Asked by: Lord Vinson (Conservative - Life peer)
Question to the HM Treasury:
To ask Her Majesty's Government how much tax is forgone annually by HM Treasury as a result of the tax exemptions for charities’ (1) donations, (2) investment income, and (3) gains on capital investments.
Answered by Baroness Penn - Minister on Leave (Parliamentary Under Secretary of State)
Tax relief is available on donations to charity by individuals and organisations, and to charities for their activities, including investment income.
Estimates for tax reliefs on charitable donations by individuals are published in “UK charity tax relief statistics”. The table below is an extract from the latest edition, showing these estimates for the previous 5 tax years.
Extract from Table 1 and 2: Estimates for UK charities tax reliefs. Updated November 2021
Restricted to those reliefs for which accurate figures can be estimated
£m | Reliefs paid to charities | Reliefs paid to individuals | |||||
Tax Year | Gift Aid | Gift Aid Small Donations Scheme | Interest, royalties, trust donations etc | Inheritance Tax | Payroll Giving | Gifts of shares and property | Higher Rate Relief on Gift Aid |
2016-17 | 1,270 | 30 | 10 | 660 | 40 | 60 | 410 |
2017-18 | 1,260 | 30 | 10 | 700 | 40 | 60 | 480 |
2018-19 | 1,350 | 40 | 10 | 800 | 40 | 70 | 500 |
2019-20 | 1,400 | 40 | 10 | 840 | 40 | 70 | 490 |
2020-21 | 1,380 | 30 | 10 | 860 | 40 | 70 | 490 |
Information about tax relief on charities’ investment income, and on charitable donations by organisations is not readily available.
Asked by: Lord Vinson (Conservative - Life peer)
Question to the HM Treasury:
To ask Her Majesty's Government what assessment they have made of the likely impact of HM Revenue’s ‘Making Tax Digital’ compulsory VAT scheme on the number of SME business that have (1) ceased trading, or (2) reduced turnover to below the VAT threshold.
Answered by Baroness Penn - Minister on Leave (Parliamentary Under Secretary of State)
There is no evidence to suggest that businesses have either ceased trading or reduced their turnover to below the VAT threshold due to Making Tax Digital (MTD) for VAT.
Following the successful introduction of MTD for VAT-registered businesses with taxable turnover above the VAT threshold in April 2019, the Government has extended MTD for VAT to all other VAT-registered businesses from April 2022.
Independent research shows that businesses using MTD-compliant software for their VAT obligations are realising efficiency benefits and the resulting reduction in errors is leading to additional tax revenue.
Asked by: Lord Vinson (Conservative - Life peer)
Question to the HM Treasury:
To ask Her Majesty's Government what assessment they have made of the impact that a rapid and sustained rise in the value of the Pound could have on the UK’s economic recovery; and what assessment they have made of the need for intervention by the Bank of England in such cases.
Answered by Lord Agnew of Oulton
The UK does not have an exchange rate target and the government does not have a desired level for sterling – the rate is set by the market.
Currency markets move up and down and it would not be appropriate for the Treasury to speculate on the impact of currency moves on the real economy. Any impact would necessarily adjust over time and be sensitive to the broader economic and financial context. The independent Monetary Policy Committee of the Bank of England has responsibility for monetary policy. Its primary objective, set out in law, is to maintain price stability, defined as a symmetric inflation target of 2 per cent, as measured by the twelve month increase in the Consumer Prices Index. The separation of fiscal and monetary policy is a key feature of the UK’s economic framework, so the Government does not comment on the conduct or effectiveness of monetary policy.
The pound currently sits 12% and 10% below the 10-year average exchange rate against the dollar and euro respectively.
Asked by: Lord Vinson (Conservative - Life peer)
Question to the HM Treasury:
To ask Her Majesty's Government what assessment they have made of the prevalence of tracker and similar funds lending the shares of beneficial owners for shorting; what regulations are in place to ensure that such funds make share owners sufficiently aware that shares may be lent in this way; whether such funds must seek the permission of beneficial owners before lending their shares for such purposes; and if not, why not.
Answered by Earl of Courtown - Captain of the Queen's Bodyguard of the Yeomen of the Guard (HM Household) (Deputy Chief Whip, House of Lords)
The FCA seeks to ensure that regulated firms provide adequate levels of disclosure to investors that invest in financial products, as well as the orderly functioning of these types of investment products.
As part of this, the FCA sets requirements for managers of authorised funds carrying out stock lending, including obligations that they make clear in the fund’s prospectus (the document provided to those considering investing in a fund) if the stocks in the fund they invest in may be lent on to others. However, the FCA does not require fund managers to then seek the permission of fund investors before lending their stock in each individual case. Under FCA rules, managers of authorised funds can only lend the stocks in these funds for the account of and for the benefit of the fund and in the interests of unitholders. The manager must be satisfied that any stock lending is appropriate for generating additional income for the fund at an acceptable degree of risk.
More broadly, the FCA is responsible for enforcing the Short Selling Regulation (SSR), which regulates short selling practices while safeguarding companies and the financial system. It imposes a disclosure regime on those who have reportable net short positions to the Financial Conduct Authority (FCA) and to the public and provides the FCA with powers to suspend short selling or limit transactions when there are significant reductions in the price of certain instruments from the previous day’s closing price. Additionally, the Treasury and FCA both have powers under the Regulation to address adverse events that pose a serious threat to market confidence or financial stability.
Asked by: Lord Vinson (Conservative - Life peer)
Question to the HM Treasury:
To ask Her Majesty's Government what estimate they have made of the number of beneficial owners with shares invested in tracker and similar funds that are not fully cognisant that their shares are being lent for shorting; and what steps they intend to take in response to any such estimate.
Answered by Earl of Courtown - Captain of the Queen's Bodyguard of the Yeomen of the Guard (HM Household) (Deputy Chief Whip, House of Lords)
The FCA seeks to ensure that regulated firms provide adequate levels of disclosure to investors that invest in financial products, as well as the orderly functioning of these types of investment products.
As part of this, the FCA sets requirements for managers of authorised funds carrying out stock lending, including obligations that they make clear in the fund’s prospectus (the document provided to those considering investing in a fund) if the stocks in the fund they invest in may be lent on to others. However, the FCA does not require fund managers to then seek the permission of fund investors before lending their stock in each individual case. Under FCA rules, managers of authorised funds can only lend the stocks in these funds for the account of and for the benefit of the fund and in the interests of unitholders. The manager must be satisfied that any stock lending is appropriate for generating additional income for the fund at an acceptable degree of risk.
More broadly, the FCA is responsible for enforcing the Short Selling Regulation (SSR), which regulates short selling practices while safeguarding companies and the financial system. It imposes a disclosure regime on those who have reportable net short positions to the Financial Conduct Authority (FCA) and to the public and provides the FCA with powers to suspend short selling or limit transactions when there are significant reductions in the price of certain instruments from the previous day’s closing price. Additionally, the Treasury and FCA both have powers under the Regulation to address adverse events that pose a serious threat to market confidence or financial stability.
Asked by: Lord Vinson (Conservative - Life peer)
Question to the HM Treasury:
To ask Her Majesty's Government, further to the Written Answer by Lord Young of Cookham on 8 July (HL16623), whether the requirement for business to “take a proportionate approach” and create “their own policies based on their assessment of risk” means that customer due diligence checks by businesses and banks for existing customers who have not given any cause for concern are optional.
Answered by Lord Young of Cookham
The Money Laundering Regulations 2017 are clear that all relevant persons (such as banks) must apply customer due diligence (CDD) measures if the person establishes a business relationship (regulation 27). Whilst CDD measures include conducting ongoing monitoring of a business relationship, as outlined in my previous answer, the extent of the measures taken must reflect the risk assessment carried out by the relevant person under regulation 18(1) and its assessment of the level of risk arising in any particular case. Therefore, if a customer is deemed low risk, the extent of ongoing CDD measures would be tailored to that risk assessment and minimum monitoring would be expected.
Asked by: Lord Vinson (Conservative - Life peer)
Question to the HM Treasury:
To ask Her Majesty's Government, further to the Written Answer by Lord Young of Cookham on 18 June (HL16068), what guidance they provide, if any, to banks and other businesses about ensuring that routine anti-money laundering checks do not cause stress to customers, particularly when those banks or businesses have not been made aware of any change to the circumstances of and have no concerns as to the identity of an existing customer as set out in regulation 27(8) of the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (SI 2017/692), and when those organisations may not be required to conduct such checks.
Answered by Lord Young of Cookham
HM Treasury is responsible for the Money Laundering Regulations 2017, which set out the high-level requirements on regulated businesses to combat money laundering. These Regulations are not prescriptive in setting out how customer due diligence (CDD) checks must be carried out, and instead require businesses to take a proportionate approach. Each business will therefore have their own policies based on their assessment of risks.
Specific guidance for banks on applying customer due diligence measures and ongoing monitoring of customers is included in guidance published by the Joint Money Laundering Steering Group. This guidance is approved by HM Treasury, and it highlights that a firm must apply CDD measures at appropriate times to its existing customers on a risk-sensitive basis.
Asked by: Lord Vinson (Conservative - Life peer)
Question to the HM Treasury:
To ask Her Majesty's Government whether all existing banking customers must provide proof of identification to banks to check for possible money laundering; if so, under which regulations this policy was brought in; whether an impact assessment was carried out on the costs to customers, particularly those in rural areas, of any such requirements; and what estimate they have made of the total cost of any such policy.
Answered by Lord Young of Cookham
The Money Laundering Regulations 2017 (‘the Regulations’) do not require banks to carry out customer due diligence – including identity checks—on all existing customers. The Regulations instead require banks to take a proportionate approach to applying customer due diligence checks commensurate with the risk of money laundering. The legal requirements on banks to carry out customer diligence for existing customers are set out in Regulations 27(8)(9) and 29(7). The Joint Money Laundering Steering Group’s guidance provides further detail on applying these requirements.
The impact assessment for the transposition of the 4th EU Money Laundering Directive (which led to the most recent revision of the regulations) estimates the total cost of the changes made, while concluding that industry has difficulty in identifying costs caused by the money laundering regulations. This is particularly the case for customer due diligence as many of these are costs that a prudent business would take on in any case as a matter of commercial practice, to comply with UN or EU sanctions, or to protect themselves and their customers from fraud. The full impact assessment is available on gov.uk.
Asked by: Lord Vinson (Conservative - Life peer)
Question to the HM Treasury:
To ask Her Majesty's Government what assessment they have made of (1) the practice whereby shares lent for short selling are sold without the explicit knowledge of the beneficial owner, and (2) whether regulatory authorities are able to ensure that those using this practice comply with relevant legislation.
Answered by Lord Bates
This practice is regulated under the terms of the EU’s Securities Financing Transactions Regulation and the UK Money Markets Code. The European Supervisory Authorities, Financial Conduct Authority and Bank of England are responsible for enforcing the Securities Financing Transactions Regulation.
Asked by: Lord Vinson (Conservative - Life peer)
Question to the HM Treasury:
To ask Her Majesty's Government what is the annual cost to the Exchequer of the tax foregone due to tax relief on charity investment income (1) in the last year, and (2) over the last five years; and what is the breakdown of the total cost over the last five years per taxpayer, per year.
Answered by Lord Bates
Tax relief is available on donations to charity by individuals and organisations, and to charities for their activities, including investment income.
Information about tax relief on charities’ investment income, and on charitable donations by organisations is not readily available.
Estimates for tax reliefs on charitable donations by individuals are published in “UK charity tax relief statistics”. The table below is an extract from the latest edition.
Extract from Table 2: Estimates for UK charities tax reliefs. Updated June 2018. Restricted to those reliefs for which accurate figures can be estimated
£m | Reliefs paid to charities | Reliefs paid to individuals | ||||
Tax Year | Gift Aid | Gift Aid Small Donations Scheme | Inheritance Tax | Payroll Giving | Gifts of shares and property | Higher Rate Relief on Gift Aid |
2013-14 | 1060 | 10 | 660 | 40 | 60 | 410 |
2014-15 | 1210 | 20 | 700 | 40 | 60 | 480 |
2015-16 | 1300 | 30 | 800 | 40 | 70 | 500 |
2016-17 | 1280 | 30 | 840 | 40 | 70 | 490 |
2017-18 | 1270 | 30 | 860 | 40 | 70 | 490 |