it comes to planning for their retirement.

There is a range of views. Scottish Widows appears to welcome the changes. The Chartered Institute of Taxation is not convinced that a change to the normal minimum pension age is necessary or desirable. What ought to be at the centre of this discussion is the people who will claim that pension. They need the clearest possible advice and the longest possible amount of notice in order to plan. I ask for clarity from the Government. It is just not acceptable to come before the Committee today without a date and say, “in due course”. People need to be able to plan for one of the most important events in their lives.

Lucy Frazer

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The hon. Members for Glasgow Central and for Ealing North both mentioned the transitional arrangements and notice. They are right to identify that the Government have acknowledged the importance of establishing a clear position on the transitional arrangements and that we have said that we will provide further advice on the proposed transitional arrangements and provisions in due course. That remains the position, but I am very happy to keep both Members updated as we progress.

The hon. Member for Glasgow Central made a point about evidence. I know she is interested in the taking of oral evidence—she has made that point before. There is, of course, a standard process on the measures in the Finance Bill. That process involves a huge amount of consultation, with particular milestones, including engagement with industry and stakeholders, often a consultation, and sometimes draft legislation that then comes forward into the Finance Bill. That is the way the Finance Bill operates.

The hon. Member mentioned the WASPI women, which I know many hon. Members from all parties feel strongly about. As she will know, it was decided 25 years ago to make the state pension age the same for men and women in what was then a long overdue reform.

Question put and agreed to.

Clause 10 accordingly ordered to stand part of the Bill.

Clause 11

Public service pension schemes: rectification of unlawful discrimination

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

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James Murray

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As we have heard, the clause concerns qualifying asset holding companies, and sits alongside schedule 2. The aim of the clause, we understand, is to recognise certain circumstances where intermediate holding companies are used only to facilitate the flow of capital, income and gains between investors and underlying investments to tax investors, broadly as if they had invested in the underlying assets, and to enable the intermediate holding companies to pay tax that is proportionate to the activities they perform.

At Budget 2020, the Government announced that they would carry out a review of the UK funds regime, covering tax and relevant areas of regulation. The review started with a consultation on the tax treatment of asset holding companies in alternative fund structures, also published at Budget 2020. The Government responded to that consultation in December 2020, launching a second-stage consultation on the detailed design features of a new regime for asset holding companies. The Government’s response to that consultation was published on 20 July 2021.

The clause and schedule 2 introduce the new regime. We understand that the purpose of the measures is to deliver a proportionate and internationally competitive tax regime for qualifying asset holding companies that will remove barriers to the establishment of such companies in the UK. The Government have said that the new regime will include the following key features: eligibility criteria to limit access to the intended users; tax rules to limit the qualifying asset holding company’s tax liability to an amount that is commensurate with its role; and rules for UK investors to ensure that they are taxed so far as possible as if they had invested in the underlying assets directly.

We understand that the eligibility criteria will ensure that the asset holding companies may only be used as part of investment structures where funds are managed for the benefit of a broad pool of investors or beneficiaries. An asset holding company cannot carry out other activities, including trading, to any substantial extent. The tax benefits arising from asset holding company status apply only in relation to qualifying investment activity. The tax treatment of any limited trading activity or any non-qualifying investment activity that is carried on by an asset holding company will not be affected by the company’s status as an asset holding company.

We note that the Government have tabled six amendments to schedule 2, which accompanies the clause. Amendments 1 and 2 seek to pin down the definition of investment management profit-sharing arrangements. According to the explanatory statement, that is to ensure that the legislation is capable of encompassing arrangements in which an entitlement to profits arising in connection with the provision of investment management services by an investment manager arises to another person, such as a company or a trust.

Amendments 3 and 6 provide that a fund that is 70% controlled by category A investors meets the diversity of ownership condition. Amendment 4 seeks to allow existing funds marketed before the commencement of the qualifying asset holding company regime to be treated as meeting regulation 75(2) of the Offshore Funds (Tax) Regulations 2009 if certain information has been produced by the fund and has been made available to Her Majesty’s Revenue and Customs. Amendment 5 modifies the way in which the interests of creditors are accounted for in determining whether a fund is closed. We will not be opposing clause 14 or the Government’s amendments to it.

Alison Thewliss

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I am a wee bit concerned that the Government have brought these amendments so late in the day. I appreciate that they have brought them now, rather than seeking to come back and amend legislation further down the road. That is something, I suppose. Does the Minister intend to review this legislation, and on what timescale? I am a wee bit worried about the letter we received yesterday, which said that, as originally drafted, the legislation includes some inconsistencies with wider tax rules and within the regime’s eligibility criteria. Given those worries and these amendments, I would like some reassurance from the Minister that the Government are going to keep an eye on this legislation to make sure that it is not exploited or used in the way that it is not intended to be. We need to make sure that people are paying the tax that they ought to be and that the legislation is not used as some kind of dodge.

Lucy Frazer

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I welcome the lack of opposition to these clauses, which will support UK growth, by the hon. Member for Ealing North. The hon. Member for Glasgow Central made a point about the fact that the Government have made amendments late in the day. I reassure her that they are technical changes. Following engagement with the industry since the introduction of the Finance Bill, the errors were pointed out to us mand, therefore, it is important that we include the amendments in the Bill. We keep all legislation under review. We are very concerned, as the hon. Member will have seen from other measures in the Bill, about tackling tax avoidance, so we will keep an eye out for any misuse of the measures. I commend the amendments and clause 14 to the Committee.

Question put and agreed to.

Clause 14 accordingly ordered to stand part of the Bill.

Amendments made: 1, in schedule 2, page 97, line 24, leave out “performing investment management services”.

This amendment is one of a pair of amendments designed to secure that the definition of investment management profit-sharing arrangements is capable of encompassing arrangements where an entitlement to profits arising in connection with the provision of investment management services by an investment manager arises to another person (such as a company or a trust).

Amendment 2, in schedule 2, page 97, line 25, leave out from “profits of” to end of line 26 and insert

“investments in connection with the provision of investment management services in relation to those investments.”

This amendment is one of a pair of amendments designed to secure that the definition of investment management profit-sharing arrangements is capable of encompassing arrangements where an entitlement to profits arising in connection with the provision of investment management services by an investment manager arises to another person (such as a company or a trust).

Amendment 3, in schedule 2, page 99, line 36, leave out paragraph (c) and insert—

“(c) the fund is 70% controlled by category A investors.”

This amendment is one of a pair of amendments that provide that a fund that is 70% controlled by category A investors meets the diversity of ownership condition.

Amendment 4, in schedule 2, page 99, line 42, leave out “6 April 2020” and insert “1 April 2022”.

This amendment will allow existing funds marketed before the commencement of the QAHC regime to be treated as meeting regulation 75(2) of the Offshore Funds (Tax) Regulations 2009 if certain information has been produced by the fund and has been made available to HMRC.

Amendment 5, in schedule 2, page 100, line 19, at end insert ‘—

(i) as if in subsection (4) of section 450 of that Act, the reference to a loan creditor were to a creditor of the fund in respect of a normal commercial loan (within the meaning it has in paragraph 3),

(ii) as if in that subsection, at the end there were inserted “and for the purposes of subsection (3)(d)”, and

(iii)’

This amendment modifies the way in which the interests of creditors are accounted for in determining whether a fund is “close”.

Amendment 6, in schedule 2, page 100, line 30, leave out sub-paragraph (6) and insert—

“(6) A fund is 70% controlled by category A investors if a category A investor, or more than one category A investor between them, directly or indirectly possesses—

(a) 70% or more of the voting power in the fund or, in the case of a fund that is not a body corporate, an equivalent ability to control the fund,

(b) so much of the fund as would, on the assumption that the whole of the income of the fund were distributed among persons with interests in the fund, entitle that investor or those investors to receive 70% or more of the amount so distributed, and

(c) such rights as would entitle that investor or those investors, in the event of the winding up of the fund or in any other circumstances, to receive 70% or more of the assets of the fund which would then be available for distribution among persons with interests in it.

(6A) For the purposes of sub-paragraph (6)—

(a) a category A investor indirectly possesses something if the investor possesses it through a body corporate or a series of bodies corporate;

(b) the interests of the participants in a category A investor that is a collective investment scheme that is transparent (within the meaning given by paragraph 6(7)) are to be treated as interests of the investor (instead of its participants) if that investor meets the diversity of ownership condition as a result of sub-paragraph (2)(a);

(c) in determining, for the purposes of sub-paragraph (6)(b) or (c), proportions of income or assets persons with an interest in the fund would be entitled to, ignore any interest any person has as a creditor of the fund in respect of a normal commercial loan (within the meaning it has in paragraph 3);

(d) paragraphs 5(5) and 6(5) and (6) apply for the purposes of determining the interests of persons in a fund as they apply for the purposes of determining relevant interests in a QAHC.

(6B) For the purposes of sub-paragraphs (5)(a)(i) and (6A)(c), references to a creditor of a fund are to be treated, in the case of a fund that is a partnership, as not including any creditor who is a partner of that fund.” —(Lucy Frazer.)

This amendment is one of a pair of amendments that provide that a fund that is 70% controlled by category A investors meets the diversity of ownership condition.

Schedule 2, as amended, agreed to.

Clause 15

Real Estate Investment Trusts

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

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James Murray

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As we have heard, clause 15 and schedule 3 concern real estate investment trusts. The clause and schedule amend the REIT rules and, as the Government have said, seek to remove superfluous restraints and administrative burdens. That includes the removal of the requirement for REIT shares to be admitted to trading in certain circumstances; the amendment of the definition of an overseas equivalent of a UK REIT; the amendment of the “holder of excessive rights” charge to corporation tax; and changes to the rules which ensure that a REIT’s business is primarily focused on its property rental business. The changes take effect from 1 April 2022.

A REIT is a company through which investors can invest in real estate directly. Specific tax rules for UK REITs were introduced in the Finance Act 2006. The regime has proved popular, and the number of UK REITs steadily increased to 92, as of June 2021. Subject to meeting certain relevant conditions, the company may notify Her Majesty’s Revenue and Customs that it is to be treated as a UK REIT. Its property rental profits and gains are then, in broad terms, treated as exempt from corporation tax, subject to ongoing conditions such as the requirement to distribute 90% of its exempt profits as property income distributions, which are in turn treated as property rental income in investors’ hands.

At Budget 2020, the Treasury launched a consultation on the tax treatment of asset holding companies, which included questions about investments in real estate. Responses to the consultation led to the inclusion of proposals for changes to the REIT regime in a second consultation on asset holding companies, which was launched in December 2020. The schedule introduces those changes, which are intended to remove restrictions and administrative burdens where they are no longer necessary. For that reason, we do not oppose the clause or schedule.

Alison Thewliss

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I have a question about transparency and how the regime will interact with the Government’s draft Registration of Overseas Entities Bill. I remember some discussion about people moving ownership to trusts and other things, but I am not quite clear how this interacts with that work on transparency.

Lucy Frazer

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I am grateful to the hon. Member for Ealing North for indicating that he will not oppose this aspect of the Bill. As he has said, the regime is very popular. I am very happy to get back to the hon. Member for Glasgow Central on her particular question.

Question put and agreed to.

Clause 15 accordingly ordered to stand part of the Bill.

Schedule 3 agreed to.

Clause 16

Film tax relief: films produced to be television programmes

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

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James Murray

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As we have heard, clause 16 allows films to remain eligible for film tax relief even if those films are no longer intended for theatrical release, provided they are intended for broadcast and meet the four conditions required for high-end television tax relief. The clause is effective for accounting periods ending on or after 1 April 2022. We do not oppose measures that support the entertainment and hospitality industry, particularly given the ongoing challenges brought about by the covid-19 pandemic. Indeed, the measures contained in clause 16 are, in themselves, sensible and appropriate.

More widely, though, we are aware that film tax relief was introduced by the Finance Act 2006, and applied only to films intended to receive theatrical release. That intention must be met at the end of every accounting period. Similarly, high-end television tax relief was introduced by the Finance Act 2013, and allows companies to claim relief on television programmes so long as they meet certain conditions.

The intention to broadcast must be met at the outset of production activities, and is then treated as being met for the remainder of production activities, regardless of the intention for the programme. That raises the possibility that a film that was initially intended for theatrical release may miss out on either relief if the intention changes part-way through production, and it is instead planned to have a television release. This is the case even when such a film would have been eligible for television tax relief if the decision had been made at the very start of production activities. Clause 16 ensures that where a film would have been eligible for high-end television tax relief if not for the date that the broadcast intention was decided on, it will not miss out on that relief, but will be eligible to claim it.

I am sure that the measures in this clause will provide welcome relief to those in the film industry. However, we would like to take this opportunity to ask the Minister about the operation of the film tax relief more widely, which is a debate that our new clause 14 seeks to encourage. Looking back briefly to 2014, the Public Accounts Committee reported on the misuse of tax relief, including the film tax relief, to which it made explicit reference. The report found:

“There is a lack of transparency and accountability for tax reliefs and no adequate system of control, following their introduction….Tax expenditures are often alternatives to spending programmes, but are not managed or evaluated as closely…The Departments do not keep Parliament adequately informed of changes in the costs of reliefs…The Departments are unable to cope with the demands of an increasingly complex tax system, including tax reliefs…The Departments do not respond promptly to unexpected increases in the costs of tax reliefs. Data on movements in the cost of reliefs is not available until tax returns are received, and HMRC takes time to react when it notices a cost increase, as it wants to ensure its response is appropriate. However, a longer elapsed time in reacting to an increase in the cost of a tax relief raises the total amount of public money at risk. In the case of film tax relief, it took ten years to resolve the problems and cost over £2 billion.”

I am aware that the operation of the film tax relief has been changed in recent years, but it is important to ensure that the tax relief continues to be effective. We need the Government to reassure us that they are taking adequate action against the possible misuse of tax reliefs. With that in mind, we tabled new clause 14, which would require the Government to include an assessment of the extent of, and potential for, misuse of the relief provided in clause 16. That assessment must also include an evaluation of the misuse of existing film tax relief more widely.

In relation to that wider potential misuse of existing film tax relief, our new clause requires the Government to set out, first, the number of total and successful enforcement actions taken against companies suspected of misusing film tax relief; secondly, a report of what action has been taken against the promoters of schemes designed to enable to misuse of film tax relief; and thirdly, what plans the Government have for further action against the misuse of film tax relief in the future.

The Minister has set out that she will not accept our new clause, but I ask her to commit to a firm timetable for a review of existing film tax relief that would have a similar effect. There are already reports suggesting that the use of film tax relief is increasing. I remind her that the 2014 Public Accounts Committee report said that

“Departments do not respond promptly to unexpected increases in the costs of tax reliefs.”

If the Minister will not commission a review along the lines that we have suggested, I would be grateful if first she could reassure us on the record that she does not believe that there are significant levels of misuse of film tax relief. Following the point that she made earlier, I would be grateful if she could also explain what the timetable is for the publication of the evaluation of film tax relief. If she does not have that to hand, could she write to me before the recess?

Alison Thewliss

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I am more than happy to support what the Government are proposing here. Consistency in these tax reliefs is really important to allow businesses to plan. My constituency particularly has a booming TV and film production sector, with the recent announcement of the BBC Studioworks development at Kelvin Hall in my constituency, and an £11.9 million investment, £7.9 million of which is coming from the Scottish Government to invest in the high quality TV and film production in Glasgow.

It is important to acknowledge the wider picture. This is not just about one tax relief; it is about the wider ecosystem. We have lots of independent production companies in Glasgow Central, and more widely in Glasgow, working away and producing high quality stuff. We have post production as well in companies such as Blazing Griffin, which does high-end stuff for the likes of Netflix. However, I would be doing them all a wee bit of a disservice if I did not mention the significance of Channel 4, and the importance of keeping it in its current model and standing away from the plans to privatise it. That model is what supports the wider ecosystem in the city of Glasgow—the model where independent production companies are able to keep their intellectual property and products, and sell them. That allows all the certainty within the sector to continue.

As I said, the issue is not just about this one tax relief; it is about the Government looking at and acknowledging the wider ecosystem that supports independent production within Glasgow. Companies such as Blazing Griffin have pointed out to me that, were it not for Channel 4, we would not have Netflix. One thing in the ecosystem depends on another, and I urge the Government to look at that in the round when it considers such tax reliefs. Where tax reliefs have been withdrawn or changed in the United States, all that happens is that production companies lift and shift, and go elsewhere. We do not want to risk doing that with such changes as those that the Government propose for Channel 4.

Lucy Frazer

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I will briefly respond to the points made by the hon. Member for Ealing North. There are four short points: first, I hope the hon. Member has taken some reassurance from the fact that I mentioned that the current regime is not subject to the same abuse as the historic regime. Secondly, I mentioned that we were doing an independent review of reliefs. Thirdly, he asked me for the timing of that project. It started in May 2021, and we expect the project to be finished and to have written a report before the end of March 2022, for publication later in the year.

The hon. Member also mentioned avoidance quite a lot; we are also interested in tackling avoidance, and we will be coming to, later on in this Committee, a whole raft of measures tackling promoters. I am sure that he will welcome those.

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James Murray

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Clause 17 will temporarily increase the rate of theatre tax credit for theatrical productions that commence production on or after 27 October 2021. From 27 October 2021 to 31 March 2023, companies will benefit from relief at a rate of 50% or 45% for touring and non-touring productions. From 1 April 2024, the rates of relief will return to the existing levels of 25% and 20% respectively.

Companies qualifying for theatre tax relief can surrender losses in exchange for a payable tax credit. The amount of loss able to be surrendered in a period is dependent on several factors, but will ultimately depend on the amount of core production expenditure that has been incurred in the UK or European Economic Area. A higher rate of relief is also available to theatrical productions that take place at more than one premise and are considered touring productions. I would be grateful if the Minister could clarify how the definition of touring will be applied.

Section 1217K(6) of the Corporation Tax Act 2009 defines touring thus:

“A theatrical production is a ‘touring production’ only if the company intends at the beginning of the production phase—

(a) that it will present performances of the production in 6 or more separate premises, or

(b) that it will present performances of the production in at least two separate premises and that the number of performances will be at least 14.”

Paragraph (b) indicates that if a theatre company puts on 14 performances that were split between two venues—perhaps in the same town, just round the corner from one another—it would be eligible for 5% more tax credits than if it kept all 14 performances in the same venue. Perhaps the Minister could confirm whether that is the case.

As we have heard, clause 18 concerns theatrical production tax relief. It amends part 15C of the Corporation Tax Act 2009 to clarify several areas of legislative ambiguity relating to eligibility for theatre tax relief in relation to theatrical productions where the production phase will begin on or after 1 April 2022. We understand that the amendments are made to narrow the focus of the legislation and, according to the background of its explanatory note, to

“reinforce the original policy intent”.

Subsection (2) requires the intended audience to number at least five people for a production to be considered a “dramatic production”. It also stipulates that for a dramatic piece to qualify as a dramatic production, it must tell

“a story or a number of related or unrelated stories.”

Subsection (3) adds productions made for training purposes to the list of productions that are not regarded as theatrical and do not qualify for relief.

Subsection (4) amends the commercial purpose condition in section 1217GA of the 2009 Act so that a performance will not meet the condition unless it is separately ticketed and such ticketing is expected to make up a significant proportion of the performance’s earnings. A ticket may cover things besides admission to the performance, so long as such things are incidental to the performance and it is possible to apportion the ticket price between the performance and anything else included in the price. The subsection additionally clarifies that for a performance to meet the commercial purpose condition by being educational, it must be provided mainly to educate the audience.

As we have heard, clause 19 provides a temporary increase to orchestra tax credit. It temporarily increases the rate of orchestra tax relief for concerts or concert series that commence production on or after 27 October 2021. From 27 October 2021 to 31 March 2023, companies will benefit from relief at a rate of 50%. From 1 April 2023 to 31 March 2024, the rate of relief will be set at 35%. From 1 April 2024, the rate of relief will return to its existing level of 25%.

Companies qualifying for orchestra tax relief can surrender losses in exchange for a payable tax credit. The amount of loss that can be surrendered in a period is dependent on several factors, but ultimately it depends on the amount of core production expenditure that has been incurred in the UK and the European Economic Area. This temporary rate rise is also being introduced to theatre tax relief, in clause 17, and museums and galleries exhibition tax relief in clause 21. It allows companies to claim a larger tax credit and is designed to support the industries as they recover from the adverse economic impact of the covid-19 pandemic.

Orchestral productions are a tremendously important cultural asset in this country, and we are pleased to support the clause, which provides additional support to a cultural industry that has been hit hard by the pandemic. However, will the Minister outline what measures are in place to support musicians of other genres, or who perform in non-orchestral configurations? This is a welcome relief for orchestras, but other musical groups could be left out.

As we have heard, clause 20 pertains to tax relief for orchestras. This clause amends part 15D of the Corporation Tax Act 2009 to clarify several areas of legislative ambiguity within orchestra tax relief. These changes have effect in relation to concerts or concert series where the production process begins on or after 1 April 2022, and they are comparable to the changes concerning theatre productions in clause 18, in so far as the Bill clarifies that relief is not applicable to orchestral productions that take place for training purposes. It amends the Corporation Tax Act so that a concert will not meet the definition unless it is separately ticketed and such ticketing is expected to make up a significant proportion of the performance’s earnings.

Those are uncontroversial provisions that we do not oppose, because they reduce the risk of the tax relief being misused and maintain the spirit in which the legislation was originally developed. However, we note the Chartered Institute of Taxation’s concern that orchestras that made a series election before the Budget—for example, an orchestra that made a series election in September for its whole annual season—would appear to lose out on the higher rate of relief for their entire season. That is perceived to be unfair, and we would welcome clarity over whether that is the Government’s intention.

Clause 21 provides a temporary increase to the rate of relief afforded to museums and gallery exhibitions that commence production on or after 27 October 2021. From 27 October 2021 to 31 March 2023, companies will benefit from relief at a rate of 50% or 45% for touring and non-touring exhibitions respectively. From 1 April 2023 to 31 March 2024, the rates of relief will be set at 35% and 30%. From 1 April 2024, the rates of relief will return to their existing levels of 25% and 20%.

Companies qualifying for this relief can surrender losses in exchange for a payable tax credit. The amount of loss that can be surrendered in a period is dependent on several factors, but it ultimately depends on the amount of core production expenditure that has been incurred in the UK and European Economic Area. We do not oppose the measure, because it relates to another sector that has been hurt by the pandemic and that we want to see back on its feet, providing the best educational and cultural enrichment that it can to the British people.

However, will the Minister clarify where world heritage sites fit into the legislation, and whether they could be considered museums or gallery exhibitions? According to UNESCO, the UK and Northern Ireland have 33 world heritage sites: 28 cultural, four natural and one mixed.

Finally, clause 22 concerns the aforementioned tax relief to museums and gallery exhibitions, clarifying some legislative ambiguities and amending criteria for primary production companies. Those amendments have effect in relation to exhibitions where the production stage begins on or after 1 April 2022. The relief was introduced with a sunset clause and was due to expire from 1 April next year, but this clause extends the relief for a further two years. Any expenditure incurred after 1 April 2024 will not qualify for relief unless there is a further extension.

As we can see, subsection (1) amends the definition of an exhibition so that a public display of an object is not an exhibition if it is subordinate to the use of that object for another purpose. For example, if a historic passenger train offers rides between two towns, although the train may have historical or cultural significance, its main purpose is to provide passenger transport. This does not preclude the possibility of there being an exhibition on board the train.

Finally, and more broadly, we are aware of concerns from within the industry regarding productions that straddle the commencement dates of these reliefs. For each relief, the increased rate applies only to productions where the production stage for the exhibition began on or after the Budget on 27 October 2021, when the change was announced. So, a production that received the green light on 26 October, or earlier, would not gain the benefit of the increased rate, however long it ran for after the commencement date for the increased rate. We understand there are those in the sector who perceive that as harsh and arbitrary, and we welcome the Minister’s thoughts on the matter.

Alison Thewliss

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Of course, I support the proposed tax credits. They will be a useful part of the picture of support for theatres, museums and orchestras, of which there are many in my constituency of Glasgow Central—which is, of course, the best constituency in the country, as I am sure everyone would agree. We have the Royal Scottish National Orchestra, the BBC Scottish Symphony Orchestra and Scottish Ballet, as well as Tron Theatre company and the Citizens Theatre company. These proposals may be of assistance to them, so I ask the Minister what communication has been put out to the sector to ensure that it is aware of the relief and taking it up as required.

I share the concerns expressed by the hon. Member for Ealing North, and I, too, seek answers from the Minister to the questions that the hon. Gentleman asked. It strikes me that many of these proposals provide assistance for productions of some kind, but that misses the other side of the equation. It is good to support companies, but if the venues and theatres in which they wish to perform go bust because they do not have the support that they need, that will not solve the problems that the companies have faced for the past year as a result of the pandemic. I urge the Minister to look at support for the sector more widely.

Many who work in the sector—in orchestras and in theatres, behind the scenes and on the stage—are freelancers, and many have received no support whatsoever from the Government during the pandemic. They have faced a very difficult time, and the Government need to resolve that part of the equation. They could perhaps do so by looking at extending the VAT relief that they introduced, as the SNP has called for.

We were very glad that the Government brought in the reduction in the rate of VAT, but it would be useful to see that continued beyond the cut-off in April next year. That would give a sector that has faced such a difficult time a bit of extra support into next year. It does not make much sense to me to cut that off, and not to incentivise people to go out and make use of the theatres and music venues we all have in our constituencies.

The sector has had a very difficult time. The proposed tax credits are useful, but we need to look at the wider picture. If there is no venue in which to perform or to showcase an orchestra, ballet, theatre production or pantomime, because those venues have gone bust and no longer exist, the Government are missing a trick. It is important that we support the venues and those who work in the sector, wherever that is, and that we look at the wider picture, rather than at a narrow bracket of tax reliefs.

Lucy Frazer

- - Excerpts

The hon. Member for Ealing North asked about world heritage sites. The answer to his question is that a world heritage site would be considered to be a site of cultural significance. It would be considered as an exhibition and would qualify, so long as it is maintained by a charity or local authority.

The hon. Gentleman recognised that those who had commenced productions before 27 October would not qualify for the relief. He is right about that, although we have doubled relief until 2023 and increased it until 2024. Productions that started before the announcement have been able to benefit from the normal rates of relief and the comprehensive package of support provided for the cultural sector over the pandemic. They will continue to benefit from relief at the 2020-21 rates. It is important, and we have made it clear, that these proposals relate to new activity, because it is new activity that we want to support through this particular relief.

The hon. Gentleman also asked about touring and musicians. HMRC has recently issued further guidance where industry has asked for it, in relation to the interpretation of the legislation. I will get back to him about those two points.

The hon. Member for Glasgow Central made a few points; I am afraid I must challenge her on her statement that Glasgow Central is the best constituency in the country. The best constituency is, of course, South East Cambridgeshire—fortunately, no one will have an opportunity to respond to that. She made an important point about communication. The Chancellor mentioned these reliefs in the Budget statement and they were included in all the communications about it at the time, which were highly publicised. The hon. Lady makes an important point, however, and I will continue to ensure that when we make reliefs, those who qualify for them are aware that they do. We are doing quite a lot of work on how to spread the message more broadly to enable companies to take up the reliefs that the Government offer.

Alison Thewliss

-

The point is that large production companies will have accountants who will know what those companies are eligible for, but smaller companies might not even be aware of what is available because they are too small to fill in the paperwork. They may need extra support to do so. Anything the Government could offer in that regard would be useful.

Lucy Frazer

- - Excerpts

That is a valuable point. I know in my constituency that small organisations got a variety of grants from the Arts Council and were able to access those reliefs, but I will discuss that point further with my officials. I thought the hon. Lady might want to intervene on the question of which constituency is the best in the country.

Alison Thewliss

-

There is no question!

Lucy Frazer

- - Excerpts

I commend the clauses to the Committee.

Question put and agreed to.

Clause 17 accordingly ordered to stand part of the Bill.

Clauses 18 to 22 ordered to stand part of the Bill.

Ordered, That further consideration be now adjourned. —(Alan Mak.)

Finance (No. 2) Bill (Second sitting)

Alison Thewliss Excerpts

Committee debates 2nd sitting
Tuesday 14th December 2021 Public Bill Committees

I would be grateful if the Minister could respond to two points. First, can she comment on whether she personally feels it is acceptable for a Government Minister, or officials acting on their behalf, to brief the press on Budgets before the House of Commons? Secondly, what assessments has she made of the consequences of this premature briefing, in terms of whether any private company or individual could have profited from advance knowledge of legislation before it was presented to Parliament?

Alison Thewliss (Glasgow Central) (SNP)

-

I support the comments made by the Labour Front-Bench spokesperson on this issue. Switching flag is the most crazy kind of gesture politics. Would it not have been better to look at green shipping? That would create a tax incentive for the industry, which is one of the leading contributors to emissions, to transfer to better forms of power, to reduce its carbon emissions and to have some positive impact on global emissions and the net zero target, rather than pursuing the gesture politics of switching flags on a ship.

Helen Whately

- - Excerpts

As I set out, the clause reforms the UK’s current tax regime to help the UK shipping industry grow and compete in a competitive global market. Overall, this will be to the benefit of our maritime industry and, therefore, to the UK as a whole, supporting GDP, tax revenues and jobs in the UK.

I will pick up on a couple of comments made by the Opposition Front-Bench spokespeople. On the points made by the hon. Member for Erith and Thamesmead, the clause is all about helping our shipping industry compete in a global market and making sure firms are not disadvantaged compared to those operating in other countries. It comes at a minimal cost to the Exchequer and we expect to see tax revenues in the sector increase as a result, because it will mean that more shipping groups are likely to headquarter in the UK. That will bring tax advantages and benefits to the UK, as well as tens of thousands of jobs that relate to that.

On the second point that the hon. Member made, I emphasise that the Treasury takes the recommendations of the Macpherson review very seriously and follows them in full. The reforms to our tax regime were rightly announced some months before they will come into force, in April next year.

The hon. Member for Glasgow Central talked about environmental factors. As part of the reforms, HMRC expects to update the guidance on assessing eligibility for the tonnage tax regime, and environmental factors will be considered as part of that, so it can help us on decarbonisation actions and ambitions.

Finance (No. 2) Bill (Second sitting)

Alison Thewliss Excerpts

Committee stage
Tuesday 14th December 2021 Public Bill Committees

I would be grateful if the Minister could respond to two points. First, can she comment on whether she personally feels it is acceptable for a Government Minister, or officials acting on their behalf, to brief the press on Budgets before the House of Commons? Secondly, what assessments has she made of the consequences of this premature briefing, in terms of whether any private company or individual could have profited from advance knowledge of legislation before it was presented to Parliament?

[Alison Thewliss (Glasgow Central) (SNP)]

I support the comments made by the Labour Front-Bench spokesperson on this issue. Switching flag is the most crazy kind of gesture politics. Would it not have been better to look at green shipping? That would create a tax incentive for the industry, which is one of the leading contributors to emissions, to transfer to better forms of power, to reduce its carbon emissions and to have some positive impact on global emissions and the net zero target, rather than pursuing the gesture politics of switching flags on a ship.

[Helen Whately]

As I set out, the clause reforms the UK’s current tax regime to help the UK shipping industry grow and compete in a competitive global market. Overall, this will be to the benefit of our maritime industry and, therefore, to the UK as a whole, supporting GDP, tax revenues and jobs in the UK.

I will pick up on a couple of comments made by the Opposition Front-Bench spokespeople. On the points made by the hon. Member for Erith and Thamesmead, the clause is all about helping our shipping industry compete in a global market and making sure firms are not disadvantaged compared to those operating in other countries. It comes at a minimal cost to the Exchequer and we expect to see tax revenues in the sector increase as a result, because it will mean that more shipping groups are likely to headquarter in the UK. That will bring tax advantages and benefits to the UK, as well as tens of thousands of jobs that relate to that.

On the second point that the hon. Member made, I emphasise that the Treasury takes the recommendations of the Macpherson review very seriously and follows them in full. The reforms to our tax regime were rightly announced some months before they will come into force, in April next year.

The hon. Member for Glasgow Central talked about environmental factors. As part of the reforms, HMRC expects to update the guidance on assessing eligibility for the tonnage tax regime, and environmental factors will be considered as part of that, so it can help us on decarbonisation actions and ambitions.

Finance (No. 2) Bill (First sitting)

Alison Thewliss Excerpts

Committee stage
Tuesday 14th December 2021 Public Bill Committees

[James Murray]

As we have heard, clause 10 relates to the increase of the normal pension age to 57 from 6 April 2028. The stated intention of the clause is to protect members of the registered pension schemes who, before 4 November 2021, had a right to take their entitlement to benefit under those schemes at or before the existing normal minimum pension age. It exempts members of certain uniformed service pension schemes from the increase, and it introduces new block and individual transfer rules specific to the new protection framework in order to reduce the restrictions on retaining a protected pension age following a transfer. The UK has a long tradition of protecting and rewarding those who have served their country. It is therefore right that we support clause 10, as it provides that protection by safeguarding recipients’ right to retain entitlement to benefits when transferring schemes.

We note, however, that the Low Incomes Tax Reform Group has concerns about the transitional arrangements relating to the clause. Paragraph 28 of the Government’s explanatory note regarding this clause states:

“There may be some transitional issues. For example, an individual who does not have a protected pension age and at 5 April 2028 will have reached age 55 and has started but not completed the process of taking pension savings before the change in normal minimum pension age. The government will provide further advice on the proposed transitional arrangements and provisions in due course.”

That raises concerns about when further advice on the proposed transitional arrangements will be made available, as well as questions about the extent to which that advice will be effectively communicated to the people concerned.

It is vital that people have full detail of any transitional provisions well before the increase to age 57 comes into effect; otherwise, there is a risk that people reaching age 55 in the run-up to 6 April 2028 will make decisions without knowing all they need to know. For example, an individual could cash in a pension in full and put the money in the bank so as to crystallise access to those funds, which may well leave them worse off in the long term, having likely incurred a large tax liability on the encashment and potentially affected their means-tested benefit entitlement. They might also have triggered the money purchase annual allowance, therefore restricting—perhaps unwittingly—their ability to make further contributions. In light of this, will the Minister clarify precisely when “due course” is, in relation to the Government’s further advice regarding the proposed transitional arrangement for the provisions? Will she also confirm what measures the Government will take to make sure that people are aware of the advice when it is finalised?

[Alison Thewliss (Glasgow Central) (SNP)]

This issue speaks to what I and my colleagues have often asked for in Finance Bills—that is, to be able to take evidence. We have received some very good written evidence from different organisations—I thank Scottish Widows, the Low Incomes Tax Reform Group and the Chartered Institute of Taxation for sending evidence to the Committee—but some of the detail requires a bit more interrogation. It would be useful if Finance Bill Committees were able to take evidence on the detail.

I agree with much of what the hon. Member for Ealing North said. Saying that something will happen in due course is not a great reassurance to many people. We have seen the terrible mess that the Government left for the WASPI women—the Women Against State Pension Inequality—who did not receive enough notice of state pension age changes. As a result, many have lost out on what they expected to happen when they reached retirement.

In its evidence, Scottish Widows makes the point well:

“Simplicity is a key driver of engagement with pensions… The average person has 11 jobs in their lifetime—with auto enrolment that could mean them having at least 11 pension pots. Some of these will now be accessible at age 55, others at 57.”

It also notes that

“some customers may have different pension ages within the same pension pot.”

That is not the simplicity that people really need when it comes to planning for their retirement.

There is a range of views. Scottish Widows appears to welcome the changes. The Chartered Institute of Taxation is not convinced that a change to the normal minimum pension age is necessary or desirable. What ought to be at the centre of this discussion is the people who will claim that pension. They need the clearest possible advice and the longest possible amount of notice in order to plan. I ask for clarity from the Government. It is just not acceptable to come before the Committee today without a date and say, “in due course”. People need to be able to plan for one of the most important events in their lives.

--- Later in debate ---

[James Murray]

As we have heard, the clause concerns qualifying asset holding companies, and sits alongside schedule 2. The aim of the clause, we understand, is to recognise certain circumstances where intermediate holding companies are used only to facilitate the flow of capital, income and gains between investors and underlying investments to tax investors, broadly as if they had invested in the underlying assets, and to enable the intermediate holding companies to pay tax that is proportionate to the activities they perform.

At Budget 2020, the Government announced that they would carry out a review of the UK funds regime, covering tax and relevant areas of regulation. The review started with a consultation on the tax treatment of asset holding companies in alternative fund structures, also published at Budget 2020. The Government responded to that consultation in December 2020, launching a second-stage consultation on the detailed design features of a new regime for asset holding companies. The Government’s response to that consultation was published on 20 July 2021.

The clause and schedule 2 introduce the new regime. We understand that the purpose of the measures is to deliver a proportionate and internationally competitive tax regime for qualifying asset holding companies that will remove barriers to the establishment of such companies in the UK. The Government have said that the new regime will include the following key features: eligibility criteria to limit access to the intended users; tax rules to limit the qualifying asset holding company’s tax liability to an amount that is commensurate with its role; and rules for UK investors to ensure that they are taxed so far as possible as if they had invested in the underlying assets directly.

We understand that the eligibility criteria will ensure that the asset holding companies may only be used as part of investment structures where funds are managed for the benefit of a broad pool of investors or beneficiaries. An asset holding company cannot carry out other activities, including trading, to any substantial extent. The tax benefits arising from asset holding company status apply only in relation to qualifying investment activity. The tax treatment of any limited trading activity or any non-qualifying investment activity that is carried on by an asset holding company will not be affected by the company’s status as an asset holding company.

We note that the Government have tabled six amendments to schedule 2, which accompanies the clause. Amendments 1 and 2 seek to pin down the definition of investment management profit-sharing arrangements. According to the explanatory statement, that is to ensure that the legislation is capable of encompassing arrangements in which an entitlement to profits arising in connection with the provision of investment management services by an investment manager arises to another person, such as a company or a trust.

Amendments 3 and 6 provide that a fund that is 70% controlled by category A investors meets the diversity of ownership condition. Amendment 4 seeks to allow existing funds marketed before the commencement of the qualifying asset holding company regime to be treated as meeting regulation 75(2) of the Offshore Funds (Tax) Regulations 2009 if certain information has been produced by the fund and has been made available to Her Majesty’s Revenue and Customs. Amendment 5 modifies the way in which the interests of creditors are accounted for in determining whether a fund is closed. We will not be opposing clause 14 or the Government’s amendments to it.

[Alison Thewliss]

I am a wee bit concerned that the Government have brought these amendments so late in the day. I appreciate that they have brought them now, rather than seeking to come back and amend legislation further down the road. That is something, I suppose. Does the Minister intend to review this legislation, and on what timescale? I am a wee bit worried about the letter we received yesterday, which said that, as originally drafted, the legislation includes some inconsistencies with wider tax rules and within the regime’s eligibility criteria. Given those worries and these amendments, I would like some reassurance from the Minister that the Government are going to keep an eye on this legislation to make sure that it is not exploited or used in the way that it is not intended to be. We need to make sure that people are paying the tax that they ought to be and that the legislation is not used as some kind of dodge.

[Lucy Frazer]

I welcome the lack of opposition to these clauses, which will support UK growth, by the hon. Member for Ealing North. The hon. Member for Glasgow Central made a point about the fact that the Government have made amendments late in the day. I reassure her that they are technical changes. Following engagement with the industry since the introduction of the Finance Bill, the amendments required were pointed out to us and, therefore, it is important that we include the amendments in the Bill. We keep all legislation under review. We are very concerned, as the hon. Member will have seen from other measures in the Bill, about tackling tax avoidance, so we will keep an eye out for any misuse of the measures. I commend the amendments and clause 14 to the Committee.

Question put and agreed to.

Clause 14 accordingly ordered to stand part of the Bill.

Amendments made: 1, in schedule 2, page 97, line 24, leave out “performing investment management services”.

This amendment is one of a pair of amendments designed to secure that the definition of investment management profit-sharing arrangements is capable of encompassing arrangements where an entitlement to profits arising in connection with the provision of investment management services by an investment manager arises to another person (such as a company or a trust).

Amendment 2, in schedule 2, page 97, line 25, leave out from “profits of” to end of line 26 and insert

“investments in connection with the provision of investment management services in relation to those investments.”

This amendment is one of a pair of amendments designed to secure that the definition of investment management profit-sharing arrangements is capable of encompassing arrangements where an entitlement to profits arising in connection with the provision of investment management services by an investment manager arises to another person (such as a company or a trust).

Amendment 3, in schedule 2, page 99, line 36, leave out paragraph (c) and insert—

“(c) the fund is 70% controlled by category A investors.”

This amendment is one of a pair of amendments that provide that a fund that is 70% controlled by category A investors meets the diversity of ownership condition.

Amendment 4, in schedule 2, page 99, line 42, leave out “6 April 2020” and insert “1 April 2022”.

This amendment will allow existing funds marketed before the commencement of the QAHC regime to be treated as meeting regulation 75(2) of the Offshore Funds (Tax) Regulations 2009 if certain information has been produced by the fund and has been made available to HMRC.

Amendment 5, in schedule 2, page 100, line 19, at end insert ‘—

(i) as if in subsection (4) of section 450 of that Act, the reference to a loan creditor were to a creditor of the fund in respect of a normal commercial loan (within the meaning it has in paragraph 3),

(ii) as if in that subsection, at the end there were inserted “and for the purposes of subsection (3)(d)”, and

(iii)’

This amendment modifies the way in which the interests of creditors are accounted for in determining whether a fund is “close”.

Amendment 6, in schedule 2, page 100, line 30, leave out sub-paragraph (6) and insert—

“(6) A fund is 70% controlled by category A investors if a category A investor, or more than one category A investor between them, directly or indirectly possesses—

(a) 70% or more of the voting power in the fund or, in the case of a fund that is not a body corporate, an equivalent ability to control the fund,

(b) so much of the fund as would, on the assumption that the whole of the income of the fund were distributed among persons with interests in the fund, entitle that investor or those investors to receive 70% or more of the amount so distributed, and

(c) such rights as would entitle that investor or those investors, in the event of the winding up of the fund or in any other circumstances, to receive 70% or more of the assets of the fund which would then be available for distribution among persons with interests in it.

(6A) For the purposes of sub-paragraph (6)—

(a) a category A investor indirectly possesses something if the investor possesses it through a body corporate or a series of bodies corporate;

(b) the interests of the participants in a category A investor that is a collective investment scheme that is transparent (within the meaning given by paragraph 6(7)) are to be treated as interests of the investor (instead of its participants) if that investor meets the diversity of ownership condition as a result of sub-paragraph (2)(a);

(c) in determining, for the purposes of sub-paragraph (6)(b) or (c), proportions of income or assets persons with an interest in the fund would be entitled to, ignore any interest any person has as a creditor of the fund in respect of a normal commercial loan (within the meaning it has in paragraph 3);

(d) paragraphs 5(5) and 6(5) and (6) apply for the purposes of determining the interests of persons in a fund as they apply for the purposes of determining relevant interests in a QAHC.

(6B) For the purposes of sub-paragraphs (5)(a)(i) and (6A)(c), references to a creditor of a fund are to be treated, in the case of a fund that is a partnership, as not including any creditor who is a partner of that fund.” —(Lucy Frazer.)

This amendment is one of a pair of amendments that provide that a fund that is 70% controlled by category A investors meets the diversity of ownership condition.

Schedule 2, as amended, agreed to.

Clause 15

Real Estate Investment Trusts

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

--- Later in debate ---

[James Murray]

As we have heard, clause 15 and schedule 3 concern real estate investment trusts. The clause and schedule amend the REIT rules and, as the Government have said, seek to remove superfluous restraints and administrative burdens. That includes the removal of the requirement for REIT shares to be admitted to trading in certain circumstances; the amendment of the definition of an overseas equivalent of a UK REIT; the amendment of the “holder of excessive rights” charge to corporation tax; and changes to the rules which ensure that a REIT’s business is primarily focused on its property rental business. The changes take effect from 1 April 2022.

A REIT is a company through which investors can invest in real estate directly. Specific tax rules for UK REITs were introduced in the Finance Act 2006. The regime has proved popular, and the number of UK REITs steadily increased to 92, as of June 2021. Subject to meeting certain relevant conditions, the company may notify Her Majesty’s Revenue and Customs that it is to be treated as a UK REIT. Its property rental profits and gains are then, in broad terms, treated as exempt from corporation tax, subject to ongoing conditions such as the requirement to distribute 90% of its exempt profits as property income distributions, which are in turn treated as property rental income in investors’ hands.

At Budget 2020, the Treasury launched a consultation on the tax treatment of asset holding companies, which included questions about investments in real estate. Responses to the consultation led to the inclusion of proposals for changes to the REIT regime in a second consultation on asset holding companies, which was launched in December 2020. The schedule introduces those changes, which are intended to remove restrictions and administrative burdens where they are no longer necessary. For that reason, we do not oppose the clause or schedule.

[Alison Thewliss]

I have a question about transparency and how the regime will interact with the Government’s draft Registration of Overseas Entities Bill. I remember some discussion about people moving ownership to trusts and other things, but I am not quite clear how this interacts with that work on transparency.

[Lucy Frazer]

I am grateful to the hon. Member for Ealing North for indicating that he will not oppose this aspect of the Bill. As he has said, the regime is very popular. I am very happy to get back to the hon. Member for Glasgow Central on her particular question.

Question put and agreed to.

Clause 15 accordingly ordered to stand part of the Bill.

Schedule 3 agreed to.

Clause 16

Film tax relief: films produced to be television programmes

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

--- Later in debate ---

[James Murray]

As we have heard, clause 16 allows films to remain eligible for film tax relief even if those films are no longer intended for theatrical release, provided they are intended for broadcast and meet the four conditions required for high-end television tax relief. The clause is effective for accounting periods ending on or after 1 April 2022. We do not oppose measures that support the entertainment and hospitality industry, particularly given the ongoing challenges brought about by the covid-19 pandemic. Indeed, the measures contained in clause 16 are, in themselves, sensible and appropriate.

More widely, though, we are aware that film tax relief was introduced by the Finance Act 2006, and applied only to films intended to receive theatrical release. That intention must be met at the end of every accounting period. Similarly, high-end television tax relief was introduced by the Finance Act 2013, and allows companies to claim relief on television programmes so long as they meet certain conditions.

The intention to broadcast must be met at the outset of production activities, and is then treated as being met for the remainder of production activities, regardless of the intention for the programme. That raises the possibility that a film that was initially intended for theatrical release may miss out on either relief if the intention changes part-way through production, and it is instead planned to have a television release. This is the case even when such a film would have been eligible for television tax relief if the decision had been made at the very start of production activities. Clause 16 ensures that where a film would have been eligible for high-end television tax relief if not for the date that the broadcast intention was decided on, it will not miss out on that relief, but will be eligible to claim it.

I am sure that the measures in this clause will provide welcome relief to those in the film industry. However, we would like to take this opportunity to ask the Minister about the operation of the film tax relief more widely, which is a debate that our new clause 14 seeks to encourage. Looking back briefly to 2014, the Public Accounts Committee reported on the misuse of tax relief, including the film tax relief, to which it made explicit reference. The report found:

“There is a lack of transparency and accountability for tax reliefs and no adequate system of control, following their introduction….Tax expenditures are often alternatives to spending programmes, but are not managed or evaluated as closely…The Departments do not keep Parliament adequately informed of changes in the costs of reliefs…The Departments are unable to cope with the demands of an increasingly complex tax system, including tax reliefs…The Departments do not respond promptly to unexpected increases in the costs of tax reliefs. Data on movements in the cost of reliefs is not available until tax returns are received, and HMRC takes time to react when it notices a cost increase, as it wants to ensure its response is appropriate. However, a longer elapsed time in reacting to an increase in the cost of a tax relief raises the total amount of public money at risk. In the case of film tax relief, it took ten years to resolve the problems and cost over £2 billion.”

I am aware that the operation of the film tax relief has been changed in recent years, but it is important to ensure that the tax relief continues to be effective. We need the Government to reassure us that they are taking adequate action against the possible misuse of tax reliefs. With that in mind, we tabled new clause 14, which would require the Government to include an assessment of the extent of, and potential for, misuse of the relief provided in clause 16. That assessment must also include an evaluation of the misuse of existing film tax relief more widely.

In relation to that wider potential misuse of existing film tax relief, our new clause requires the Government to set out, first, the number of total and successful enforcement actions taken against companies suspected of misusing film tax relief; secondly, a report of what action has been taken against the promoters of schemes designed to enable to misuse of film tax relief; and thirdly, what plans the Government have for further action against the misuse of film tax relief in the future.

The Minister has set out that she will not accept our new clause, but I ask her to commit to a firm timetable for a review of existing film tax relief that would have a similar effect. There are already reports suggesting that the use of film tax relief is increasing. I remind her that the 2014 Public Accounts Committee report said that

“Departments do not respond promptly to unexpected increases in the costs of tax reliefs.”

If the Minister will not commission a review along the lines that we have suggested, I would be grateful if first she could reassure us on the record that she does not believe that there are significant levels of misuse of film tax relief. Following the point that she made earlier, I would be grateful if she could also explain what the timetable is for the publication of the evaluation of film tax relief. If she does not have that to hand, could she write to me before the recess?

[Alison Thewliss]

I am more than happy to support what the Government are proposing here. Consistency in these tax reliefs is really important to allow businesses to plan. My constituency particularly has a booming TV and film production sector, with the recent announcement of the BBC Studioworks development at Kelvin Hall in my constituency, and an £11.9 million investment, £7.9 million of which is coming from the Scottish Government to invest in the high quality TV and film production in Glasgow.

It is important to acknowledge the wider picture. This is not just about one tax relief; it is about the wider ecosystem. We have lots of independent production companies in Glasgow Central, and more widely in Glasgow, working away and producing high quality stuff. We have post production as well in companies such as Blazing Griffin, which does high-end stuff for the likes of Netflix. However, I would be doing them all a wee bit of a disservice if I did not mention the significance of Channel 4, and the importance of keeping it in its current model and standing away from the plans to privatise it. That model is what supports the wider ecosystem in the city of Glasgow—the model where independent production companies are able to keep their intellectual property and products, and sell them. That allows all the certainty within the sector to continue.

As I said, the issue is not just about this one tax relief; it is about the Government looking at and acknowledging the wider ecosystem that supports independent production within Glasgow. Companies such as Blazing Griffin have pointed out to me that, were it not for Channel 4, we would not have Netflix. One thing in the ecosystem depends on another, and I urge the Government to look at that in the round when it considers such tax reliefs. Where tax reliefs have been withdrawn or changed in the United States, all that happens is that production companies lift and shift, and go elsewhere. We do not want to risk doing that with such changes as those that the Government propose for Channel 4.

[Lucy Frazer]

I will briefly respond to the points made by the hon. Member for Ealing North. There are four short points: first, I hope the hon. Member has taken some reassurance from the fact that I mentioned that the current regime is not subject to the same abuse as the historic regime. Secondly, I mentioned that we were doing an independent review of reliefs. Thirdly, he asked me for the timing of that project. It started in May 2021, and we expect the project to be finished and to have written a report before the end of March 2022, for publication later in the year.

The hon. Member also mentioned avoidance quite a lot; we are also interested in tackling avoidance, and we will be coming to, later on in this Committee, a whole raft of measures tackling promoters. I am sure that he will welcome those.

--- Later in debate ---

[Alison Thewliss]

Of course, I support the proposed tax credits. They will be a useful part of the picture of support for theatres, museums and orchestras, of which there are many in my constituency of Glasgow Central—which is, of course, the best constituency in the country, as I am sure everyone would agree. We have the Royal Scottish National Orchestra, the BBC Scottish Symphony Orchestra and Scottish Ballet, as well as Tron Theatre company and the Citizens Theatre company. These proposals may be of assistance to them, so I ask the Minister what communication has been put out to the sector to ensure that it is aware of the relief and taking it up as required.

I share the concerns expressed by the hon. Member for Ealing North, and I, too, seek answers from the Minister to the questions that the hon. Gentleman asked. It strikes me that many of these proposals provide assistance for productions of some kind, but that misses the other side of the equation. It is good to support companies, but if the venues and theatres in which they wish to perform go bust because they do not have the support that they need, that will not solve the problems that the companies have faced for the past year as a result of the pandemic. I urge the Minister to look at support for the sector more widely.

Many who work in the sector—in orchestras and in theatres, behind the scenes and on the stage—are freelancers, and many have received no support whatsoever from the Government during the pandemic. They have faced a very difficult time, and the Government need to resolve that part of the equation. They could perhaps do so by looking at extending the VAT relief that they introduced, as the SNP has called for.

We were very glad that the Government brought in the reduction in the rate of VAT, but it would be useful to see that continued beyond the cut-off in April next year. That would give a sector that has faced such a difficult time a bit of extra support into next year. It does not make much sense to me to cut that off, and not to incentivise people to go out and make use of the theatres and music venues we all have in our constituencies.

The sector has had a very difficult time. The proposed tax credits are useful, but we need to look at the wider picture. If there is no venue in which to perform or to showcase an orchestra, ballet, theatre production or pantomime, because those venues have gone bust and no longer exist, the Government are missing a trick. It is important that we support the venues and those who work in the sector, wherever that is, and that we look at the wider picture, rather than at a narrow bracket of tax reliefs.

[Lucy Frazer]

The hon. Member for Ealing North asked about world heritage sites. The answer to his question is that a world heritage site would be considered to be a site of cultural significance. It would be considered as an exhibition and would qualify, so long as it is maintained by a charity or local authority.

The hon. Gentleman recognised that those who had commenced productions before 27 October would not qualify for the relief. He is right about that, although we have doubled relief until 2023 and increased it until 2024. Productions that started before the announcement have been able to benefit from the normal rates of relief and the comprehensive package of support provided for the cultural sector over the pandemic. They will continue to benefit from relief at the 2020-21 rates. It is important, and we have made it clear, that these proposals relate to new activity, because it is new activity that we want to support through this particular relief.

The hon. Gentleman also asked about touring and musicians. HMRC has recently issued further guidance where industry has asked for it, in relation to the interpretation of the legislation. I will get back to him about those two points.

The hon. Member for Glasgow Central made a few points; I am afraid I must challenge her on her statement that Glasgow Central is the best constituency in the country. The best constituency is, of course, South East Cambridgeshire—fortunately, no one will have an opportunity to respond to that. She made an important point about communication. The Chancellor mentioned these reliefs in the Budget statement and they were included in all the communications about it at the time, which were highly publicised. The hon. Lady makes an important point, however, and I will continue to ensure that when we make reliefs, those who qualify for them are aware that they do. We are doing quite a lot of work on how to spread the message more broadly to enable companies to take up the reliefs that the Government offer.

[Alison Thewliss]

The point is that large production companies will have accountants who will know what those companies are eligible for, but smaller companies might not even be aware of what is available because they are too small to fill in the paperwork. They may need extra support to do so. Anything the Government could offer in that regard would be useful.

[Lucy Frazer]

That is a valuable point. I know in my constituency that small organisations got a variety of grants from the Arts Council and were able to access those reliefs, but I will discuss that point further with my officials. I thought the hon. Lady might want to intervene on the question of which constituency is the best in the country.

[Alison Thewliss]

There is no question!

[Lucy Frazer]

I commend the clauses to the Committee.

Question put and agreed to.

Clause 17 accordingly ordered to stand part of the Bill.

Clauses 18 to 22 ordered to stand part of the Bill.

Ordered, That further consideration be now adjourned. —(Alan Mak.)

Oral Answers to Questions

Alison Thewliss Excerpts

Tuesday 7th December 2021 Commons Chamber

[Mr Speaker]

I call the Scottish National party spokesperson, Alison Thewliss.

[Alison Thewliss (Glasgow Central) (SNP)]

The Chancellor likes to talk a good game on the universal credit taper rate and his pretendy living wage, but that only benefits those who are lucky enough to be in work and ignores many people who are disabled, carers or out of work, and those who are still on legacy benefits. Why has he abandoned and forgotten that group when they face a cost-of-living crisis this winter which will often affect them more than the rest of the population?

[Rishi Sunak]

It is simply not right to say that we have forgotten anyone. We remain committed to supporting all the most vulnerable in our society. I have mentioned previously the various different mechanisms that we have to help people with energy bills, and indeed the recent increase in the local housing allowance.

The hon. Lady says that we talk a good game. Those of us on the Government Benches believe fundamentally in the power and ability of work to transform people’s lives. We want to make sure that people have great jobs, and we want to make sure that those jobs are well paid. The cut in the universal credit taper rate will ensure that there is a £2.2 billion tax cut for those on the lowest incomes, and we are insanely proud of that.

--- Later in debate ---

[The Exchequer Secretary to the Treasury (Helen Whately)]

As we build a strong economy, we need to raise skills. That is why we announced in the spending review an increase of £3.8 billion in skills spending over this Parliament. The spending review included funding for a specific 50-plus training scheme to support people like those being helped by Teach A Trade so that they can retrain and stay in work. I am happy to speak further to my hon. Friend about how we can support Teach A Trade and others like it to do what they do.

[Alison Thewliss (Glasgow Central) (SNP)]

In this season of generosity and good will, will the Chancellor deliver a gift to the hard-pressed hospitality and tourism sector and amend the Finance (No. 2) Bill to extend the lower rate of VAT beyond March next year?

[Rishi Sunak]

I am glad that our VAT cuts extend all the way to spring. It is a £7 billion tax cut, and next year, as I have said, there is a 50% discount on business rates.

Finance (No. 2) Bill

Alison Thewliss Excerpts

Committee stage
Wednesday 1st December 2021 Commons Chamber

[James Murray]

I rise to speak in support of the new clauses in my name and those of the Leader of the Opposition and the shadow Chancellor.

Key principles of our tax system are that everyone should pay their fair share and that, in turn, the Government should treat everyone fairly. On the first of those two principles, the fact that large multinationals avoid paying their fair share of tax in the UK is one that rightly angers people across the country. This behaviour means that the UK misses out on vital revenue that could support our public services and it leaves British businesses that play fair at a disadvantage.

As the Minister will know, we were very disappointed that the Government recently allowed the global minimum corporate tax rate, which seeks to limit profit shifting and tax avoidance, to fall from the initial 21% proposed by President Biden to just 15%, but this is still progress. Before I turn directly to clauses 27 and 28, which relate to profit shifting, I ask the Minister to briefly confirm when she next speaks exactly what the timetable is for the Government putting the global minimum rate into UK law.

Clauses 27 and 28 amend the operation of the diverted profits tax, which was introduced in 2015 to try to limit multinationals from entering into profit-shifting arrangements through which they could avoid paying tax. As we have heard, clause 27 amends UK law on double tax treaties to allow mutual agreements between the UK and the other relevant tax state to take effect in relation to the diverted profits tax. Clause 28 is also technical, although it raises an important question about this Government’s willingness to hold companies to account for tax fraud. I would like to press the Minister on that point. TaxWatch has highlighted that HMRC’s annual accounts, published in November, show that HMRC is currently carrying out 100 investigations into multinational companies that may be diverting profits away from the UK, and HMRC’s statements clearly imply that a number of these investigations relate to fraudulent conduct.

In 2019, HMRC introduced a new profit diversion compliance facility, which allows multinationals to come forward and pay the taxes that they should have paid, plus any penalties, without having to pay the diverted profits tax. The changes in clause 28 appear to facilitate the settlement of disputes without diverted profits tax being charged, by extending the time period for which a company can amend previous tax returns in order to get out of having to pay it. Will the Minister confirm whether any company that is currently under investigation for fraudulent conduct involving diverting profits away from the UK may have the investigation of their fraudulent conduct dropped if they make use of the profit diversion compliance facility? It is an important question about how robust the Government’s approach to tax avoidance really is. As TaxWatch has put it,

“the Profit Diversion Compliance Facility should not become an amnesty for tax fraud.”

More widely, it is critical that the Government take more action on economic crime. We therefore support the principle behind the levy introduced by clauses 53 to 66, and hope that the funding from the levy will go some way towards increasing much needed capacity for the Government to tackle economic crime. We question, however, whether it will be enough, so our new clause 5 would require the effectiveness of the levy to be reviewed. This concern is evidently shared across the House, as new clause 15 in the name of my right hon. Friend the Member for Barking (Dame Margaret Hodge) and some Government Members would require the Government to assess the effectiveness of the proposed levy rates, and of levy rates twice and three times as high.

We also question why the Government are failing to make critical changes to the law that everyone agrees would strengthen the UK’s ability to fight economic crime. At the top of the list must be finally putting in place a public register of the beneficial owners of overseas entities that own UK property, to which our new clause 5 refers. A new public register would bring much needed and much delayed transparency to the overseas ownership of UK property, and help to stop the use of UK property for money laundering.

Plans to introduce a register were first announced by the Conservatives in 2016. Legislation was first published in 2018. We were promised that it would be operational by 2021, yet with just one month of this year left to go, this has become another broken promise from the Conservatives. It is very hard to conclude anything other than that the Government are, under the leadership of the current Prime Minister, deliberately abandoning their commitment to the register. We need only look at the language in the annual written statements on progress toward its introduction to see a clear pattern emerge.

In May 2019—two months before the right hon. Member for Uxbridge and South Ruislip (Boris Johnson) became Prime Minister—a ministerial update on the register reported:

“Over the past year, significant progress has been made towards the introduction of the register... the Government intends that the register will be operational in 2021”.

Yet a year after the current Prime Minister took office, the next ministerial update, in July 2020, took a different tone, saying rather more cautiously:

“This register will be novel, and careful consideration is needed before any measures are adopted”.

By November 2021, the latest ministerial update simply said:

“The overseas entities register is one of a number of proposed corporate transparency reforms... The Government intend to introduce legislation to Parliament as soon as parliamentary time allows.”

Those statements do not sound like a toughening of resolve.

What is more, the ministerial statements themselves have only been published because the Government have been required, by section 50 of the Sanctions and Anti-Money Laundering Act 2018, to publish three reports on progress toward the register—one in each of the years 2019, 2020 and 2021. That is why our new clause 5 would require the Government to continue publishing annual updates on 31 December each year on progress towards implementing the register. We are determined not to allow the Prime Minister to let this commitment slip out of sight.

As I said on Second Reading, it is astonishing that the Government feel that the need for this register is becoming less urgent. The Pandora papers confirmed how overseas shell companies secretly buy up luxury property in the UK and how much transparency is needed to help to tackle money laundering. Ministers did not respond to my questions on Second Reading, but I did receive a letter from the Exchequer Secretary yesterday, where she wrote:

“While these measures have full Treasury support, they are not Treasury led.”

It is quite astonishing that Treasury Ministers are now trying to blame their colleagues in the Department for Business, Energy and Industrial Strategy for the delay in bringing in the register, when every indication is that the lack of determination comes directly from the Prime Minister. The truth is that concerns over Russian donations to the Conservative party and the use of high-end property in the UK for Russian money laundering mean that putting in place the register of overseas owners without delay is a key part of restoring the trust in politics that Conservative MPs and the Prime Minister have done so much to erode.

Clauses 84 to 92 and schedules 12 and 13 relate to tax avoidance. Our new clause 7 requires an independent assessment of HMRC’s approach to the loan charge scheme and recommendations for altering that approach. In my opening remarks on the previous group of amendments, I said that a key principle of our tax system was that the Government should treat everyone fairly. We fear that with their approach to the loan charge the Government are sorely failing in that duty. The Government’s approach to the loan charge means that ordinary people who are victims of mis-selling are facing huge bills that are causing untold distress and personal harm. It was truly shocking to read reports only last week of eight cases of suicide among those facing demands for payments. A new approach to the loan charge is urgently needed.

That is why our new clause would require the Chancellor to commission an independent review to consider HMRC’s approach to the loan charge scheme and make recommendations on how it should be altered. This new review must finally offer a truly independent assessment, which is why we would require the Government to make a statement to the House of Commons on what efforts have been taken to guarantee its independence. Once recommendations have been made, we would then require the Government to explain which of them they will accept, and why, and to report on progress towards implementing them every six months.

It is clear that something is very wrong with the Government’s approach on the loan charge scheme and that efforts until now to find a solution have fallen far short. Our proposal would finally offer a way forward. I urge Members on both sides of the Committee to support our new clause on this matter when it comes to a vote. I also urge them to support our new clause to make sure that the register of the beneficial owners of overseas entities that own UK property does not get forgotten. We have already seen that the promise to have this register operational by this year has been broken. We must now ensure that the Government do not allow it to disappear altogether.

[Alison Thewliss (Glasgow Central) (SNP)]

On 10 November, the Prime Minister said that the UK is

“not remotely a corrupt country”.

One can believe or disbelieve things that the Prime Minister says, but it is clear from the Bill that the UK is certainly not a transparent country when it comes to taxes. Efforts in the Bill to tackle economic crime are of course welcome, but, as ever, this Government are not going far enough to do so. The Minister mentioned the economic crime plan. On Monday, we had the Minister for Security and Borders at the Treasury Committee, where he set out that 34 of the 52 actions have been completed, while the rest are in progress and a few of them appear to be some way from being completed. It worries me that priority is not being given to these actions.

Clauses 53 to 66 provide for the Economic Crime (Anti-Money Laundering) Levy, which the Government estimate will raise approximately £100 million per year to help to fund anti-money laundering and economic crime reforms. SNP Members are concerned that this part of the Bill is not well targeted and could potentially act as an additional tax on businesses that are not breaking the rules. For example, the Association of British Insurers is concerned that insurers will be disproportionately hit, because they present very little risk to the Treasury of tax avoidance and money laundering. The Chartered Institute of Taxation has expressed concern that smaller tax adviser firms may be driven from the market because of the increasing costs and reducing choices for consumers. It has also said that the measure could increase the tax gap by incentivising de-professionalisation. If it becomes too costly for firms to meet compliance, they may just choose to de-register from professional bodies altogether. De-professionalisation can result in less ethical behaviour and increased costs of supervision by HMRC, neither of which is particularly in keeping with the aims of this legislation. I understand that more than 32,000 firms are already supervised directly by HMRC, and the staffing to cover that does not nearly match the size of the job.

Conduct of the Right Hon. Member for Uxbridge and South Ruislip

Alison Thewliss Excerpts

Tuesday 30th November 2021 Commons Chamber

[Alison Thewliss (Glasgow Central) (SNP)]

Thank you, Madam Deputy Speaker.

Ministers and Government Members have been trying all afternoon to treat this debate as though it was not serious—as though it was a Westminster bubble story that will go away or in which our constituents are not interested, but that is not the case. Constituents have been emailing me since I came here in 2015, as they have been observing this place and its shenanigans. We are talking about practices and behaviour that would not be allowed or tolerated in the lives of our constituents or in workplaces up and down the country. They see a Parliament led by a Prime Minister for whom rules do not apply and consequences do not exist. They see grubby, manky, tawdry lies repeated again and again. My constituents see the Prime Minister at that Dispatch Box saying things that are not true. Like me, they find it bizarre that this is the only place where calling out a lie gets you in more trouble than telling one.

It is not for the Paymaster General or those on the Tory Benches to tell me what is important to my constituents and what they feel is important. My constituents have contacted me to tell me that they believe the House of Lords—that repository of those who have lost their seats, the donors and the cronies—should be abolished. Constituents have contacted me on the need for an urgent inquiry into the covid-19 scandals, to get the truth of where these VIP lanes have led. They have contacted me angry about the Electoral Commission being undermined by this Tory Government, about the Elections Bill, about voter ID, which will suppress their democratic rights, and about the shameful behaviour of Conservative Members seeking to change the standards to protect their pals.

My constituents care deeply about fairness and democracy. They are increasingly appalled by the behaviour of this UK Tory Government and this Prime Minister, and many of them are now seeking an alternative.

Finance (No. 2) Bill

Alison Thewliss Excerpts

2nd reading
Tuesday 16th November 2021 Commons Chamber

[Alison Thewliss (Glasgow Central) (SNP)]

It is a pleasure to speak on Second Reading of the second Finance Bill of the year. I welcome the Financial Secretary to the Treasury to her place, although I feel obliged to express my sadness that I will not spend the next few weeks in the company of the right hon. Member for Hereford and South Herefordshire (Jesse Norman), who has just left the Chamber. I am sure that he will not miss my constant references to Scottish limited partnerships, but I put the new Minister on notice that I expect her to be the one to fix that issue once and for all.

We on the Scottish National party Benches will of course propose worthy amendments—that will get voted down and ignored—in trying to make the very best of this flawed Finance Bill process, as the UK’s horribly complex tax system obtains yet another layer. I call again for the Finance Bill Committee to be allowed to take evidence. It remains baffling to me that although all the other legislative Committees in this place take expert evidence, the one that will directly affect the lives of everyone and every business in the country does not. That must change.

If the Finance Bill Committee took evidence, perhaps the UK Government would make fewer mistakes. Parts of the Bill correct oversights and errors, such as clause 83 and schedule 11 concerning the plastic packaging tax, about which I raised concerns in the passage of the previous Finance Bill. That measure is due to come into force in April next year, but the explanatory notes state that the changes in this Bill are

“to ensure that the tax…meets”

previously “announced policy objectives” and “works as intended”—well, I hae ma doots. I note that there are also measures to deal finally with the issue of second-hand cars in Northern Ireland—another bit of Brexit red tape that was not written on the side of the bus.

There is no doubt that we are facing a cost-of-living crisis and this Finance Bill provided the biggest possible opportunity for the Government to improve the lives of people across the UK. Instead, however, we see in schedule 6 that the Chancellor has seized the opportunity not to redistribute wealth, but to cut taxes for his banker pals, paid for by slashing universal credit, increasing national insurance and scrapping the pensions triple lock.

Ministers are keen to try to claim that the minimum wage is, in some way, a living wage, but it is not. This week is Living Wage Week and the real living wage rate has risen from £9.50 to £9.90 and to £11.05 in the city of London from today, so the UK Government proposals do not even keep pace with the real living wage, based on the cost of living.

I am proud that I have lots of real living wage employers in my constituency, because they see the benefit to their employees of paying a fair wage—they retain staff better and those staff are happier in their work—and they are right across a full range of sectors. There are 2,400 living wage employers in Scotland, including, in my constituency, Bike for Good, Pure Spa, Thenue housing association and a club that has obtained legendary status in the past couple of weeks: Firewater, on Sauchiehall Street. All of them pay their staff a fair wage and do their bit. I encourage the Government to become a living wage employer with the real living wage, because it would help so many people if they took a lead on that, as the Scottish Government and local authorities in Scotland have done.

[David Linden (Glasgow East) (SNP)]

I pay tribute to my hon. Friend’s work on campaigning for a fair wage for all, regardless of age. Will she join me on calling on the Government to extend that pay equality to apprentices? We have seen that with such things as the business pledge in Scotland, but unfortunately, this Government continue to think that apprentices can be paid less than £4 an hour, which is absolutely shocking.

[Alison Thewliss]

My hon. Friend is absolutely right to point that out. I do not know how the Government think that apprentices are supposed to live and pay their bills on the meagre wages set as their minimum wage. In fact, through the years of this Tory Government and since Labour brought in the minimum wage, the rate between the lowest-paid—those youngest workers entitled to the minimum wage—and those at the highest end of that age distribution has increased. That gap is growing wider and wider every single year, and it is a scandal, frankly, that people are being discriminated against solely on the basis of age. The Government should put that right.

It is a grim time for many people in this country and things are not optimistic for many businesses either. As the Minister mentioned, the March Budget gave notice on increasing corporation tax and extended the annual investment allowance until the end of March 2023. These measures, however, come in the context of a national insurance hike—a tax on jobs—that the Federation of Small Businesses estimates might have a 7% marginal rate for some. This should have been scrapped and the employment allowance increased, if the Chancellor was serious about helping business owners and employees.

Hospitality and tourism firms, having been hit the hardest during the pandemic, will not retain their 12.5% VAT rate beyond March. Many did not benefit at all from the reduced rate during the pandemic, because they were not able to trade, and to hike VAT back up to 20% just as the tourist season begins next year seems absolutely daft. The UK Government seem to be playing catch-up with Scotland. The Chancellor’s plan to cut hospitality and business rates next year is less than what they are offering now and far below the 100% relief that the Scottish Government are already offering to those businesses this financial year. That is in addition to the hugely successful small business bonus scheme, which takes many businesses out of business rates altogether.

The tax reliefs in clauses 16 to 22 for businesses in the culture and arts sector that have struggled so much in the past year are welcome, but keeping the VAT reduction could provide an incentive to get people back through the doors of our galleries, theatres, music venues and funfairs.

My SNP colleagues and I have long argued in this House that more should be done to tackle economic crime and I was interested to see some measures in the Finance Bill that deal with this area of policy. Part 3 provides a framework for the Government to issue a new tax to tackle economic crime. This UK Tory Government have failed time and again to tackle tax avoidance and economic crimes—that is not a matter entirely of inadequate legislation or resources, but of woefully poor enforcement.

Under the plans set out in the Bill, all undertakings that fall under money-laundering regulations and have a revenue of over £10.2 million will be subject to the new economic crime levy. Although I support the broad principles, I have some concerns about how this will work in practice, because placing more of a burden on businesses might not exactly have the desired effect. The Law Society of England and Wales has stated its opposition to the levy, stating that it is “an additional tax” on anti-money laundering regulators and against the “polluter pays” principle. The Association of British Insurers has concerns that insurance firms, a very low risk area for money laundering, may be disproportionately hit by the measure, which could result in reducing access to insurance for vulnerable consumers. This is another area where more evidence needs to be taken to be sure that the intended effect of the Government’s measures is actually what transpires.

The Treasury Committee, which I am proud to sit on, has taken a lot of evidence in our inquiry on financial crime and it would be wise of the Government to take heed of that before progressing further with this measure. It would also be useful to know the Government’s full timetable and resourcing plan for Companies House reform. By tightening up company registration, giving Companies House AML responsibilities—as they should have—increasing the comically low fee for company registration and actually enforcing their own laws, the Government could bring in much more money and lose less of it through the complex schemes that Companies House currently facilitates.

When I asked the small business Minister—the Under-Secretary of State for Business, Energy and Industrial Strategy, the hon. Member for Sutton and Cheam (Paul Scully)—in a written parliamentary question recently how much money has been raised by fines on Scottish limited partnerships that have not registered a person of significant control in the past three years, I received a response that stated that one fine had been levied in 2020-21. One fine—is that it? The last time I asked, in March last year, 948 SLPs had not filed PSC information by 31 January 2020. That figure was 2,019 in January 2019 and 7,078 in January 2018. Ministers may claim that this looks like an improving picture, but what is more likely to be happening is that people are moving those business around to similar structures in Ireland or into other vehicles such as trusts. To be clear, Companies House rules state:

“Anyone who does not respond to…notices within one calendar month, or gives false information, commits a criminal offence. They could receive a 2 year prison sentence, a fine or both.”

As far as I can establish, none of the firms that fell foul of the law was fined, apart from one, and no one got the jail. I ask again: how much money are the UK Government forgoing by not enforcing their own rules? What is the damage to our reputation, and to Scotland’s reputation, from being associated with money laundering and criminality that this UK Tory Government are failing to prevent?

The SNP is calling for a root-and-branch review of the tax system, which is much too complex and has too many places to hide and move things around. The UK Government have not confirmed whether any of the money raised by their proposed tax will be used to tackle tax avoidance. I would welcome some clarity on that point today.

Part 5 contains provisions to tackle tax avoidance, which is an issue that I have raised again and again, so I am pleased to see that some limited steps are being taken. The Bill will give HMRC powers to publish information on individuals who promote tax avoidance schemes. We support that approach in principle, but I note the concerns that the Chartered Institute of Taxation has raised about the drafting. HMRC says that it is targeting “the most egregious promoters” who flout the rules, but CIOT is concerned that the definitions of “promoter”, “relevant proposal”, “relevant arrangements” and “connected person” set a low bar.

The Bill’s wording also extends considerable latitude to HMRC officers: an authorised officer need only “suspect” that a scheme falls within the definition for people to be publicly named and shamed. I have constituents who have been named and shamed under minimum wage regulations and who have found it very difficult to challenge that and recover their reputation.

CIOT is also concerned that in future HMRC could use the measure more widely than is being proposed. I appreciate that the Bill makes provision for HMRC to retract and amend published information that has been shown to be incorrect, but it would be much better if we could have some assurances that it will get it right the first time, and some assurances about how the scheme will be resourced.

Lastly, I want to speak about an issue that has been literally close to home in the past few weeks. The eyes of the world have been on my constituency in Glasgow Central as it hosted the COP26 summit on climate change. The summit was an opportunity for the Government to show global leadership and grasp the opportunities that a green economy can provide, but the reality is that the only thing green about the Bill is the paper it is printed on. The Government’s ambivalence towards a just transition is writ right through it.

We need a comprehensive plan that understands the impact of our taxation choices on our emissions—a green OBR, perhaps, to hold this Government to account. The Government have given the Financial Conduct Authority and the Bank of England responsibilities in that area, but are taking none themselves in the Bill. Nowhere is that clearer than in the cut to domestic air passenger duty, which the Red Book says will lose the Government £30 million to £35 million a year in revenue. People do not have many options when they fly long-haul—despite what the Proclaimers say, few people would walk 500 miles and walk 500 more—but within these islands they do have the choice between getting on a plane and getting on a train. It is already much, much cheaper to fly in many circumstances. Cutting APD while allowing train fares to rise again and again is absolutely no way to incentivise people to take more climate-friendly options.

The Bill makes provision for global shipping companies to receive tax breaks for flying the red ensign. Tonnage tax is a complicated scheme that allows companies to disregard profits for tax purposes, creating a very low-tax environment. Would it not have been better to link tax breaks to emissions rather than to waving the British flag, to incentivise the green technologies required to transform shipping, and to take a lead on the issue?

Scotland is delivering action to secure a net zero and climate-resilient future in a way that is fair and just for everyone. We are committed to a just transition to net zero by 2045, with an ambitious interim target of a 75% reduction by 2030. The Bill’s purpose allegedly covers delivery on the commitments made in the 2020 White Paper on energy and the Prime Minister’s 10-point plan, contributing to the Government meeting their legally binding obligations to achieve net zero carbon emissions by 2050, but in reality there is very little in it to help Scotland to achieve our climate change goals. Indeed, in many ways it holds us back.

There is no reversal of the decision to scrap investment in a carbon capture and storage facility in the north-east of Scotland; it looks as if that investment will instead go to Tory marginals in the red wall. That is the worst type of pork barrel politics. The Acorn project at St Fergus would have been a world-leading example of a just transition project, but once again the people of Scotland have been let down by the Tories at Westminster. Neither is there any commitment to help to develop emerging wave technologies, which might well move abroad without the correct support, and there are no measures in the Bill to reform the transmission charging scheme, which costs wind farms in Scotland to plug into the grid while it pays companies in the south-east of England to connect. When I asked the Chancellor about that recently, I got blank looks and blah blah blah in return.

The Bill makes clear once again the UK Government’s lack of interest in Scotland’s commitment to tackling climate change. Schedule 14 makes provision to change VAT rates for freeports; it is disappointing to see no commitment to the fair work conditions and net zero ambitions put forward by the Scottish Government for a green port scheme. Scottish Ministers have engaged in good faith to try to improve a UK Government policy while further progressing our climate change goals: the Scottish Government wanted to take the freeport policy and augment it to work in the best interests of workers and the environment. Who could argue with that, other than Government Members? The Scottish Government have been ignored and sidelined by this UK Government. It is just not good enough.

This UK Tory Government cannot be trusted to act in the interests of Scotland. I look forward to the day when there is a Government who can and will act in those interests, using the levers of taxation powers to benefit our people, make our businesses grow and protect our environment for the future. Only independence can give Scotland that Government.

Oral Answers to Questions

Alison Thewliss Excerpts

Tuesday 2nd November 2021 Commons Chamber

[Rishi Sunak]

As always, my right hon. Friend makes an excellent point, and I thank him for the eloquent speech he made on this topic last week. I wholeheartedly agree with him. My intention and goal over the rest of this Parliament is to reduce taxes, and we both know that the best way to create growth and prosperity in this country is to unleash the entrepreneurial innovation of our private businesses.

[Alison Thewliss (Glasgow Central) (SNP)]

A happy Diwali to the Chancellor and all who are celebrating. Hospitality and tourism businesses face a tough winter, with rising fuel, staffing and supply costs. While the Scottish Government, to their credit, have brought in 100% rates relief, the Chancellor’s proposals of a few pence off a pint are small comfort in comparison. A greater help would be maintaining the 12.5% value added tax rate right through next year, not putting it back up to 20% in the spring. Will he bring forward proposals to do that and to support our tourism and hospitality businesses in the Finance Bill?

[Rishi Sunak]

The reduced rate of VAT was put in place to support the hospitality industry during coronavirus. It extends all the way to next spring; it does not step up until next March, as the hon. Lady pointed out. As she also pointed out, the Government are putting in place business rates support to help businesses in that industry—as I said previously, up to £110,000 for each business next year through a 50% discount on their business rates, with Barnett consequentials flowing to Scotland as a result.

--- Later in debate ---

[Mr Speaker]

Order. I call Alison Thewliss.

[Alison Thewliss (Glasgow Central) (SNP)]

COP26 is under way in my constituency, and the Scottish Government have set an ambitious target to reach net zero by 2045. In contrast, the Minister has completely failed to justify the cut to air passenger duty on internal flights while allowing the already eye-watering price of train tickets to rise again at the turn of the year. This is no pro-Union policy, as the Government like to pretend, because 62% of Scots think that cutting APD is entirely the wrong priority. So, in this week of COP, will the Minister do her bit for the planet and scrap this climate-damaging policy once and for all?

[Lucy Frazer]

I am grateful to have this opportunity to address the issue of air passenger duty. The hon. Member will know that, as well as cutting the duty on domestic flights, we have increased taxation on long-haul flights. She will also know that domestic flights are contributing less than 1% of the UK’s carbon emissions.

Budget Resolutions

Alison Thewliss Excerpts

Wednesday 27th October 2021 Commons Chamber

[Greg Clark (Tunbridge Wells) (Con)]

It is a pleasure to follow my right hon. Friend the Member for Sutton Coldfield (Mr Mitchell). I do not know whether his offer to the Chancellor has advanced or impeded his prospects in the future, but I am sure that he will look forward to the dinner none the less.

No one can be in any doubt about the central importance of science, innovation and technology to the future wellbeing and prosperity not just of this country, but of every country around the world. Yesterday, my Committee —the Science and Technology Committee—was privileged to hear from Professor Sir Andrew Pollard who, with Dame Sarah Gilbert, was one of the scientists who developed the Oxford-AstraZeneca vaccine against covid. Their work is saving millions of lives in this country and around the world, and allowing life here and around the world to resume. The vaccine would not have been possible had it not been built on sustained research conducted by world-class scientists in Britain over many years. It is not just in vaccine development, but in almost every field of human endeavour that research and science are transforming the world, from battery technology and energy storage, as we move to net zero, to the role that satellites play in monitoring agricultural matters from space to get the best crop yields around the world.

At this most exciting and transformational time for science and technology since the first industrial revolution forged in Britain, it is obvious that our future must be even more science and innovation focused than ever.

In the industrial strategy that we launched in 2017, the then Prime Minister and I committed the UK to invest 2.4% of our GDP in research and development within a decade—the OECD average—and then to move on to 3% thereafter. We increased the public science budget from £9 billion to £12 billion a year by 2020—then the biggest ever increase. I mention this to underline the remarkable fact that this Budget will increase the national investment from public funds in research and development not from £9 billion to £12 billion, but to £20 billion a year by 2024-25.

However, the Government had previously committed in the manifesto to invest £22 billion by that year, so, clearly, it is a source of regret that the Chancellor has not been able to keep that commitment. Having said that, had the original commitment been to £20 billion by 2024-25, it would still have been regarded as a remarkable transformation in our science funding and warmly welcomed. None the less, there is a cost to commitments that are not met in terms of the confidence of investors, who are investing alongside the Government.

Having said that, the Committee and the science community were very concerned that there might be a stop-start approach to meeting this commitment because of the current fiscal difficulties, with future increases deferred until later in the Parliament and therefore more uncertain. Witnesses to my Committee talked about the importance of a sustained increase in funding rather than famine first and feast later. I welcome very strongly the fact that the increases are not just in the later years, but that there is steady progress throughout the spending review period that will give great confidence to the science community. In fact, the later increases to get to £22 billion are somewhat less than the early increases that are being made, so I hope that it might prove possible in future Budgets to find the £2 billion required to get to the target earlier than 2026-27.

[Alison Thewliss (Glasgow Central) (SNP)]

Last week, in my constituency, I met representatives from the Glasgow School of Art, who raised concerns that the creative industries were part of the original industrial strategy, but that that now seems to have been lost given where the Government are going now. Does the right hon. Gentleman share my concern that much economic activity can come from the creative industry—innovation as well as other things—and that perhaps it ought to form a larger part of the strategy?

[Greg Clark]

The creative industries play a crucial role right across the country. The creative industries cluster in Glasgow has given a great deal of boost to that city and that has been matched by a lot of private sector investment. I pay tribute to Sir Peter Bazalgette who led the creative industries review that resulted in that. The money is there now as a result of this settlement and I very much hope that the faith placed in successful programmes such as that will be maintained.

Let me say a brief word about the fact that the Budget and the spending review provide the necessary funding for our association with Horizon Europe, the European funding system. There are many advantages to that association, as science is inherently international, but we are facing difficulties with the Commission ratifying our application for association. I do worry that the delays are already leading to British research institutions not being included in bids that are being put together for some of the funding that will be available over the next seven years. As every month goes by, the attractiveness of association diminishes.

The Chancellor has confirmed to me personally that the Horizon subscription that is listed in the Red Book is guaranteed, available and set aside. It is £1.3 billion this year and rises to £2.3 billion in 2023-24, and more thereafter. We no longer get more out of Horizon than we put in, which was the case when we were a member of the European Union. We also have to pay an administration fee, which I understand to be about £200 million a year, which is about twice the administration cost of running our own domestic innovation programme. Given that and the delay, it seems to me that the science community will want to assure itself that it would not prefer the budget that the Chancellor has guaranteed to be in the hands of UK universities and research establishments so that they can deploy themselves in international collaborations.

Science is inherently international, so I share the welcome of my right hon. Friend the Member for Sutton Coldfield for the prospects of resuming the 0.7% target on official development assistance. I particularly welcome the increase in the Red Book for ODA funding of science, even within the spending review period. In fact, that will nearly double. The cuts to science programmes that were funded by ODA were a big blow to science, so it is good to see that funding increase.

A major theme of this Budget is levelling up. British universities and research institutions all across Britain are often the most important institution in their area for driving prosperity. I therefore hope that, with a substantially rising tide of funding, it will be possible to keep faith with the programmes of excellence that we have, while strengthening the contribution made by the regions and nations of the United Kingdom. As Professor Richard Jones of the University of Manchester said in evidence to my Committee, that is literally levelling up—advancing the prospects of the nations and regions without diminishing the investments that we already make.

The science and research community and my Committee will look in detail at what has been proposed, but we recognise this substantial commitment to science—the biggest ever increase in the science budget. Even if we regret that the £22 billion that was scheduled may be two years late in being delivered, we are relieved that there will be sustained and steady progress towards it. If the economy recovers even more strongly in future years, we hope that we will be able to get there as planned, as originally set out.