Finance (No.2) Bill

Nigel Huddleston Excerpts

3rd reading
Thursday 23rd May 2024 Commons Chamber

[The Financial Secretary to the Treasury (Nigel Huddleston)]

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

May I take the opportunity to thank you, Madam Deputy Speaker, and the other Madam Deputy Speaker for your professionalism, kindness and robustness in this place? You will be sorely missed, and I express my appreciation to all those who have announced that they will be standing down at this election and thank them for their service in this House. I think I speak for everybody when I say that everybody who comes into this place does so with very positive motivations, because they want to make the world a better place for their children and grandchildren. That may sound trite, but it is a motivation we all share. We may disagree on the route to achieve that, but anybody who comes into this place does so with incredible professionalism, and we should all thank them for that service.

Moving on to the politics and policy of today, this Bill helps to deliver the priorities of the Prime Minister and the Government following the autumn statement and the spring Budget. The economy has vastly improved. It is growing again. Real wages are increasing and, as we found out this week, inflation is down to its lowest figure in nearly three years. The Finance Bill builds on that economic improvement by rewarding work, encouraging investment in our economy and boosting home ownership.

As the two recent fiscal events outlined, we have rewarded work by making national insurance tax cuts. Some 27 million employees will get an average tax cut of £900 a year, and 2 million self-employed people will get a tax cut averaging £700. That is the largest ever cut to employee and self-employed national insurance, and this Bill furthers the work done on rewarding work by increasing the high income child benefit charge threshold from £50,000 to £60,000. In addition, the rate of the charge will be halved, so that child benefit is not repaid in full until someone earns £80,000, taking 170,000 families out of paying this tax charge. Some 485,000 families will benefit by an average of £1,260 from these child benefit changes.

[Jim Shannon (Strangford) (DUP)]

I put on record my thanks to the Minister and the Government for that change. It is a policy that my party and I have pursued over a number of years. The Government took it on board and they are very kindly changing the law. I thank the Minister, but also the Government, because it is one of the things that we can put to our constituents, including my constituents in Strangford, and say, “Here is delivery of what you asked for. Here is what we did.”

[Nigel Huddleston]

I thank the hon. Gentleman for his gracious and pertinent intervention, as ever. I thank him and all those who have campaigned for this change, because we know it will make a difference to the budgets of many households across the country in what we recognise are still challenging times.

The Bill will drive investment in the economy through various measures, including additional support for our world-leading creative industries, and we are making tax reliefs for theatres, orchestras, museums and galleries permanent, at a rate of 45% for touring theatres, museums, galleries and touring productions, 40% for non-touring productions and 45% for orchestras. That will ensure that our creative industries have the support they need after the unprecedented economic shock of the pandemic.

We will further support the UK’s independent film sector through a new UK independent film tax credit, at a rate of 53% for films with lower budgets. That will support the production of UK independent films and the incubation of UK talent. Our creative sector is vital to our national life, and the Government are committed to supporting UK businesses in the sector.

This is also a Bill that will boost transactions in the housing market. It will cut the higher rate of capital gains tax on residential property from 28% to 24%, encouraging landlords and second home owners to sell their properties, which would in fact increase revenues because there would be more transactions. That will make more homes available to purchase for a variety of buyers, including, of course, first-time buyers.

We need to ensure that the property system is fit for purpose. The Government are clear that where policies are not meeting their objectives, we will take clear and decisive action. That is why we are abolishing multiple dwellings relief—a bulk purchase relief in the stamp duty land tax regime—from 1 June 2024. Abolition follows an external evaluation that found no strong evidence that the relief is meeting its original objective of supporting investment in the private rented sector. His Majesty’s Revenue and Customs has recorded many instances of abuse and attempted abuse.

We are amending the rules so that individuals buying a new lease over a leasehold residential property through a nominee or bare trustee will be able to claim first-time buyers’ relief on their stamp duty land tax bill. That change will ensure that, for example, victims of domestic abuse are not unfairly penalised if they wish to buy their first homes anonymously. It will ensure that those in difficult circumstances do not face additional barriers to purchasing homes.

The Bill will also make the tax system fairer by closing tax avoidance loopholes and making relevant changes to VAT.

I thank right hon. and hon. Members from across the House for their helpful and insightful contributions to the debates during the Bill’s quicker than expected passage. I thank the many stakeholders who have provided their views on the issues raised and provided evidence to the Public Bill Committee, as well as Treasury and HMRC officials and, of course, the House Clerks and officials who have supported us in getting the Bill to this point so quickly.

The Bill rewards work, encourages investment in our economy and boosts home ownership. It is part of the Government’s clear plan of action. For those reasons, I commend it to the House.

--- Later in debate ---

[Nigel Huddleston]

I thank those who contributed to the debate, and, of course, those who have contributed to debates on the Bill throughout its progress. I turn first to comments made by the hon. Member for Aberdeen North (Kirsty Blackman). I respect her views about scrutiny of Bills in this place. However, I hope that she recognises that finance Bills often contain many, many clauses, some of which have been developed over many years, been subject to multiple consultations, and had a huge amount of input. I appreciate that she acknowledged that a lot of written evidence, which is hugely valuable and very much appreciated, is also provided. The fact that she and her colleagues are pressing for a Division on the Bill this evening evidences that there is scrutiny, holding to account, and a diversity of opinion on these matters.

I disagree with many of the hon. Lady’s other comments. On who is better off, 27 million workers are better off because of the national insurance cut, and 2 million self-employed people are better off. If she does not believe that, I suggest that she looks at her payslips; she will see that national insurance is going down. That makes a meaningful difference. She may be sniffy about it, but £900 is a meaningful difference for an average worker—for many of my constituents, and constituents across the country. For those not in work, of course, we also increased benefits by 6.7%, and pensions by 8.5%. We Conservatives always make sure that all people in society are looked after.

The hon. Lady made comments about support with the cost of living. The Opposition consistently seem to have a collective sense of amnesia, and have completely forgotten the last five years and the global challenges that all economies faced, with the pandemic followed by the global cost of living crisis. This Government have had to intervene in a way that nobody anticipated. It meant that taxes had to be higher, but as soon as we get the opportunity—as soon as we have the choice—to bring them down, that is exactly what we will do, because we know how difficult this has been for people and want to put more money in their pockets as soon as we can. We have a plan, and it is working.

I always respect the opinions and views of my hon. Friend the Member for Waveney (Peter Aldous), and I am never alarmed or disturbed by his frequently holding me, and the Government, to account for policy decisions. I can give him some reassurance, though. The multiple dwellings relief is being abolished for very good reason: it is not working as intended. Of course, a considerable amount of money is involved. When we spend taxpayers’ money or allow a relief, we need to make sure that it has the intended impact. The relief was not working as intended, and was subject to considerable abuse, so we are abolishing it.

However, I can give my hon. Friend some assurance, particularly on certain issues that he mentioned. For example, large investors, including those in the build-to-rent sector who purchased six or more properties in a single transaction, can still continue to benefit from the non-residential rates of stamp duty land tax, which can be quite beneficial. We are engaged in discussions with stakeholders, including some of the bodies that he has mentioned, because we do not want there to be unintended consequences. We appreciate their input on this Bill, as always. I thank my hon. Friend for his fantastic interventions, as always. He is an amazing MP for his constituents, and I always appreciate his contributions.

I thank the hon. Member for Ealing North (James Murray) for his gracious comments. He is correct that what is written in Hansard and what the public see of our sometimes rather robust debates is not always a reflection of our generally positive relationships on a personal level. However, that does not mean we do not have robust disagreements on policy, and I am afraid that I will have to raise quite a few points of disagreement today.

Every single time I have appeared at the Dispatch Box, the hon. Gentleman has complained about the Government not calling a general election, and now that we have called a general election, he is still complaining. That really takes the biscuit. He continued with his familiar refrain; he never misses an opportunity to talk Britain down. I refer him to my earlier comments about our interventions during the pandemic and their immense £400 billion cost to the UK economy. I do not believe the Opposition opposed a single one of our interventions at the time, so it is a bit rich to complain about the obvious impact on taxation. If he had an alternative plan, I would have loved to have heard it then, and I would love to hear it now, but it is non-existent. The hon. Gentleman is hoping to alarm, disturb and depress the British public into voting Labour, which is not a particularly bright strategy. The British public deserve better, and we need to hear confidence and optimism, not pessimism, about the UK economy.

I will not repeat the comments I have made on many occasions about Labour’s ridiculous scaremongering on the national insurance cuts and the impact they could have on pensions. He knows that the cuts will not have a negative impact on pensions, for the obvious reason that I had hoped he would now understand. National insurance does not wholly pay for pensions, welfare or the NHS, so why on earth is Labour going around the country trying to scaremonger old people and people who rely on the NHS into believing otherwise? I do not know. It is not an admirable way to try to win an election.

The hon. Gentleman and his colleagues keep repeating the mantra of “a changed Labour party”. Maybe in some ways that is true. Labour has certainly gone from embracing the hard left of British politics to embracing the hard right. That unbelievable journey speaks volumes about Labour’s values: it has none. Or, as the old saying goes, “These are our values. If you don’t like them, don’t worry: we have others.” On policy, too, there is a constant string of flip-flops, U-turns and uncertainty, which I am sure we will see during the general election. We will be holding Labour to account.

For example, Labour has abolished its £28 billion green spending commitment, but it seems to have retained the policy. Is Labour abolishing tuition fees? Maybe not. Will it abolish the House of Lords? Maybe not. Will it return to free movement and the single market? Maybe not. Will it abolish universal credit? Maybe not. Will it increase income tax on top earners? Maybe not. Rent caps, the ultra low emission zone, bankers’ bonuses and zero-hours contracts—we have had constant flip-flops from the Opposition. Not even they know what their actual policy is. It completely lacks credibility. As I said, they cannot expect the British public to be taken for such a ride.

The British public know where they stand with the Conservatives, because we have a plan. They can see it in the recent autumn statement, the spring Budget and this Bill. No matter what stage of life they are at, they can be confident that the Conservatives are there to support them. With our childcare measures and the child benefit changes in this Bill, it is clear that when they bring children into this world, we are there for them. Through our national insurance cuts and our measures to support businesses, it is clear that we are there for those in work or running a business. If they have finished work and have retired, we have shown through the triple lock and other measures that we are always there for them.

We can have strong public services and a strong welfare system that helps the most vulnerable in society only if we also have a strong economy to generate the taxes to pay for them. A strong recovery is vital for both the public and the private sector. That means that we on this side of the House are unapologetically pro-business.

Despite the challenges of the past few years, we are now on a clear path to recovery: the economy is growing again; inflation is falling; real wages are increasing; and people who look at their pay packet will see that their national insurance taxes have been cut too. That is more money in people’s pockets because of the actions and decisions of this Government—we have a plan, whereas the Opposition do not. We cannot put that at risk, so stick with the Conservatives for a brighter future. I commend this Bill to the House.

Question put, That the Bill be now read the Third time.

Finance (No. 2) Bill

Nigel Huddleston Excerpts

Committee stage
Tuesday 21st May 2024 Public Bill Committees

[The Chair]

Copies of written evidence that the Committee receives will be made available in the Committee Room and will be circulated to Members by email.

Clause 5

Increase in thresholds to £60,000 and £80,000

[The Financial Secretary to the Treasury (Nigel Huddleston)]

It is a pleasure to serve under your chairmanship, Mrs Latham, and I thank all hon. Members for their participation in today’s debate. I also thank those who have submitted written evidence on a variety of the clauses we will discuss today, including the Institute of Chartered Accountants in England and Wales, the Chartered Institute of Taxation, the Low Incomes Tax Reform Group and others, and all those who have contributed to consultations as part of this Finance Bill process.

Clause 5 makes changes to the high income child benefit charge, or HICBC, as it is commonly called. It increases the threshold at which child benefit begins to be withdrawn, from £50,000 to £60,000. The Government are also increasing the threshold at which child benefit is fully withdrawn, from £60,000 to £80,000. That means that 1% is withdrawn for every £200 of income that exceeds £60,000; previously, the rate was 1% for every £100 of income that exceeded £50,000, and child benefit was fully removed once individuals earned £60,000 or above.

The HICBC is a tax charge and was introduced in January 2013 for recipients of child benefit payments, or their partners, on higher incomes. It applies where the highest earner has an adjusted net income—that is, their total taxable income, less certain reliefs, such as pension contributions—above the threshold, which is rising to £60,000. For individuals with incomes above the top of the taper, which is rising to £80,000, the tax charge is equal to the full amount of the child benefit payment.

The changes will ensure that the HICBC continues to withdraw child benefit from high-income families, as it was designed to, without unfairly penalising those on middle incomes. By halving the rate at which HICBC withdraws the child benefit gain, the Government are improving people’s incentives to continue working or to take up more hours. The Office for Budget Responsibility estimates that, as a result of both changes, those already working will increase their hours by a total equivalent to those of around 10,000 full-time individuals by 2028-29.

The changes made by clause 5 will have a positive impact for around 485,000 families, who will gain an average of £1,260 in 2024-25, which they can put towards the cost of raising their children. That includes around 170,000 individuals who will no longer be liable for HICBC, and 135,000 individuals currently paying the HICBC who will have it reduced. The remaining 180,000 are the families currently not claiming child benefit or families opting out of getting child benefit payments who are now eligible to receive payments without incurring a tax charge.

The increase in the HICBC’s adjusted net income threshold reaffirms the Government’s commitment to rewarding working families, by allowing them to keep as much of their hard-earned money as possible in a sustainable way. I therefore commend the clause to the Committee.

[James Murray (Ealing North) (Lab/Co-op)]

It is a pleasure to serve on this Committee with you in the Chair, Mrs Latham. I am pleased to respond on behalf of the Opposition in the Public Bill Committee stage of the Finance (No. 2) Bill.

As we have heard from the Minister, clause 5 increases the adjusted net income threshold for the high income child benefit charge from £50,000 to £60,000, with effect from the 2024-25 tax year. The clause also amends the rate at which the high income child benefit charge applies to individuals with adjusted net incomes of between £60,000 to £80,000 in a tax year, and contains an administrative easement to prevent backdated child benefit payments from triggering a charge in 2023-24.

As we all know, due to high levels of inflation during the current Parliament, families across the country have felt the impact of threshold freezes, particularly in relation to income tax. Millions of people will be paying income tax for the first time or paying it at higher rates as a result of high inflation and the frozen thresholds. Similarly, the fixed nominal thresholds for the high income child benefit charge mean that more and more people will have been affected by the charge as a result of inflation. The adjustment to the thresholds in this clause will therefore be a welcome step for many families, and brings the number of individuals affected by the high income child benefit charge closer to what Parliament envisaged when the policy was introduced in the Finance Act 2012.

Although we support the measures in the clause and will not oppose them, we would appreciate some clarification from the Minister on one point. In particular, we understand that subsection (2) effectively halves the rate of clawback in the calculation of the charge, so the child benefit is fully withdrawn when the relevant adjusted net income reaches £20,000 above the initial threshold —that is, £80,000. I am grateful to the Chartered Institute of Taxation for pointing out that, because the clawback happens across a wider range of incomes, some individuals will be caught out by higher marginal rates of tax and will therefore likely need to file a self-assessment return. Is the Minister concerned that that will introduce more complexity into the tax system, and if so, what is he doing to communicate these changes so that taxpayers are not caught out?

Finally, we understand that the Government will be moving the assessment of the charge to a household basis from April 2026. I would be grateful if the Minister confirmed when the Government will announce further details about the consultation on that change. Will he also set out the details of what he is doing to consult industry and professional bodies about it?

[Drew Hendry (Inverness, Nairn, Badenoch and Strathspey) (SNP)]

It is a pleasure to serve under your chairmanship, Mrs Latham. We will not be opposing the clause, but I do want to make some comments about this paltry measure, which will help very few people in a cost of living crisis that the Conservative Government are trying to pretend is over and done with—in fact, they are saying that that is the case. That is not the reality for people in their homes across the nations of the UK.

The Minister said that the intention of this provision —I think I am quoting him correctly—was to allow people to “keep as much of their hard-earned money as possible.” That reflects incredibly badly on the way that this Government have conducted themselves by artificially boosting the cost of living through reckless actions such as Brexit and, of course, the mini-Budget. If they wanted to do something that was meaningful to help families, they could have copied the Scottish child payment in Scotland, which has lifted 100,000 children out of poverty. But no: they have decided to do this. They have also decided to keep the two-child limit on universal credit. That should be scrapped, and the Labour party should be joining in calls for that to be scrapped. The rape clause has no place in our society, and this measure will not go far enough to help families.

[Nigel Huddleston]

I thank my opposite numbers for their comments. I respectfully disagree with several of their points, and I will remind my opposite number, the hon. Member for Ealing North—as I do on almost every occasion—of the significant changes to the income tax threshold that the Conservative Government have brought in. It was £6,475 under Labour; it is now £12,570. That is a significant increase and it has taken many people out of paying income tax altogether, which is something we are very proud of.

The hon. Gentleman will be well aware that, as we have discussed on multiple occasions, the reason why taxes are higher than any of us would desire is the level of intervention required to support households and livelihoods during the pandemic and, more recently, the cost of living challenges since the invasion of Ukraine and the energy price shocks in particular. I would make a similar point to the hon. Member for Inverness, Nairn, Badenoch and Strathspey, who also made those points. I remind him that we have made interventions in cost of living support to the tune of about £100 billion. With respect, half a million people will benefit from the changes that we are introducing. HICBC is not a small amount. It is a meaningful amount of money for a large number of people, and it comes on top of the many other support measures that we have introduced.

I thank the hon. Member for Ealing North for pointing out the easements and the fact that there will be automatic backdating. Hopefully, that will be a relief and good news, and be positive for many families. Child benefit is normally backdated by three months, but because of the timing of the implementation, some could overlap two tax years. We are trying to make that simple and bring it into one tax year.

The hon. Gentleman mentioned the increase from £60,000 to £80,000 and the impact on marginal rates. The changes that were announced will reduce the total marginal effective tax rates, which includes income tax, employee national insurance contributions and HICBC, from about 64% to 53% for someone with, for example, two children. That is a good thing.

We recognise that high marginal rates introduce complexity to the tax system, but that needs to be weighed against other considerations when designing tax policy. The Government must ensure sure that they are committed to a fair tax system that supports strong public finances. Individuals will, as the hon. Gentleman pointed out, still be required to submit a self-assessment tax return to declare and pay their HICBC liability. However, the Government announced in July last year that we are taking steps to allow newly liable taxpayers to pay the HICBC through their tax code without the need to register for self-assessment. Further details on this improvement will be shared in due course.

The hon. Gentleman also mentioned the consultation on moving to a household basis. We will announce further details of the consultation in due course and, as with all tax policy, any changes would be considered as part of future fiscal events. The Chancellor announced that the Government will be consulting on moving the HICBC to a system based on household incomes, and that change will be delivered by April 2026. If the hon. Gentleman is patient, we will announce further details on that consultation in due course.

A point was made about communication. There have already been significant communications on the changes to HICBC. There has been a lot of online and offline activity from His Majesty’s Revenue and Customs, various Government Departments and others. The campaign to raise awareness also includes working with, for example, parenting platforms such as Bounty and Emma’s Diary, and issuing emails through third party partners, including childcare providers. The hon. Gentleman raised an important point about not just making the changes, but ensuring that everybody is aware of them, so that everybody who is intended to benefit is able to.

Question put and agreed to.

Clause 5 accordingly ordered to stand part of the Bill.

Clause 6

Reduction in higher CGT rate for residential property gains to 24%

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

[The Chair]

With this it will be convenient to debate clauses 7 to 11 stand part.

[Nigel Huddleston]

Clauses 6 to 11 are related to the property tax measures in the Bill. I hope that Members will forgive me, but this is a slightly longer speech, as I will talk through each clause. Indeed, it is the longest speech that I plan on giving today, although it is not too long—please do not have a heart attack; I will not be reading every one of these pieces of paper.

Clause 6 cuts the higher rate of capital gains tax, or CGT, charged on residential property gains from 28% to 24% from 6 April 2024. CGT is of course charged on the disposals of buy-to-lets and second homes. Main homes are exempt through private residence relief, which means for that the majority of residential property sales no CGT is paid at all. Where a disposal is liable to CGT, gains are taxed at a lower rate of 18% for any gains that fall within an individual’s basic rate band and at a higher rate for any gains above that.

The 28% higher rate was deterring some sales of residential properties, so the Government announced a 4 percentage point cut to the higher rate at spring Budget 2024. That will encourage more landlords and second home owners to sell their residential properties, making more homes available to the market for a variety of purchasers, including first-time buyers. The OBR forecasts that there will be around 60,000 more residential property transactions over the next five years owing to the cut. As more homes are bought and sold, the Exchequer is expected to raise an additional £690 million in revenue over that period. There will be no change to the lower rate of 18% for private residence relief.

Clause 7 concerns multiple dwellings relief, or MDR, which is a bulk purchase relief in the stamp duty land tax regime. The clause abolishes multiple dwellings relief from 1 June 2024. Multiple dwellings relief allows anyone purchasing two or more dwellings in a single transaction or in linked transactions to calculate their stamp duty based on the average value of the properties purchased, as opposed to their aggregate value. Multiple dwellings relief was introduced in 2011 with the intention of promoting investment in the private rented sector, but a recent external evaluation found no strong evidence that it has done so, meaning that the relief is not cost-effective and is therefore not acting as intended.

His Majesty’s Revenue and Customs has seen a high number of incorrect and abusive claims for the relief. Those have been driven by tax repayment agents, who often convince private individuals to make relief claims for the purchase of two dwellings when individuals have in fact only purchased one. One such example is somebody buying a large house with a separate indoor entertainment area, including a swimming pool and toilet, and that being counted as two properties when it is transparently one.

The changes made by clause 7 will abolish multiple dwellings relief for property transactions that complete on or after 1 June 2024. However, for contracts that were exchanged on or before 6 March 2024, relief will continue to apply regardless of when the contracts complete. The change will not impact those purchasing a single property. It will only increase the stamp duty payable by individuals or businesses purchasing two or more properties in a single transaction or as part of the same deal. Individuals or businesses purchasing six or more dwellings will continue to qualify for the non-residential rates of SDLT.

Clause 8 makes changes to ensure that first-time buyers’ relief from stamp duty land tax can be accessed by those purchasing new residential leases through a nominee or bare trustee, including victims of domestic abuse. A nominee is a person who holds the legal title of a property, while the beneficial ownership—the person who ultimately owns or controls the assets—is held by another person. A bare trust is a trust under which property is held by a person as trustee for another person who is fully entitled to all of the capital and income of the trust.

The measure also changes the definition of first-time buyers to ensure that individuals who use such arrangements cannot claim relief more than once. First-time buyers’ relief from SDLT is available where an individual who has not previously owned a dwelling purchases a home they intend to use as their only or main residence, but that is not currently available to individuals purchasing a new residential lease through a nominee or bare trustee.

The changes made by clause 8 will benefit certain first-time buyers of residential leasehold properties purchasing through a nominee or bare trustee, reducing the up-front cost of buying a home by allowing them to claim the relief they are entitled to. The changes bring those purchasers in line with purchases of residential freeholds and pre-existing leases using similar arrangements.

--- Later in debate ---

[The Chair]

With the leave of the Committee, I will put the Question on clauses 7 to 11.

[Nigel Huddleston]

If I may respond briefly, I will answer the perfectly reasonable questions raised by the hon. Member for Ealing North in relation to several points in multiple areas. Regarding the overall impact, and if I may reference the change of the capital gains tax rate from 28% to 24%, the OBR estimates that this costing will have a positive impact beyond the current forecasting period and generate a small long-term yield, too. Of course, beyond the forecasting period, it is difficult to estimate the exact amount.

On the points that the hon. Gentleman raised about MDR and other measures, it is interesting that although there are examples of abuse, it is also the case that only 32% of businesses buying property to let said that this relief had an important influence on their purchase decision at all and only 45% were aware of multiple dwellings relief before making a purchase decision. That feeds into the overall picture of MDR not fulfilling the original intent and purpose, which of course was to support investment in the private rented sector. Again, it is building the picture that the relief is no longer cost-effective. The Government are continuing to engage with stakeholders in the build-to-rent sector and other sectors to ensure that we understand their concerns and we will continue to listen to representations made to highlight any exception or unforeseen impacts that the abolition of MDR could have in the future.

I welcome the hon. Gentleman’s welcoming of many of the other measures. He asked whether they would be applied before the April deadline. They will not be applied retrospectively—for example, the updates on the registered social landlord exemption will not be applied retrospectively.

The hon. Gentleman mentioned the number of public bodies that have paid stamp duty at the 15% higher rate. The number of transactions—of those impacted previously —has been very small, and we therefore do not anticipate a huge impact.

Clauses 7 to 11 ordered to stand part of the Bill.

Clause 14

Additional relief for low-budget films with specified UK connection

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

[The Chair]

With this it will be convenient to discuss clause 15 stand part.

[Nigel Huddleston]

Clauses 14 and 15 make changes to better support the UK independent film industry. That is in recognition of the sector’s cultural importance and its role in growing and supporting UK talent. The Government have heard from several representatives of the British film industry, including the British Film Institute, about the specific challenges that the independent film industry faces. The Government also recognise the vital role that independent film plays in incubating UK talent.

The changes made by clauses 14 and 15 substantially increase the level of audio-visual expenditure credit available to smaller budget films from 34% to 53%. This increased rate for qualifying films is referred to as the UK independent film tax credit. The 53% tax credit will be applied on up to 80% of a film’s production costs, up to a cap of about £15 million. That translates into £31.80 back for every £100 spent, after accounting for corporation tax at 25%.

Films will also need to meet the criteria of a new British Film Institute test, with the expectation that films will have either a UK writer, a UK director or be certified as an official co-production. Clauses 14 to 15 set out the bulk of the measure, but further detail, including on the additional test, will be provided in a statutory instrument in due course.

Productions that start principal photography from 1 April 2024 will be eligible, and companies will be able to make claims from 1 April 2025 on expenditure incurred from 1 April 2024. The UK independent film tax credit is a transformational, generous, enhanced tax credit, which will boost the production of UK independent films and incubate UK film talent.

[James Murray]

As we have heard from the Minister, clause 14 introduces a higher rate of expenditure credit for independent films, defined as films below a maximum budget that have either a UK director or writer, or are an official international co-production. As the Government’s policy paper on this measure makes clear, the basic rate of credit under the audio-visual expenditure credit scheme is 34%. Independent films will now receive a rate of 53%, with the amount of credit capped to relevant global expenditure of £15 million. The Opposition strongly support the UK’s creative sector as one of the areas of the global economy in which Britain is world leading. As such, we will not oppose any measures that provide certainty and greater opportunities for growth in that critical sector.

Clause 15 provides the administrative framework for the previous clause and sets out that the higher rate will be available only on expenditure incurred from 1 April for films that commenced principal photography on or after that date. We understand that claims can in turn be made from 1 April 2025, so I would like to ask the Minister about the role of His Majesty’s Revenue and Customs, because we know that the new schemes will need to be properly explained through new guidance and may require new staff, as the Government’s policy paper makes clear. What is HMRC doing to ensure that the guidance remains timely and up to date for those wanting to make a claim? What will HMRC do to support those who want to apply for the credit so that they can understand how it operates? Similarly, what allocation of staff will be made to administer the measure?

[Nigel Huddleston]

I thank the Opposition for their support. I think there is agreement across the House on the vital role of the world-leading UK creative industries, and, in particular, our thriving film sector. In answer to the broad question put by the hon. Member for Ealing North, further information will provided by a statutory instrument that we will discuss in due course. His Majesty’s Revenue and Customs will have a role in that, and the precise resource allocation is an operational decision for it. As the Minister who oversees HMRC, I will pay close attention to the issue and I will ensure that it is properly resourced. This is a very important policy area and we want to ensure that it is successful. Again, I am afraid that I will ask the hon. Gentleman to be a little patient and wait for the details in the statutory instrument, but we are consulting key stakeholders on that.

Question put and agreed to.

Clause 14 accordingly ordered to stand part of the Bill.

Clause 15 ordered to stand part of the Bill.

Clause 16

Increase in theatre tax credit

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

[The Chair]

With this it will be convenient to discuss clauses 17 and 18 stand part.

[Nigel Huddleston]

We are powering through this— I have on my notes “tea break” by now, but it is not going to happen. That is no bad thing, and I appreciate the comments and input from hon. Members. I will repeat my thanks as well—a lot of work has gone into the measures that we are discussing today and many stakeholders have already contributed significant amounts, including through consultations.

One such area is what we are debating now: clauses 16 to 18 make changes to ensure that our world-leading theatres, orchestras and museums and galleries may continue to put on outstanding home-grown productions and attract inward investment. The orchestra, theatre, and museums and galleries exhibition tax reliefs have had rates of 45% for non-touring productions and 50% for touring productions and orchestral productions since October 2021, reflecting the unique challenges faced by those sectors during the covid-19 pandemic and the recovery period, which of course we are still in.

The rates were due to be reduced to 30% and 35% on 1 April 2025 and then return to their original levels of 20% and 25% on 1 April 2026. Clauses 16 and 17 change that so the tax reliefs will reduce to only 40% for non-touring productions and 45% for touring productions and orchestral productions on 1 April 2025, and will then remain at that level permanently. That was a key ask of the sector. Clause 18 removes the expiry date of the museums and galleries exhibition tax relief so that the relief similarly becomes permanent rather than ending on 1 April 2026.

The changes will benefit approximately 1,300 theatre companies, orchestra companies and museums and galleries that claim those tax reliefs on an annual basis. Our creative sector is vitally important to our national life and one of the fastest growing sectors in the UK economy. These clauses will bolster our theatres, orchestras and museums and galleries, ensuring that they remain among the best in the world. I commend the clauses to the Committee.

--- Later in debate ---

[Drew Hendry]

I briefly want to endorse the comments about these sectors requiring support. It is good to see some support for the sectors here, but we would like to see more in the future.

[Nigel Huddleston]

I do not have much more to add, other than to point out the strength of our creative industries in all four nations of the United Kingdom, which I am glad has been recognised across the Committee today. It is an incredible strength, and I am therefore pleased to hear today the very obvious cross-party agreement on continuing support for this vital sector.

Question put and agreed to.

Clause 16 accordingly ordered to stand part of the Bill.

Clauses 17 and 18 ordered to stand part of the Bill.

Clause 20

Collective investment schemes: co-ownership schemes

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

[The Exchequer Secretary to the Treasury (Gareth Davies)]

It is a great pleasure, as always, to see you in the Chair, Mrs Latham. Clause 20 begins the process of introducing legislation for a new type of investment fund—the reserved investor fund, which I will refer to from now on as the RIF. At Budget 2020, the Government announced a review of the UK’s funds regime, covering tax and relevant areas of regulation. The review had an overarching objective to make the UK a more attractive location to set up, manage and administer funds, as well as ensuring that UK investors can access a wide enough range of investment vehicles to suit their needs. In the years since, the Government have made a number of successful reforms. In order to build on these successes, the Government announced at spring Budget 2024 that we would be proceeding with the RIF.

The RIF will fill a gap in the UK’s existing fund offering by creating an onshore alternative to existing non-UK fund vehicles that are commonly used to hold UK real estate. Clause 20 provides a definition of the RIF and provides a power for the Treasury to make detailed tax rules through secondary legislation, consistent with the approach taken when introducing tax rules for other investment funds. A later statutory instrument will set out detailed tax rules for the RIF. The regulations will set out supplementary qualifying conditions for a RIF, entry and exit provisions, and rules that deal with breaches of one or more qualifying conditions.

The UK has a world-leading asset management sector. The RIF will play an important role in supporting that leadership by making the UK a more competitive destination for our fund management industry. Indeed, stakeholders from the financial services industry have already shown considerable support for the RIF. I therefore commend the clause to the Committee.

--- Later in debate ---

[Gareth Davies]

I am grateful for the comments from Opposition Members. I think we all agree that we want to tackle these issues in the most serious way possible, with the most force. I am comforted by the comments from the Financial Action Task Force, which previously said that the UK has one of the strongest regimes when it comes to tackling economic crime. The levy specifically seeks to fund the tackling of anti-money laundering rather than fraud or sanctions, which I will come on to in a second.

It is appropriate to stress that the levy is a targeted measure on the anti-money laundering regulated sector, therefore the proceeds go towards tackling anti-money laundering. That is in the context of the economic crime plan 2, which covers up to 2026 and is backed by £200 million from the levy plus £200 million of Government investment. We are taking broader action on fraud in the technology sector specifically, not least through the online fraud charter, the Online Safety Act 2023 and the telecommunications fraud sector charter.

The hon. Member for Inverness, Nairn, Badenoch and Strathspey mentioned sanctions evasion. We are cracking down on kleptocracy and sanctions evasion through the economic crime plan 2. The Office of Financial Sanctions Implementation actively monitors sanctions evasion every single day.

On corruption, the Foreign, Commonwealth and Development Office leads our efforts to support companies to tackle corruption and strengthen governance across the world. The Government are actively working with partners across the world to strengthen international standards, not least through the UN convention against corruption. In the UK, we also have the National Crime Agency’s international corruption unit. There is significant action to tackle fraud and corruption as well as sanctions evasion, but of course we can always do more and we are vigilant about that.

On the reporting and transparency of the levy, there was a reasonable question from the hon. Member for Hampstead and Kilburn and from the sector. There will be a report on the levy this year and it will be reviewed in 2027. We will engage with stakeholders leading up to that review.

Question put and agreed to.

Clause 21 accordingly ordered to stand part of the Bill.

Clause 22

Transfers of assets abroad

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

[Nigel Huddleston]

Clause 22 makes changes to ensure that individuals cannot use a company as a device to bypass anti-avoidance legislation, known as the transfer of assets abroad provisions. Those provisions are designed to prevent individuals from transferring ownership of income-generating assets, such as real estate or stocks, to an overseas individual or entity while still benefiting from the income that the assets generate. The provisions prevent the moving of assets into offshore structures outside the scope of UK taxation being a simple tax avoidance route for UK residents.

The clause has been introduced following a Supreme Court decision. Prior to the decision, HMRC considered that shareholders and directors who controlled a company could transfer an asset and were therefore in scope of the transfer of assets abroad provisions. However, the Supreme Court decision means that a shareholder cannot be determined as a transferor, which therefore opens up a loophole that can be exploited by shareholders transferring assets abroad via a close company to avoid UK tax. A close company is a company with five or fewer participators, usually shareholders or directors, who have ownership or control over the business.

The changes made by the clause will introduce a provision that deems an individual as the transferor where they are participators in a close company that transfers an asset to a person abroad in order to avoid UK tax. The amendment also applies to transfers by non-resident companies that would be treated as a close company if they were UK resident. The changes will have an impact on transactions only where the purpose of the transfer is to avoid tax and will not have an impact on transfers that are genuine commercial transactions. The changes will apply to income that arises after 6 April 2024, regardless of when the transfer took place.

In situations where multiple shareholders are involved in the transfer of an asset, any resulting tax charge will be apportioned between those individuals in proportion to their respective shareholdings. Further details will be provided in HMRC guidance. The measure is expected to affect a small number of individuals a year and will raise about £15 million in tax revenue over the forecast period.

This change was anticipated by external groups and demonstrates that the Government are quick to crack down on tax avoidance loopholes. This clause prevents tax avoidance by ensuring that individuals cannot bypass anti-avoidance legislation by using a company to transfer assets abroad while still benefiting from the income they generate. I therefore commend the clause to the Committee.

[Tulip Siddiq]

We believe that individuals or companies generating wealth in the UK should pay their fair share, so we are in complete support of the aims of this clause. However, we have heard concerns raised by the Chartered Institute of Taxation about the effectiveness of the Government’s proposals and I would be interested to hear the Minister’s views on those concerns.

First, the Chartered Institute of Taxation has argued that the clause adds complexity to the tax system, because it uses income tax legislation to tackle perceived corporate tax avoidance. Clause 22 extends provision within the Income Tax Act 2007 to cover avoidance of any tax through transfer made by a closely held company. Could the Minister explain the thinking behind the Government’s decision to tackle corporate tax avoidance in this way, rather than through the corporate tax regime? Does he agree with the Chartered Institute of Taxation that it could add unnecessary complication to the tax system?

Secondly, the Chartered Institute of Taxation made the case that the Government’s position that any participator in a company is deemed to be involved in a company’s decision to move assets abroad is unfair. For example, a company may have several minority shareholders who have no participation in the running of the company. What is the Minister’s assessment of the case made by the Chartered Institute of Taxation that only major shareholders, directors and shadow directors should be assumed to be involved for the purposes of this legislation?

Thirdly, the Chartered Institute of Taxation has warned that these changes could damage the UK’s international competitiveness, because the test as set out in the legislation leaves too much discretion to HMRC, which compounds uncertainty for businesses. For example, a UK holding company that provides a loan to an offshore subsidiary that in turn generates profits could be caught by the changes, despite that being a routine transaction. The Chartered Institute of Taxation argues that that could lead to an increased number of inquiries and appeals to the tax tribunals and could seriously undermine the UK’s attractiveness for international headquarters.

What does the Minister make of those concerns? What steps will HMRC take to ensure that involvement and objection defences under the clause are not ambiguous or uncertain, and to ensure that those charges do not prove to be increased excessively for taxpayers?

My final point is that the changes introduced by clause 22 appear to be retrospective, as no date is specified whereafter transactions are affected; the clause says only that income arising after April 2024 is caught by the regime. Can the Minister confirm whether that is the case? Will commercial transactions that were carried out many years ago, but from which income arises after April 2024, still be caught?

[Nigel Huddleston]

I thank the hon. Member for Hampstead and Kilburn for her comments. We very much appreciate the input that we have received from stakeholders and interested parties, including the Chartered Institute of Taxation. Some of those points are about broader issues around the TOAA regime, rather than specific to this legislation, but we do hear what they have to say.

I will respond to the hon. Lady’s points about the changes that apply to companies when the TOAA regime is primarily about individuals. The transfer of assets abroad legislation is an anti-avoidance provision aimed at preventing individuals from avoiding a tax charge by transferring an asset to a person overseas while still being able to enjoy the income of that asset in some way. It would be easy for an individual to sidestep the legislation by transferring such an asset to a company that they controlled before the company then made the transfer abroad. The legislative changes are aimed at preventing that situation and ensuring that the TOAA rules are applied as intended.

On the point about the legislation being broad, let us not forget that it is being brought in in response to the Supreme Court judgment; we are trying to make sure that it acts as intended throughout. The intention of the legislation is to put the situation involving transfers by companies back to how HMRC considered it operated before the Supreme Court decision. The transfer of assets abroad legislation aims to stop that tax avoidance.

It is also important to remember that the legislation does not bring a tax charge when the transfer is for genuine commercial reasons or when tax avoidance was not the purpose of the transfer. The new legislation gives individuals the opportunity to exclude themselves from the tax charge if certain conditions are met. We respectfully disagree with the CIOT on some of those conditions. We have outlined some of those, and HMRC will produce further guidance in due course.

On the retroactive criticism, the clause has retroactive effect because if it did not, it would have allowed individuals to abuse the loophole between the date of the Fisher judgment and the enactment of the legislation. Again, we do not believe that there will be a significant increase in complexity. The purpose behind the legislation is primarily to ensure that the regime acts as intended.

I will not go into the weeds on HMRC’s determination process—further guidance will be given—but HMRC will review the facts of a case to judge whether someone is directly or indirectly involved in the decision making of a company. It will accept evidence that shows whether someone is involved or not. However, any arrangements that are put in place purely to be used as evidence that an individual is not involved in the decision making of a company will be disregarded and a charge will be levied if the other conditions are met. As I said, HMRC will issue guidance on how it will approach the matter in due course. Decisions will be made based on the facts of each individual case.

I hope that I have given the hon. Member for Hampstead and Kilburn some assurance. We appreciate the concerns that have raised by key stakeholders, and further information and guidance will be forthcoming.

Question put and agreed to.

Clause 22 accordingly ordered to stand part of the Bill.

Clause 23

Minor VAT amendments

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

[Nigel Huddleston]

Clause 23 makes some minor, technical changes to VAT legislation relating to the DIY house builders’ scheme and VAT credit in the penalty reform regime, and allows for reform of the VAT terminal markets order. I will speak briefly about each measure in turn.

The DIY house builders’ scheme allows individuals building their own home, or converting a non-residential building to their own home, to recover VAT incurred on the cost. That puts individual house builders in the same position as property developers, who are able to sell new build residential property at a zero rate and recover the VAT they incur in the process of constructing new build properties. The scheme was simplified and made digital in December last year, which has significantly reduced the time taken for claims to be paid. Under the new process, only essential details are required on the claim form, eliminating the need for claimants to submit certain evidential documents up front. Based on the information provided on the claim form, HMRC can then request evidential documents to verify the claim.

Clause 23(1) will give HMRC a clear power under the DIY house builders’ scheme to require further evidential documentation, such as invoices, from the person who submitted a claim under the scheme. That will assist HMRC in verifying claims.

Clause 23(3) is a minor update to the existing powers that allow for reform of the VAT terminal markets order. The order reduces VAT administration burdens on commodities traded on specified markets, so the power will allow for simplifications to support businesses trading those commodities. The Government previously announced their intention to reform the order to reflect current market practices and to keep pace with market changes, such as trades in new products, including carbon credits. This clause takes that commitment forward.

Finally, subsections (4) and (5) make changes to ensure that VAT interest rules operate as intended. For most major taxes, the Finance Act 2009 requires HMRC to pay interest on amounts due from HMRC to taxpayers, and to charge interest on late payments to HMRC. Historically, that regime did not apply to VAT, which had its own interest rules. Harmonising the rules on interest was an important step in delivering the Government’s ambition to build a trusted, modern tax administration system. Changes made by the Finance Act 2021 brought VAT interest in line with taxes such as income tax from 1 January last year. In implementing the new interest rules for VAT, HMRC has discovered some minor defects in the legislation, which without correction would force it to act in a way that conflicts with policy intent.

Clause 23 will therefore make two changes to the interest rules. The first will address the situation in which interest ought to be repaid to HMRC because, following an assessment or amendment that reduces the amount of VAT credit, the repayment interest due is also reduced. It was always intended that HMRC could recover all these amounts through a simple automated process that does not add to burdens for taxpayers and HMRC alike. The IT system can already operate, but the legislation, mistakenly, does not always allow that automated recovery. The change will ensure that HMRC can do so in all cases instead of needing a different, onerous process for a minority of cases that the original legislation did not cover.

The second change will make sure that VAT-registered businesses are always protected by a provision that creates a fairer basis for the calculation of interest where they owed money to HMRC over the same time that HMRC owed money to them. The original legislation failed to extend that safeguard to all scenarios in which that could happen with VAT, undermining the fairness of the interest regime. To ensure that all VAT-registered businesses are treated equally, the changes will be given backdated effect to 1 January 2023, when the interest rules were introduced for VAT.

Clause 23 makes some small changes to ensure that policy works as intended and to further Government commitments on reforming the VAT terminal markets order. I commend it to the Committee.

[Tulip Siddiq]

The Opposition support the changes that will assist with compliance checks by making online applications equivalent to paper applications. Has the Minister considered adding the online application as a service to the agent services accounts so that an agent can prepare and submit the claim on behalf of their client?

We also support the provisions for modifying the application of VAT for terminal markets, as that will allow for further reforms such as bringing trades in carbon credits within the scope of the Value Added Tax (Terminal Markets) Order. We feel that is a vital and necessary step in developing this important market.

We support the changes to legislation that governs the interaction between late payment interest and repayment interest for VAT. Has the Minister given any thought to reinstating HMRC’s ability not to charge interest on VAT errors where the supplier did not charge VAT, with no loss to the Exchequer because the customer could claim in full?

[Drew Hendry]

On clause 23’s minor VAT amendments, there is very little to disagree with. VAT should be paid where it is due, and HMRC should pay interest where it should pay interest. That is to be welcomed.

However, on Second Reading I pointed out the paucity of thought and imagination that had gone into providing real help for people across the nations of the UK, and the kinds of thing that the Government could have done but have not. The clause title, “Minor VAT amendments”, just highlights the problem with the entire Bill. The Government could have taken some action to deal with the issues for people in hospitality by cutting VAT and doing something meaningful for tourism, but no: they have chosen to make these minor adjustments. They could have used VAT as a mechanism for helping our high streets to create economic zones that could boost life back into vital high streets and centres. Instead, they have taken to tinkering with the VAT rules.

My question to the Minister is why there is such a lack of ambition in his Government. Is it that this is a fag-end Government in a fag-end Parliament that has run out of ideas, or is it just that they do not care?

[Nigel Huddleston]

The hon. Member for Inverness, Nairn, Badenoch and Strathspey has been charming until this point, and now he goes back to this. I know him very well; I am sure he does not mean it. First, he knows as well as anybody in this House that everybody who comes into Parliament cares: they care about their constituents and they care about the country. We are motivated to come here because we want to make the country a better place for our children and grandchildren.

I know that the hon. Gentleman occasionally gets rather vocal on some of these points, but I politely request that he be a little bit careful with some of his comments. I would never criticise the motivation, incentives or purposes of any colleague in this place. I may fundamentally disagree with some of their policies, but I will not disagree with their motivations. In saying things like “People don’t care” or “The Government don’t care,” I am afraid he is straightforwardly wrong.

[Drew Hendry]

I am very fond of the Minister, as he knows. We often have these back and forths, and I often have to rise to my feet to correct what he has said. I did not make any assertion about any individual; I was talking about his Government. I was very explicit about that. I just want to make that clear.

[Nigel Huddleston]

Yet again, I appreciate the hon. Gentleman’s trying to clarify, but I am a member of the Government and therefore I am afraid that I do take offence, direct or indirect. But that is a side point to the matters under discussion.

The hon. Gentleman is making fair and valid points about the support that has been given, but I repeat that this Government, like every Government around the world, have had incredibly difficult circumstances to deal with. I do not think that there is any doubt whatever that the support measures that we have put in place to support lives and livelihoods have been incredible and stack up pretty well when compared internationally. That includes cost of living support, as I have mentioned.

I know that the hon. Gentleman is a huge supporter of the tourism, hospitality and leisure industry. We have spoken about that many times, and I know that it is particularly important to Scotland, where it is a disproportionately larger share of the economy than in England, for example, although it is important and large across every single constituency in the UK—and I do mean every single constituency. But the hon. Gentleman is being a little bit rich, because he knows as well as I do that there are other measures beyond VAT to support the hospitality and leisure industry. Of course, in England we have extended the 75% business rates reduction to the retail, hospitality and leisure sector, but that has not been done in Scotland, nor has it been done to its full extent in Wales.

[Drew Hendry]

I am grateful to the Minister for allowing a bit of back and forth on this. It is generous of him to do so. He fails to mention that in Scotland, 100,000 businesses are lifted out of business rates altogether through the small business bonus scheme. The record in Scotland shows that we are supporting businesses, and those businesses are very prevalent in the tourism sector.

[Nigel Huddleston]

I acknowledge the efforts made by the Scottish Government to support various sectors, but as I say, on that particular item, the hon. Gentleman will know as well as I do that it is a key ask of the industry in Scotland for the Scottish Government to follow suit with England and elsewhere.

The hon. Member for Hampstead and Kilburn raised several points. Some were slightly out of the scope of the specific measures under discussion, including IT systems and other considerations, but I take on board what she says, as does HMRC, because there is a constant need to review and assess the scope of IT systems and so on. We do so on a regular basis; I spend a lot of time talking to HMRC about this, so I can assure the hon. Lady that the points that she raised are constantly under consideration. I will probably leave it at that.

Question put and agreed to.

Clause 23 accordingly ordered to stand part of the Bill.

Clause 24

Collective money purchase arrangements

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

[Nigel Huddleston]

Clause 24 makes further provision for collective money purchase arrangements. CMP arrangements are a new type of pension that have the benefit of pooling individuals’ pension pots to provide better incomes in retirement while limiting the liability of employers.

These changes will enable the Government to authorise the transfer of benefits to a member’s beneficiaries, such as their dependants, in the unlikely event that a member dies while a CMP arrangement is being wound up. That will ensure that such transfers do not incur an unauthorised payment charge of 55%, and it will deliver the Government’s commitment to provide the correct tax outcome for CMP arrangements.

The Pension Schemes Act 2021 introduced legislation to allow collective money purchase schemes to operate in the United Kingdom. This measure authorises the transfer of survivor benefits in collective money purchase pension schemes. This will ensure that Royal Mail Group, the first provider of a collective money purchase pension scheme, can launch its scheme as planned.

It is a complicated title, but with a simple purpose. As a result of these changes, an employee of Royal Mail will be able to sign on to a CMP, with all the benefits, without the risk of transferring survivor benefits being put through as unauthorised transactions. I therefore commend the clause to the Committee.

[Tulip Siddiq]

This clause is so uncontroversial that we give it our full support. For the first time, I agree with everything the Minister has said, and the Committee will be happy to know that I have no further questions for him.

Question put and agreed to.

Clause 24 accordingly ordered to stand part of the Bill.

Clause 25

Interpretation

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

[Nigel Huddleston]

I will be very brief, because the clause is fairly straightforward. It provides for the use of abbreviations for a variety of Acts. For example, it provides for the use of “CTA 2009” as an abbreviation for the Corporation Tax Act 2009. I commend the clause to the Committee.

Question put and agreed to.

Clause 25 accordingly ordered to stand part of the Bill.

Clause 26

Short title

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

[Nigel Huddleston]

The clause provides for the Bill to be known as the Finance (No. 2) Act 2024 upon Royal Assent. I commend it to the Committee.

Question put and agreed to.

Clause 26 accordingly ordered to stand part of the Bill.

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

[Nigel Huddleston]

We have moved forward very quickly today. I thank everybody for their participation: you, Mrs Latham, all the officials in the House, the Clerks, and all those who have been working on the Bill at HMRC, HMT and other Government Departments. I repeat my thanks to the external stakeholders for their comments and to all those who have been involved in consultations. In particular, I thank the Chartered Institute of Taxation, the Institute of Chartered Accountants in England and Wales, and the Low Incomes Tax Reform Group for their contributions to this Committee, including in written form, and all those who have participated today.

I look forward to the Bill progressing smoothly through its final stages. I thank everybody involved.

[James Murray]

I add my thanks to my colleagues in the Opposition: my fellow shadow Minister, my hon. Friend the Member for Hampstead and Kilburn; the Opposition Whip, my hon. Friend the Member for Gower; and, of course, the Back Benchers who have joined us for this lengthy Committee session. [Laughter.] I place on the record my thanks to all the House authorities and to third parties, particularly the Chartered Institute of Taxation, whose expertise is always greatly valued.

Finance (No. 2) Bill (Except clauses 1 to 4, 12 and 13, and 19)

Nigel Huddleston Excerpts

Tuesday 21st May 2024 Public Bill Committees

[The Chair]

Copies of written evidence that the Committee receives will be made available in the Committee Room and will be circulated to Members by email.

Clause 5

Increase in thresholds to £60,000 and £80,000

[The Financial Secretary to the Treasury (Nigel Huddleston)]

It is a pleasure to serve under your chairmanship, Mrs Latham, and I thank all hon. Members for their participation in today’s debate. I also thank those who have submitted written evidence on a variety of the clauses we will discuss today, including the Institute of Chartered Accountants in England and Wales, the Chartered Institute of Taxation, the Low Incomes Tax Reform Group and others, and all those who have contributed to consultations as part of this Finance Bill process.

Clause 5 makes changes to the high income child benefit charge, or HICBC, as it is commonly called. It increases the threshold at which child benefit begins to be withdrawn, from £50,000 to £60,000. The Government are also increasing the threshold at which child benefit is fully withdrawn, from £60,000 to £80,000. That means that 1% is withdrawn for every £200 of income that exceeds £60,000; previously, the rate was 1% for every £100 of income that exceeded £50,000, and child benefit was fully removed once individuals earned £60,000 or above.

The HICBC is a tax charge and was introduced in January 2013 for recipients of child benefit payments, or their partners, on higher incomes. It applies where the highest earner has an adjusted net income—that is, their total taxable income, less certain reliefs, such as pension contributions—above the threshold, which is rising to £60,000. For individuals with incomes above the top of the taper, which is rising to £80,000, the tax charge is equal to the full amount of the child benefit payment.

The changes will ensure that the HICBC continues to withdraw child benefit from high-income families, as it was designed to, without unfairly penalising those on middle incomes. By halving the rate at which HICBC withdraws the child benefit gain, the Government are improving people’s incentives to continue working or to take up more hours. The Office for Budget Responsibility estimates that, as a result of both changes, those already working will increase their hours by a total equivalent to those of around 10,000 full-time individuals by 2028-29.

The changes made by clause 5 will have a positive impact for around 485,000 families, who will gain an average of £1,260 in 2024-25, which they can put towards the cost of raising their children. That includes around 170,000 individuals who will no longer be liable for HICBC, and 135,000 individuals currently paying the HICBC who will have it reduced. The remaining 180,000 are the families currently not claiming child benefit or families opting out of getting child benefit payments who are now eligible to receive payments without incurring a tax charge.

The increase in the HICBC’s adjusted net income threshold reaffirms the Government’s commitment to rewarding working families, by allowing them to keep as much of their hard-earned money as possible in a sustainable way. I therefore commend the clause to the Committee.

[James Murray (Ealing North) (Lab/Co-op)]

It is a pleasure to serve on this Committee with you in the Chair, Mrs Latham. I am pleased to respond on behalf of the Opposition in the Public Bill Committee stage of the Finance (No. 2) Bill.

As we have heard from the Minister, clause 5 increases the adjusted net income threshold for the high income child benefit charge from £50,000 to £60,000, with effect from the 2024-25 tax year. The clause also amends the rate at which the high income child benefit charge applies to individuals with adjusted net incomes of between £60,000 to £80,000 in a tax year, and contains an administrative easement to prevent backdated child benefit payments from triggering a charge in 2023-24.

As we all know, due to high levels of inflation during the current Parliament, families across the country have felt the impact of threshold freezes, particularly in relation to income tax. Millions of people will be paying income tax for the first time or paying it at higher rates as a result of high inflation and the frozen thresholds. Similarly, the fixed nominal thresholds for the high income child benefit charge mean that more and more people will have been affected by the charge as a result of inflation. The adjustment to the thresholds in this clause will therefore be a welcome step for many families, and brings the number of individuals affected by the high income child benefit charge closer to what Parliament envisaged when the policy was introduced in the Finance Act 2012.

Although we support the measures in the clause and will not oppose them, we would appreciate some clarification from the Minister on one point. In particular, we understand that subsection (2) effectively halves the rate of clawback in the calculation of the charge, so the child benefit is fully withdrawn when the relevant adjusted net income reaches £20,000 above the initial threshold —that is, £80,000. I am grateful to the Chartered Institute of Taxation for pointing out that, because the clawback happens across a wider range of incomes, some individuals will be caught out by higher marginal rates of tax and will therefore likely need to file a self-assessment return. Is the Minister concerned that that will introduce more complexity into the tax system, and if so, what is he doing to communicate these changes so that taxpayers are not caught out?

Finally, we understand that the Government will be moving the assessment of the charge to a household basis from April 2026. I would be grateful if the Minister confirmed when the Government will announce further details about the consultation on that change. Will he also set out the details of what he is doing to consult industry and professional bodies about it?

[Drew Hendry (Inverness, Nairn, Badenoch and Strathspey) (SNP)]

It is a pleasure to serve under your chairmanship, Mrs Latham. We will not be opposing the clause, but I do want to make some comments about this paltry measure, which will help very few people in a cost of living crisis that the Conservative Government are trying to pretend is over and done with—in fact, they are saying that that is the case. That is not the reality for people in their homes across the nations of the UK.

The Minister said that the intention of this provision —I think I am quoting him correctly—was to allow people to “keep as much of their hard-earned money as possible.” That reflects incredibly badly on the way that this Government have conducted themselves by artificially boosting the cost of living through reckless actions such as Brexit and, of course, the mini-Budget. If they wanted to do something that was meaningful to help families, they could have copied the Scottish child payment in Scotland, which has lifted 100,000 children out of poverty. But no: they have decided to do this. They have also decided to keep the two-child limit on universal credit. That should be scrapped, and the Labour party should be joining in calls for that to be scrapped. The rape clause has no place in our society, and this measure will not go far enough to help families.

[Nigel Huddleston]

I thank my opposite numbers for their comments. I respectfully disagree with several of their points, and I will remind my opposite number, the hon. Member for Ealing North—as I do on almost every occasion—of the significant changes to the income tax threshold that the Conservative Government have brought in. It was £6,475 under Labour; it is now £12,570. That is a significant increase and it has taken many people out of paying income tax altogether, which is something we are very proud of.

The hon. Gentleman will be well aware that, as we have discussed on multiple occasions, the reason why taxes are higher than any of us would desire is the level of intervention required to support households and livelihoods during the pandemic and, more recently, the cost of living challenges since the invasion of Ukraine and the energy price shocks in particular. I would make a similar point to the hon. Member for Inverness, Nairn, Badenoch and Strathspey, who also made those points. I remind him that we have made interventions in cost of living support to the tune of about £100 billion. With respect, half a million people will benefit from the changes that we are introducing. HICBC is not a small amount. It is a meaningful amount of money for a large number of people, and it comes on top of the many other support measures that we have introduced.

I thank the hon. Member for Ealing North for pointing out the easements and the fact that there will be automatic backdating. Hopefully, that will be a relief and good news, and be positive for many families. Child benefit is normally backdated by three months, but because of the timing of the implementation, some could overlap two tax years. We are trying to make that simple and bring it into one tax year.

The hon. Gentleman mentioned the increase from £60,000 to £80,000 and the impact on marginal rates. The changes that were announced will reduce the total marginal effective tax rates, which includes income tax, employee national insurance contributions and HICBC, from about 64% to 53% for someone with, for example, two children. That is a good thing.

We recognise that high marginal rates introduce complexity to the tax system, but that needs to be weighed against other considerations when designing tax policy. The Government must ensure sure that they are committed to a fair tax system that supports strong public finances. Individuals will, as the hon. Gentleman pointed out, still be required to submit a self-assessment tax return to declare and pay their HICBC liability. However, the Government announced in July last year that we are taking steps to allow newly liable taxpayers to pay the HICBC through their tax code without the need to register for self-assessment. Further details on this improvement will be shared in due course.

The hon. Gentleman also mentioned the consultation on moving to a household basis. We will announce further details of the consultation in due course and, as with all tax policy, any changes would be considered as part of future fiscal events. The Chancellor announced that the Government will be consulting on moving the HICBC to a system based on household incomes, and that change will be delivered by April 2026. If the hon. Gentleman is patient, we will announce further details on that consultation in due course.

A point was made about communication. There have already been significant communications on the changes to HICBC. There has been a lot of online and offline activity from His Majesty’s Revenue and Customs, various Government Departments and others. The campaign to raise awareness also includes working with, for example, parenting platforms such as Bounty and Emma’s Diary, and issuing emails through third party partners, including childcare providers. The hon. Gentleman raised an important point about not just making the changes, but ensuring that everybody is aware of them, so that everybody who is intended to benefit is able to.

Question put and agreed to.

Clause 5 accordingly ordered to stand part of the Bill.

Clause 6

Reduction in higher CGT rate for residential property gains to 24%

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

[The Chair]

With this it will be convenient to debate clauses 7 to 11 stand part.

[Nigel Huddleston]

Clauses 6 to 11 are related to the property tax measures in the Bill. I hope that Members will forgive me, but this is a slightly longer speech, as I will talk through each clause. Indeed, it is the longest speech that I plan on giving today, although it is not too long—please do not have a heart attack; I will not be reading every one of these pieces of paper.

Clause 6 cuts the higher rate of capital gains tax, or CGT, charged on residential property gains from 28% to 24% from 6 April 2024. CGT is of course charged on the disposals of buy-to-lets and second homes. Main homes are exempt through private residence relief, which means for that the majority of residential property sales no CGT is paid at all. Where a disposal is liable to CGT, gains are taxed at a lower rate of 18% for any gains that fall within an individual’s basic rate band and at a higher rate for any gains above that.

The 28% higher rate was deterring some sales of residential properties, so the Government announced a 4 percentage point cut to the higher rate at spring Budget 2024. That will encourage more landlords and second home owners to sell their residential properties, making more homes available to the market for a variety of purchasers, including first-time buyers. The OBR forecasts that there will be around 60,000 more residential property transactions over the next five years owing to the cut. As more homes are bought and sold, the Exchequer is expected to raise an additional £690 million in revenue over that period. There will be no change to the lower rate of 18% for private residence relief.

Clause 7 concerns multiple dwellings relief, or MDR, which is a bulk purchase relief in the stamp duty land tax regime. The clause abolishes multiple dwellings relief from 1 June 2024. Multiple dwellings relief allows anyone purchasing two or more dwellings in a single transaction or in linked transactions to calculate their stamp duty based on the average value of the properties purchased, as opposed to their aggregate value. Multiple dwellings relief was introduced in 2011 with the intention of promoting investment in the private rented sector, but a recent external evaluation found no strong evidence that it has done so, meaning that the relief is not cost-effective and is therefore not acting as intended.

His Majesty’s Revenue and Customs has seen a high number of incorrect and abusive claims for the relief. Those have been driven by tax repayment agents, who often convince private individuals to make relief claims for the purchase of two dwellings when individuals have in fact only purchased one. One such example is somebody buying a large house with a separate indoor entertainment area, including a swimming pool and toilet, and that being counted as two properties when it is transparently one.

The changes made by clause 7 will abolish multiple dwellings relief for property transactions that complete on or after 1 June 2024. However, for contracts that were exchanged on or before 6 March 2024, relief will continue to apply regardless of when the contracts complete. The change will not impact those purchasing a single property. It will only increase the stamp duty payable by individuals or businesses purchasing two or more properties in a single transaction or as part of the same deal. Individuals or businesses purchasing six or more dwellings will continue to qualify for the non-residential rates of SDLT.

Clause 8 makes changes to ensure that first-time buyers’ relief from stamp duty land tax can be accessed by those purchasing new residential leases through a nominee or bare trustee, including victims of domestic abuse. A nominee is a person who holds the legal title of a property, while the beneficial ownership—the person who ultimately owns or controls the assets—is held by another person. A bare trust is a trust under which property is held by a person as trustee for another person who is fully entitled to all of the capital and income of the trust.

The measure also changes the definition of first-time buyers to ensure that individuals who use such arrangements cannot claim relief more than once. First-time buyers’ relief from SDLT is available where an individual who has not previously owned a dwelling purchases a home they intend to use as their only or main residence, but that is not currently available to individuals purchasing a new residential lease through a nominee or bare trustee.

The changes made by clause 8 will benefit certain first-time buyers of residential leasehold properties purchasing through a nominee or bare trustee, reducing the up-front cost of buying a home by allowing them to claim the relief they are entitled to. The changes bring those purchasers in line with purchases of residential freeholds and pre-existing leases using similar arrangements.

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[The Chair]

With the leave of the Committee, I will put the Question on clauses 7 to 11.

[Nigel Huddleston]

If I may respond briefly, I will answer the perfectly reasonable questions raised by the hon. Member for Ealing North in relation to several points in multiple areas. Regarding the overall impact, and if I may reference the change of the capital gains tax rate from 28% to 24%, the OBR estimates that this costing will have a positive impact beyond the current forecasting period and generate a small long-term yield, too. Of course, beyond the forecasting period, it is difficult to estimate the exact amount.

On the points that the hon. Gentleman raised about MDR and other measures, it is interesting that although there are examples of abuse, it is also the case that only 32% of businesses buying property to let said that this relief had an important influence on their purchase decision at all and only 45% were aware of multiple dwellings relief before making a purchase decision. That feeds into the overall picture of MDR not fulfilling the original intent and purpose, which of course was to support investment in the private rented sector. Again, it is building the picture that the relief is no longer cost-effective. The Government are continuing to engage with stakeholders in the build-to-rent sector and other sectors to ensure that we understand their concerns and we will continue to listen to representations made to highlight any exception or unforeseen impacts that the abolition of MDR could have in the future.

I welcome the hon. Gentleman’s welcoming of many of the other measures. He asked whether they would be applied before the April deadline. They will not be applied retrospectively—for example, the updates on the registered social landlord exemption will not be applied retrospectively.

The hon. Gentleman mentioned the number of public bodies that have paid stamp duty at the 15% higher rate. The number of transactions—of those impacted previously —has been very small, and we therefore do not anticipate a huge impact.

Clauses 7 to 11 ordered to stand part of the Bill.

Clause 14

Additional relief for low-budget films with specified UK connection

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

[The Chair]

With this it will be convenient to discuss clause 15 stand part.

[Nigel Huddleston]

Clauses 14 and 15 make changes to better support the UK independent film industry. That is in recognition of the sector’s cultural importance and its role in growing and supporting UK talent. The Government have heard from several representatives of the British film industry, including the British Film Institute, about the specific challenges that the independent film industry faces. The Government also recognise the vital role that independent film plays in incubating UK talent.

The changes made by clauses 14 and 15 substantially increase the level of audio-visual expenditure credit available to smaller budget films from 34% to 53%. This increased rate for qualifying films is referred to as the UK independent film tax credit. The 53% tax credit will be applied on up to 80% of a film’s production costs, up to a cap of about £15 million. That translates into £31.80 back for every £100 spent, after accounting for corporation tax at 25%.

Films will also need to meet the criteria of a new British Film Institute test, with the expectation that films will have either a UK writer, a UK director or be certified as an official co-production. Clauses 14 to 15 set out the bulk of the measure, but further detail, including on the additional test, will be provided in a statutory instrument in due course.

Productions that start principal photography from 1 April 2024 will be eligible, and companies will be able to make claims from 1 April 2025 on expenditure incurred from 1 April 2024. The UK independent film tax credit is a transformational, generous, enhanced tax credit, which will boost the production of UK independent films and incubate UK film talent.

[James Murray]

As we have heard from the Minister, clause 14 introduces a higher rate of expenditure credit for independent films, defined as films below a maximum budget that have either a UK director or writer, or are an official international co-production. As the Government’s policy paper on this measure makes clear, the basic rate of credit under the audio-visual expenditure credit scheme is 34%. Independent films will now receive a rate of 53%, with the amount of credit capped to relevant global expenditure of £15 million. The Opposition strongly support the UK’s creative sector as one of the areas of the global economy in which Britain is world leading. As such, we will not oppose any measures that provide certainty and greater opportunities for growth in that critical sector.

Clause 15 provides the administrative framework for the previous clause and sets out that the higher rate will be available only on expenditure incurred from 1 April for films that commenced principal photography on or after that date. We understand that claims can in turn be made from 1 April 2025, so I would like to ask the Minister about the role of His Majesty’s Revenue and Customs, because we know that the new schemes will need to be properly explained through new guidance and may require new staff, as the Government’s policy paper makes clear. What is HMRC doing to ensure that the guidance remains timely and up to date for those wanting to make a claim? What will HMRC do to support those who want to apply for the credit so that they can understand how it operates? Similarly, what allocation of staff will be made to administer the measure?

[Nigel Huddleston]

I thank the Opposition for their support. I think there is agreement across the House on the vital role of the world-leading UK creative industries, and, in particular, our thriving film sector. In answer to the broad question put by the hon. Member for Ealing North, further information will provided by a statutory instrument that we will discuss in due course. His Majesty’s Revenue and Customs will have a role in that, and the precise resource allocation is an operational decision for it. As the Minister who oversees HMRC, I will pay close attention to the issue and I will ensure that it is properly resourced. This is a very important policy area and we want to ensure that it is successful. Again, I am afraid that I will ask the hon. Gentleman to be a little patient and wait for the details in the statutory instrument, but we are consulting key stakeholders on that.

Question put and agreed to.

Clause 14 accordingly ordered to stand part of the Bill.

Clause 15 ordered to stand part of the Bill.

Clause 16

Increase in theatre tax credit

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

[The Chair]

With this it will be convenient to discuss clauses 17 and 18 stand part.

[Nigel Huddleston]

We are powering through this— I have on my notes “tea break” by now, but it is not going to happen. That is no bad thing, and I appreciate the comments and input from hon. Members. I will repeat my thanks as well—a lot of work has gone into the measures that we are discussing today and many stakeholders have already contributed significant amounts, including through consultations.

One such area is what we are debating now: clauses 16 to 18 make changes to ensure that our world-leading theatres, orchestras and museums and galleries may continue to put on outstanding home-grown productions and attract inward investment. The orchestra, theatre, and museums and galleries exhibition tax reliefs have had rates of 45% for non-touring productions and 50% for touring productions and orchestral productions since October 2021, reflecting the unique challenges faced by those sectors during the covid-19 pandemic and the recovery period, which of course we are still in.

The rates were due to be reduced to 30% and 35% on 1 April 2025 and then return to their original levels of 20% and 25% on 1 April 2026. Clauses 16 and 17 change that so the tax reliefs will reduce to only 40% for non-touring productions and 45% for touring productions and orchestral productions on 1 April 2025, and will then remain at that level permanently. That was a key ask of the sector. Clause 18 removes the expiry date of the museums and galleries exhibition tax relief so that the relief similarly becomes permanent rather than ending on 1 April 2026.

The changes will benefit approximately 1,300 theatre companies, orchestra companies and museums and galleries that claim those tax reliefs on an annual basis. Our creative sector is vitally important to our national life and one of the fastest growing sectors in the UK economy. These clauses will bolster our theatres, orchestras and museums and galleries, ensuring that they remain among the best in the world. I commend the clauses to the Committee.

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[Drew Hendry]

I briefly want to endorse the comments about these sectors requiring support. It is good to see some support for the sectors here, but we would like to see more in the future.

[Nigel Huddleston]

I do not have much more to add, other than to point out the strength of our creative industries in all four nations of the United Kingdom, which I am glad has been recognised across the Committee today. It is an incredible strength, and I am therefore pleased to hear today the very obvious cross-party agreement on continuing support for this vital sector.

Question put and agreed to.

Clause 16 accordingly ordered to stand part of the Bill.

Clauses 17 and 18 ordered to stand part of the Bill.

Clause 20

Collective investment schemes: co-ownership schemes

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

[The Exchequer Secretary to the Treasury (Gareth Davies)]

It is a great pleasure, as always, to see you in the Chair, Mrs Latham. Clause 20 begins the process of introducing legislation for a new type of investment fund—the reserved investor fund, which I will refer to from now on as the RIF. At Budget 2020, the Government announced a review of the UK’s funds regime, covering tax and relevant areas of regulation. The review had an overarching objective to make the UK a more attractive location to set up, manage and administer funds, as well as ensuring that UK investors can access a wide enough range of investment vehicles to suit their needs. In the years since, the Government have made a number of successful reforms. In order to build on these successes, the Government announced at spring Budget 2024 that we would be proceeding with the RIF.

The RIF will fill a gap in the UK’s existing fund offering by creating an onshore alternative to existing non-UK fund vehicles that are commonly used to hold UK real estate. Clause 20 provides a definition of the RIF and provides a power for the Treasury to make detailed tax rules through secondary legislation, consistent with the approach taken when introducing tax rules for other investment funds. A later statutory instrument will set out detailed tax rules for the RIF. The regulations will set out supplementary qualifying conditions for a RIF, entry and exit provisions, and rules that deal with breaches of one or more qualifying conditions.

The UK has a world-leading asset management sector. The RIF will play an important role in supporting that leadership by making the UK a more competitive destination for our fund management industry. Indeed, stakeholders from the financial services industry have already shown considerable support for the RIF. I therefore commend the clause to the Committee.

--- Later in debate ---

[Gareth Davies]

I am grateful for the comments from Opposition Members. I think we all agree that we want to tackle these issues in the most serious way possible, with the most force. I am comforted by the comments from the Financial Action Task Force, which previously said that the UK has one of the strongest regimes when it comes to tackling economic crime. The levy specifically seeks to fund the tackling of anti-money laundering rather than fraud or sanctions, which I will come on to in a second.

It is appropriate to stress that the levy is a targeted measure on the anti-money laundering regulated sector, therefore the proceeds go towards tackling anti-money laundering. That is in the context of the economic crime plan 2, which covers up to 2026 and is backed by £200 million from the levy plus £200 million of Government investment. We are taking broader action on fraud in the technology sector specifically, not least through the online fraud charter, the Online Safety Act 2023 and the telecommunications fraud sector charter.

The hon. Member for Inverness, Nairn, Badenoch and Strathspey mentioned sanctions evasion. We are cracking down on kleptocracy and sanctions evasion through the economic crime plan 2. The Office of Financial Sanctions Implementation actively monitors sanctions evasion every single day.

On corruption, the Foreign, Commonwealth and Development Office leads our efforts to support companies to tackle corruption and strengthen governance across the world. The Government are actively working with partners across the world to strengthen international standards, not least through the UN convention against corruption. In the UK, we also have the National Crime Agency’s international corruption unit. There is significant action to tackle fraud and corruption as well as sanctions evasion, but of course we can always do more and we are vigilant about that.

On the reporting and transparency of the levy, there was a reasonable question from the hon. Member for Hampstead and Kilburn and from the sector. There will be a report on the levy this year and it will be reviewed in 2027. We will engage with stakeholders leading up to that review.

Question put and agreed to.

Clause 21 accordingly ordered to stand part of the Bill.

Clause 22

Transfers of assets abroad

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

[Nigel Huddleston]

Clause 22 makes changes to ensure that individuals cannot use a company as a device to bypass anti-avoidance legislation, known as the transfer of assets abroad provisions. Those provisions are designed to prevent individuals from transferring ownership of income-generating assets, such as real estate or stocks, to an overseas individual or entity while still benefiting from the income that the assets generate. The provisions prevent the moving of assets into offshore structures outside the scope of UK taxation being a simple tax avoidance route for UK residents.

The clause has been introduced following a Supreme Court decision. Prior to the decision, HMRC considered that shareholders and directors who controlled a company could transfer an asset and were therefore in scope of the transfer of assets abroad provisions. However, the Supreme Court decision means that a shareholder cannot be determined as a transferor, which therefore opens up a loophole that can be exploited by shareholders transferring assets abroad via a close company to avoid UK tax. A close company is a company with five or fewer participators, usually shareholders or directors, who have ownership or control over the business.

The changes made by the clause will introduce a provision that deems an individual as the transferor where they are participators in a close company that transfers an asset to a person abroad in order to avoid UK tax. The amendment also applies to transfers by non-resident companies that would be treated as a close company if they were UK resident. The changes will have an impact on transactions only where the purpose of the transfer is to avoid tax and will not have an impact on transfers that are genuine commercial transactions. The changes will apply to income that arises after 6 April 2024, regardless of when the transfer took place.

In situations where multiple shareholders are involved in the transfer of an asset, any resulting tax charge will be apportioned between those individuals in proportion to their respective shareholdings. Further details will be provided in HMRC guidance. The measure is expected to affect a small number of individuals a year and will raise about £15 million in tax revenue over the forecast period.

This change was anticipated by external groups and demonstrates that the Government are quick to crack down on tax avoidance loopholes. This clause prevents tax avoidance by ensuring that individuals cannot bypass anti-avoidance legislation by using a company to transfer assets abroad while still benefiting from the income they generate. I therefore commend the clause to the Committee.

[Tulip Siddiq]

We believe that individuals or companies generating wealth in the UK should pay their fair share, so we are in complete support of the aims of this clause. However, we have heard concerns raised by the Chartered Institute of Taxation about the effectiveness of the Government’s proposals and I would be interested to hear the Minister’s views on those concerns.

First, the Chartered Institute of Taxation has argued that the clause adds complexity to the tax system, because it uses income tax legislation to tackle perceived corporate tax avoidance. Clause 22 extends provision within the Income Tax Act 2007 to cover avoidance of any tax through transfer made by a closely held company. Could the Minister explain the thinking behind the Government’s decision to tackle corporate tax avoidance in this way, rather than through the corporate tax regime? Does he agree with the Chartered Institute of Taxation that it could add unnecessary complication to the tax system?

Secondly, the Chartered Institute of Taxation made the case that the Government’s position that any participator in a company is deemed to be involved in a company’s decision to move assets abroad is unfair. For example, a company may have several minority shareholders who have no participation in the running of the company. What is the Minister’s assessment of the case made by the Chartered Institute of Taxation that only major shareholders, directors and shadow directors should be assumed to be involved for the purposes of this legislation?

Thirdly, the Chartered Institute of Taxation has warned that these changes could damage the UK’s international competitiveness, because the test as set out in the legislation leaves too much discretion to HMRC, which compounds uncertainty for businesses. For example, a UK holding company that provides a loan to an offshore subsidiary that in turn generates profits could be caught by the changes, despite that being a routine transaction. The Chartered Institute of Taxation argues that that could lead to an increased number of inquiries and appeals to the tax tribunals and could seriously undermine the UK’s attractiveness for international headquarters.

What does the Minister make of those concerns? What steps will HMRC take to ensure that involvement and objection defences under the clause are not ambiguous or uncertain, and to ensure that those charges do not prove to be increased excessively for taxpayers?

My final point is that the changes introduced by clause 22 appear to be retrospective, as no date is specified whereafter transactions are affected; the clause says only that income arising after April 2024 is caught by the regime. Can the Minister confirm whether that is the case? Will commercial transactions that were carried out many years ago, but from which income arises after April 2024, still be caught?

[Nigel Huddleston]

I thank the hon. Member for Hampstead and Kilburn for her comments. We very much appreciate the input that we have received from stakeholders and interested parties, including the Chartered Institute of Taxation. Some of those points are about broader issues around the TOAA regime, rather than specific to this legislation, but we do hear what they have to say.

I will respond to the hon. Lady’s points about the changes that apply to companies when the TOAA regime is primarily about individuals. The transfer of assets abroad legislation is an anti-avoidance provision aimed at preventing individuals from avoiding a tax charge by transferring an asset to a person overseas while still being able to enjoy the income of that asset in some way. It would be easy for an individual to sidestep the legislation by transferring such an asset to a company that they controlled before the company then made the transfer abroad. The legislative changes are aimed at preventing that situation and ensuring that the TOAA rules are applied as intended.

On the point about the legislation being broad, let us not forget that it is being brought in in response to the Supreme Court judgment; we are trying to make sure that it acts as intended throughout. The intention of the legislation is to put the situation involving transfers by companies back to how HMRC considered it operated before the Supreme Court decision. The transfer of assets abroad legislation aims to stop that tax avoidance.

It is also important to remember that the legislation does not bring a tax charge when the transfer is for genuine commercial reasons or when tax avoidance was not the purpose of the transfer. The new legislation gives individuals the opportunity to exclude themselves from the tax charge if certain conditions are met. We respectfully disagree with the CIOT on some of those conditions. We have outlined some of those, and HMRC will produce further guidance in due course.

On the retroactive criticism, the clause has retroactive effect because if it did not, it would have allowed individuals to abuse the loophole between the date of the Fisher judgment and the enactment of the legislation. Again, we do not believe that there will be a significant increase in complexity. The purpose behind the legislation is primarily to ensure that the regime acts as intended.

I will not go into the weeds on HMRC’s determination process—further guidance will be given—but HMRC will review the facts of a case to judge whether someone is directly or indirectly involved in the decision making of a company. It will accept evidence that shows whether someone is involved or not. However, any arrangements that are put in place purely to be used as evidence that an individual is not involved in the decision making of a company will be disregarded and a charge will be levied if the other conditions are met. As I said, HMRC will issue guidance on how it will approach the matter in due course. Decisions will be made based on the facts of each individual case.

I hope that I have given the hon. Member for Hampstead and Kilburn some assurance. We appreciate the concerns that have raised by key stakeholders, and further information and guidance will be forthcoming.

Question put and agreed to.

Clause 22 accordingly ordered to stand part of the Bill.

Clause 23

Minor VAT amendments

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

[Nigel Huddleston]

Clause 23 makes some minor, technical changes to VAT legislation relating to the DIY house builders’ scheme and VAT credit in the penalty reform regime, and allows for reform of the VAT terminal markets order. I will speak briefly about each measure in turn.

The DIY house builders’ scheme allows individuals building their own home, or converting a non-residential building to their own home, to recover VAT incurred on the cost. That puts individual house builders in the same position as property developers, who are able to sell new build residential property at a zero rate and recover the VAT they incur in the process of constructing new build properties. The scheme was simplified and made digital in December last year, which has significantly reduced the time taken for claims to be paid. Under the new process, only essential details are required on the claim form, eliminating the need for claimants to submit certain evidential documents up front. Based on the information provided on the claim form, HMRC can then request evidential documents to verify the claim.

Clause 23(1) will give HMRC a clear power under the DIY house builders’ scheme to require further evidential documentation, such as invoices, from the person who submitted a claim under the scheme. That will assist HMRC in verifying claims.

Clause 23(3) is a minor update to the existing powers that allow for reform of the VAT terminal markets order. The order reduces VAT administration burdens on commodities traded on specified markets, so the power will allow for simplifications to support businesses trading those commodities. The Government previously announced their intention to reform the order to reflect current market practices and to keep pace with market changes, such as trades in new products, including carbon credits. This clause takes that commitment forward.

Finally, subsections (4) and (5) make changes to ensure that VAT interest rules operate as intended. For most major taxes, the Finance Act 2009 requires HMRC to pay interest on amounts due from HMRC to taxpayers, and to charge interest on late payments to HMRC. Historically, that regime did not apply to VAT, which had its own interest rules. Harmonising the rules on interest was an important step in delivering the Government’s ambition to build a trusted, modern tax administration system. Changes made by the Finance Act 2021 brought VAT interest in line with taxes such as income tax from 1 January last year. In implementing the new interest rules for VAT, HMRC has discovered some minor defects in the legislation, which without correction would force it to act in a way that conflicts with policy intent.

Clause 23 will therefore make two changes to the interest rules. The first will address the situation in which interest ought to be repaid to HMRC because, following an assessment or amendment that reduces the amount of VAT credit, the repayment interest due is also reduced. It was always intended that HMRC could recover all these amounts through a simple automated process that does not add to burdens for taxpayers and HMRC alike. The IT system can already operate, but the legislation, mistakenly, does not always allow that automated recovery. The change will ensure that HMRC can do so in all cases instead of needing a different, onerous process for a minority of cases that the original legislation did not cover.

The second change will make sure that VAT-registered businesses are always protected by a provision that creates a fairer basis for the calculation of interest where they owed money to HMRC over the same time that HMRC owed money to them. The original legislation failed to extend that safeguard to all scenarios in which that could happen with VAT, undermining the fairness of the interest regime. To ensure that all VAT-registered businesses are treated equally, the changes will be given backdated effect to 1 January 2023, when the interest rules were introduced for VAT.

Clause 23 makes some small changes to ensure that policy works as intended and to further Government commitments on reforming the VAT terminal markets order. I commend it to the Committee.

[Tulip Siddiq]

The Opposition support the changes that will assist with compliance checks by making online applications equivalent to paper applications. Has the Minister considered adding the online application as a service to the agent services accounts so that an agent can prepare and submit the claim on behalf of their client?

We also support the provisions for modifying the application of VAT for terminal markets, as that will allow for further reforms such as bringing trades in carbon credits within the scope of the Value Added Tax (Terminal Markets) Order. We feel that is a vital and necessary step in developing this important market.

We support the changes to legislation that governs the interaction between late payment interest and repayment interest for VAT. Has the Minister given any thought to reinstating HMRC’s ability not to charge interest on VAT errors where the supplier did not charge VAT, with no loss to the Exchequer because the customer could claim in full?

[Drew Hendry]

On clause 23’s minor VAT amendments, there is very little to disagree with. VAT should be paid where it is due, and HMRC should pay interest where it should pay interest. That is to be welcomed.

However, on Second Reading I pointed out the paucity of thought and imagination that had gone into providing real help for people across the nations of the UK, and the kinds of thing that the Government could have done but have not. The clause title, “Minor VAT amendments”, just highlights the problem with the entire Bill. The Government could have taken some action to deal with the issues for people in hospitality by cutting VAT and doing something meaningful for tourism, but no: they have chosen to make these minor adjustments. They could have used VAT as a mechanism for helping our high streets to create economic zones that could boost life back into vital high streets and centres. Instead, they have taken to tinkering with the VAT rules.

My question to the Minister is why there is such a lack of ambition in his Government. Is it that this is a fag-end Government in a fag-end Parliament that has run out of ideas, or is it just that they do not care?

[Nigel Huddleston]

The hon. Member for Inverness, Nairn, Badenoch and Strathspey has been charming until this point, and now he goes back to this. I know him very well; I am sure he does not mean it. First, he knows as well as anybody in this House that everybody who comes into Parliament cares: they care about their constituents and they care about the country. We are motivated to come here because we want to make the country a better place for our children and grandchildren.

I know that the hon. Gentleman occasionally gets rather vocal on some of these points, but I politely request that he be a little bit careful with some of his comments. I would never criticise the motivation, incentives or purposes of any colleague in this place. I may fundamentally disagree with some of their policies, but I will not disagree with their motivations. In saying things like “People don’t care” or “The Government don’t care,” I am afraid he is straightforwardly wrong.

[Drew Hendry]

I am very fond of the Minister, as he knows. We often have these back and forths, and I often have to rise to my feet to correct what he has said. I did not make any assertion about any individual; I was talking about his Government. I was very explicit about that. I just want to make that clear.

[Nigel Huddleston]

Yet again, I appreciate the hon. Gentleman’s trying to clarify, but I am a member of the Government and therefore I am afraid that I do take offence, direct or indirect. But that is a side point to the matters under discussion.

The hon. Gentleman is making fair and valid points about the support that has been given, but I repeat that this Government, like every Government around the world, have had incredibly difficult circumstances to deal with. I do not think that there is any doubt whatever that the support measures that we have put in place to support lives and livelihoods have been incredible and stack up pretty well when compared internationally. That includes cost of living support, as I have mentioned.

I know that the hon. Gentleman is a huge supporter of the tourism, hospitality and leisure industry. We have spoken about that many times, and I know that it is particularly important to Scotland, where it is a disproportionately larger share of the economy than in England, for example, although it is important and large across every single constituency in the UK—and I do mean every single constituency. But the hon. Gentleman is being a little bit rich, because he knows as well as I do that there are other measures beyond VAT to support the hospitality and leisure industry. Of course, in England we have extended the 75% business rates reduction to the retail, hospitality and leisure sector, but that has not been done in Scotland, nor has it been done to its full extent in Wales.

[Drew Hendry]

I am grateful to the Minister for allowing a bit of back and forth on this. It is generous of him to do so. He fails to mention that in Scotland, 100,000 businesses are lifted out of business rates altogether through the small business bonus scheme. The record in Scotland shows that we are supporting businesses, and those businesses are very prevalent in the tourism sector.

[Nigel Huddleston]

I acknowledge the efforts made by the Scottish Government to support various sectors, but as I say, on that particular item, the hon. Gentleman will know as well as I do that it is a key ask of the industry in Scotland for the Scottish Government to follow suit with England and elsewhere.

The hon. Member for Hampstead and Kilburn raised several points. Some were slightly out of the scope of the specific measures under discussion, including IT systems and other considerations, but I take on board what she says, as does HMRC, because there is a constant need to review and assess the scope of IT systems and so on. We do so on a regular basis; I spend a lot of time talking to HMRC about this, so I can assure the hon. Lady that the points that she raised are constantly under consideration. I will probably leave it at that.

Question put and agreed to.

Clause 23 accordingly ordered to stand part of the Bill.

Clause 24

Collective money purchase arrangements

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

[Nigel Huddleston]

Clause 24 makes further provision for collective money purchase arrangements. CMP arrangements are a new type of pension that have the benefit of pooling individuals’ pension pots to provide better incomes in retirement while limiting the liability of employers.

These changes will enable the Government to authorise the transfer of benefits to a member’s beneficiaries, such as their dependants, in the unlikely event that a member dies while a CMP arrangement is being wound up. That will ensure that such transfers do not incur an unauthorised payment charge of 55%, and it will deliver the Government’s commitment to provide the correct tax outcome for CMP arrangements.

The Pension Schemes Act 2021 introduced legislation to allow collective money purchase schemes to operate in the United Kingdom. This measure authorises the transfer of survivor benefits in collective money purchase pension schemes. This will ensure that Royal Mail Group, the first provider of a collective money purchase pension scheme, can launch its scheme as planned.

It is a complicated title, but with a simple purpose. As a result of these changes, an employee of Royal Mail will be able to sign on to a CMP, with all the benefits, without the risk of transferring survivor benefits being put through as unauthorised transactions. I therefore commend the clause to the Committee.

[Tulip Siddiq]

This clause is so uncontroversial that we give it our full support. For the first time, I agree with everything the Minister has said, and the Committee will be happy to know that I have no further questions for him.

Question put and agreed to.

Clause 24 accordingly ordered to stand part of the Bill.

Clause 25

Interpretation

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

[Nigel Huddleston]

I will be very brief, because the clause is fairly straightforward. It provides for the use of abbreviations for a variety of Acts. For example, it provides for the use of “CTA 2009” as an abbreviation for the Corporation Tax Act 2009. I commend the clause to the Committee.

Question put and agreed to.

Clause 25 accordingly ordered to stand part of the Bill.

Clause 26

Short title

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

[Nigel Huddleston]

The clause provides for the Bill to be known as the Finance (No. 2) Act 2024 upon Royal Assent. I commend it to the Committee.

Question put and agreed to.

Clause 26 accordingly ordered to stand part of the Bill.

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

[Nigel Huddleston]

We have moved forward very quickly today. I thank everybody for their participation: you, Mrs Latham, all the officials in the House, the Clerks, and all those who have been working on the Bill at HMRC, HMT and other Government Departments. I repeat my thanks to the external stakeholders for their comments and to all those who have been involved in consultations. In particular, I thank the Chartered Institute of Taxation, the Institute of Chartered Accountants in England and Wales, and the Low Incomes Tax Reform Group for their contributions to this Committee, including in written form, and all those who have participated today.

I look forward to the Bill progressing smoothly through its final stages. I thank everybody involved.

[James Murray]

I add my thanks to my colleagues in the Opposition: my fellow shadow Minister, my hon. Friend the Member for Hampstead and Kilburn; the Opposition Whip, my hon. Friend the Member for Gower; and, of course, the Back Benchers who have joined us for this lengthy Committee session. [Laughter.] I place on the record my thanks to all the House authorities and to third parties, particularly the Chartered Institute of Taxation, whose expertise is always greatly valued.

HMRC

Nigel Huddleston Excerpts

Monday 13th May 2024 Written Statements

[The Financial Secretary to the Treasury (Nigel Huddleston)]

His Majesty’s Revenue and Customs plays a crucial role in collecting revenue to fund our vital public services. The Department’s strategy is to become a ‘digital first’ tax administration. This involves helping customers move to online services, with the aim of making services easier for customers, and of allowing HMRC to operate more efficiently.



Last year HMRC received over 3 million calls on just three things that can easily be done: resetting an online password, getting a tax code, and getting a national insurance number. Shifting customer contact such as this to online interactions is helping to, and will continue to help, reduce demand on phone lines and allow HMRC to prioritise calls for those who really need to speak to an adviser. This is a fine example of a tangible way to improve public sector productivity.



This digital first strategy is the correct long-term vision for tax administration. In support of this, the Chancellor invested over £136 million in the 2021 spending review to enable HMRC to enhance its digital services. HMRC received a £900 million cash increase over this Parliament, from £4.3 billion in 2019-20 to £5.2 billion in 2024-25.



However, the Government are clear that while HMRC continues to make this digital transition, customers deserve a reliable and responsive service on traditional contact methods, such as the phone lines. Therefore today the Government are providing HMRC with £51 million in new funding to bring HMRC’s phoneline service back up to the published target of 85% of calls to HMRC advisers being answered.



Today’s additional funding enables HMRC to meet the performance standards on its phone lines that its customers expect, while continuing the transition to a digital first model of tax administration. The Government are fully committed to providing HMRC with the resources it needs to meet the needs of all its customers, and will continue to do so.

[HCWS456]

Finance (No. 2) Bill

Nigel Huddleston Excerpts

Committee of the whole House
Wednesday 8th May 2024 Commons Chamber

[The Financial Secretary to the Treasury (Nigel Huddleston)]

It is an honour to open the debate. I will start by setting out how, because of the progress the Government have made, we have been able to cut taxes as part of our plan to reward work and grow the economy.

The Government cut national insurance at both the autumn statement and the spring Budget and have made above-inflation increases to thresholds since 2010, with the basic rate threshold rising from £6,475 to £12,570 today. Taken together, those measures mean that an average worker on £35,400 in 2024-25 will save £1,500 more in personal taxes than they otherwise would have done. Due to the significant real-terms increases to the personal allowance, it is estimated that 1.8 million people will be taken out of income tax altogether by 2024-25, compared with the threshold rising in line with inflation from 2010-11. All workers can now earn £1,000 a month before paying any tax, due to the significant increases to the national insurance starting threshold, which we changed in July 2022.

Let me turn to the first four clauses of the Bill. Income tax is the largest source of Government revenue and helps to fund the UK’s schools, hospitals and defence, and other essential services we all rely on. In 2024-25, it is expected to raise more than £302 billion. Each year, the Government must legislate to charge and set rates of income tax, which is why we are all here today. Clauses 1 to 3 impose an income tax charge and set the rates of it for 2024-25. The rates are not changed by the Bill; rather, we are confirming that they will remain the same.

Clause 1 imposes a charge on individuals to pay income tax for the year 2024-25. Clause 2 sets the main income tax rates—namely the basic rate of 20%, the higher rate of 40% and the additional rate of 45%—for non-savings and non-dividend income of taxpayers in England and Northern Ireland. Those rates are set separately from those in clause 3, as the income tax rates for non-savings and non-dividend income, such as earnings from employment, are devolved to the Scottish and Welsh Governments, and are set by their respective Parliaments. The decision to separate savings and dividends from other forms of income was made as part of the devolution settlement. It ensures that the UK system works effectively and coherently, recognising that dividend and savings income is generally more mobile and generated across the UK, and has some interactions with corporation tax, which is not devolved.

Clause 3 sets the default income tax rates at the same levels as the main rates—namely 20%, 40% and 45%—across the entire UK. These rates apply to the non-savings and non-dividend income of taxpayers who are not subject to the main rates of income tax or to Welsh or Scottish rates of income tax, such as non-UK resident individuals. The clause also sets the savings rates of income tax for all UK taxpayers, again at 20%, 40% and 45%.

As I mentioned, income tax is a vital revenue stream for our public services, without which we could not fund our schools, hospitals, defence and more. It is important that we keep it at its current level.

[Jonathan Edwards (Carmarthen East and Dinefwr) (Ind)]

I receive emails from constituents asking me why the Government are not unfreezing the personal tax thresholds.

[Nigel Huddleston]

We all know that, because of the level of intervention that we had to take, out of necessity, during the pandemic and in response to the cost of living challenges, Government intervention was far greater than any of us anticipated—to the tune of £400 billion in the pandemic and £100 billion for the cost of living challenges. That money has to be paid back, and I think most of our constituents know that. We have seen the same pattern right around the world, where tax levels have had to be higher out of necessity. That means that thresholds have not been able to move in the way that we would normally like. However, now that economic circumstances are changing, we have turned a corner and we are able to reduce taxes, such as for the 27 million people who will receive on average an extra £900 through the national insurance cuts.

[Jonathan Edwards]

I am grateful to the Minister for giving way a second time. He started by talking about some of the fiscal measures that the Government have taken to reduce tax, but by not unfreezing the personal allowances, are the Government not taking money from one pocket and putting it back in the other?

[Nigel Huddleston]

No. I advise the hon. Member and others to look at their wage slip from a few months ago—say, in December last year. They will see a direct impact because of the national insurance changes that we made in January and again in April. People will see that they are paying less national insurance than in the past. That is transparently and clearly a tax cut. We are able to reduce taxation because the direction of travel is changing.

Taxes have increased across the whole of the western world. Our tax level is projected to increase to about 37%, compared with around 39% in Germany, around 42% in Italy and around 46% in France. This is a phenomenon whereby Governments have had to intervene and spend more money and, as an obvious consequence, they have had to increase taxation to a greater level than anticipated or desired.

However, now that we are back to growth and on a firmer footing, the economy has turned a corner, and we are able to reward the hard work of the British public by reducing taxation. We are doing that in the form of income tax cuts. As the Chancellor and the Prime Minister have said on multiple occasions, we wish to continue in that direction of travel. As I said, people should look at their pay packets. I recognise that it is one thing to talk in the Chamber about implementing laws, but people will now see that in their pay packets in a meaningful way. An average worker on £35,400 will be £900 better off as a result of the national insurance cuts. That is a meaningful amount for constituents right across the country, including those in the hon. Gentleman’s constituency.

Another principle of taxation is fairness. Income tax is fair: those with the most contribute the most. The income tax system is highly progressive, with different rates of tax sitting above an internationally high personal allowance. The top 5% of income tax payers are projected to pay nearly half of all income tax in 2023-24. The top 1% are projected to pay more than 28% of income tax. Thanks to the personal allowance, almost a quarter of individuals will not pay income tax at all in 2024-25. It is important to note that the percentage paid by the top earners is greater than it was under the last Labour Government. In other words, the tax system is more progressive under the Conservatives.

Income tax is also internationally competitive. According to the OECD, the UK has some of the most generous starting allowances for income tax and social security contributions in the OECD, and the most generous in the G7—more generous than in France, Germany, Italy, Canada, Japan and the US. According to the OECD, in the United Kingdom the average single worker faced a net average tax rate of 23.7% in 2023, compared with the OECD average of 24.9%. In other words, in the United Kingdom, the take-home pay of an average single worker after tax and benefits was 76.3% of their gross wage, compared with the OECD average of 75.1%.

I have talked a lot of statistics, but what they mean is more money in people’s pockets to spend as they wish—a fundamental Conservative philosophy. We have also been able to return some money to taxpayers now that inflation is falling and the economy is improving, by reducing national insurance contributions. We have put money back into people’s pockets. We have prioritised tax cuts for those in work, and we believe that that is the best way to stimulate growth in the economy overall.

Clause 4 continues the theme of maintaining the income tax arrangements by keeping the starting rate limit for savings at its current level of £5,000 for the 2024-25 tax year. Many colleagues may be familiar with this but some may not, so briefly by way of explanation, the starting rate for savings is an extra £5,000 tax-free allowance for interest from savings, specifically for individuals who have earned incomes of less than £17,570. That supports in particular people with low earned income, such as pensioners who are reliant on savings interest.

The Government made significant changes to the starting rate for savings in 2015, when they raised the threshold to get the starting rate for savings from £2,880 to £5,000, and lowered the starting rate for savings from 10% to 0%. As many Members will be aware, the starting rate limit for savings must be legislated for each year to confirm the band of savings income to which it applies. Again, that is what we are doing today. This clause will ensure that the limit is held at this level. It ensures simplicity and fairness in the tax system, while maintaining a generous tax relief and supporting the public finances by taking fiscally responsible decisions. As well as benefiting from the starting rate for savings—whereby, as I have said, individuals with earned income of less than £17,507 can earn up to £5,000 in savings income free of tax—savers are supported by the personal savings allowance, which provides up to £1,000 of tax-free savings income for basic rate taxpayers. They can also continue to benefit from the annual ISA allowance of £20,000. Moreover, in the spring Budget 2024 the Government introduced the British ISA, which will provide a new allowance of £5,000 in addition to the existing ISA allowance, along with a new tax-free savings opportunity for people to invest in the UK. Taken together, those generous allowances mean that about 85% of savers pay no tax on their savings income. The Government are committed to continuing to help people on all incomes and at all stages of life to save. The significant increase in the starting limit in 2015 means that the taxation arrangements for savings income remain generous, and the Government therefore believe that it is appropriate to retain the starting rate for savings at its existing value at this time.

The Government are managing the public finances in a balanced and responsible way. Our approach to delivering fiscal sustainability is underpinned by fairness, with those on the highest incomes paying a larger share. By maintaining the current rates of income tax and the starting rate limit for savings thresholds, we will ensure that the highest earners contribute more to the revenue, helping the Government to take a balanced approach to revenue raising while still supporting vital public services.

--- Later in debate ---

[Ben Lake]

I am not one to make up policy on the hoof, but the review could look at that, and if the evidence shows that tax decisions could be made to promote growth and to level up, which I think the right hon. Gentleman is in favour of, we should follow that evidence and do so.

Our continued reliance on the Barnett formula to allocate funds between the UK’s nations is problematic not only due to its flaws, but because of its inconsistent application in recent years, which has meant that Wales has lost out on billions of pounds of much-needed public investment. Members will be familiar with the concerns raised by communities across Wales regarding the way in which HS2 spending has been classified. Although not a single inch of track or rail was to be laid in Wales itself, it was categorised as an England and Wales project under the statement of funding policy, thus depriving Wales of significant consequential funding that the Barnett formula would otherwise have provided. The latest estimates suggest that Wales has lost £4 billion in consequential funding—money that could have transformed the country’s public transport infrastructure.

I understand that there will be reluctance within Government to move away from the Barnett formula, not least because devising a needs-based formula is far from simple. However, if we are to retain the Barnett formula, the funding floor should at the very least be updated to use census data from 2021 rather than the 2001 data it currently uses. I am sure the Minister will agree that much has changed since 2001—when I was actually still in primary school. The needs and population of Wales have changed considerably, so it is only reasonable that the funding floor element of the Barnett formula is at least brought up to date.

Such a consideration could be included in the review that I propose, as well as a review of the implications of UK tax policy in Wales. Again, all of this analysis and information could help inform debate for future tax policy decisions and ultimately ensure that we have a tax system that is fit for purpose and meets the needs of people in Wales.

[Nigel Huddleston]

I thank the Members who have spoken for their contributions to the debate. As we have discussed, the Government have shown their commitment to keeping taxes low in order to support people to keep more of what they earn. That is why we have nearly doubled the income tax personal allowance since 2010, ensuring that some of the lowest earners do not pay income tax, while also benefiting higher-rate taxpayers.

The Government have shown that we are also committed to ensuring that older people can live with the dignity and respect they deserve, and the state pension is the foundation of state support for them. Thanks to the Government honouring our commitment to the triple lock, the basic and new state pensions increased by 8.5% this April—one of the largest ever cash increases in the state pension. Those on the new full state pension will therefore be £900 per year better off. That £900 figure is significant, because of course that is the average amount by which 27 million employees will benefit from the national insurance cut: £900 additional for many pensioners and £900 additional for 27 million workers. I think most people will agree that is fair.

--- Later in debate ---

[Drew Hendry]

Just to be clear, I was saying that the Tories have been hollowed out by the extremists on the right wing within their Government, not that we have an extremist right-wing Government—that is, of course, for people out there to make their mind up about.

[Nigel Huddleston]

I think the hon. Gentleman just dug even deeper there. As I say, I like him but I do not always like what he says. On income tax, I do not think that everybody in Scotland would share his enthusiasm for the Scottish tax system, given that the thresholds and rates are higher, to the tune of up to 5%.

Turning to my opposite number, the hon. Member for Ealing North (James Murray), I will try to avoid the déjà vu all over again—we seem to have the same debate again and again. Yet again we have heard a Labour party spokesman constantly talking Britain down, as if we are in some declinist environment of failure upon failure. That is not a characterisation of the UK, its economy or our constituents that I recognise. I wish he had greater optimism and enthusiasm, and could support the UK economy and the workers to a greater degree. After all, the UK is doing incredibly well.

The hon. Member for Ealing North was right to recognise that all of our constituents are facing extraordinarily difficult times, but he is wrong to believe that is something unique to the UK economy; it is as a result of the pandemic and the cost of living challenges, which have had an impact right the way around the world. Given the extraordinary circumstances that the whole developed world has found itself in, what is extraordinary is how the UK has performed so well. I wish he would recognise the great optimism and the potential future of the UK economy.

For example, the International Monetary Fund has forecast that this country will grow faster than Germany, France, Italy and Japan over the next few years to 2028-29. The hon. Gentleman should also recognise that since the Conservatives came to power in 2010, the UK economy has generated an average of 800 jobs per day. Since Brexit, the UK has gone up the global export league tables, from seventh to fourth. We are the second largest exporter of services in the world and have reached record levels of service exports recently. We have overtaken France to become the eighth largest manufacturer in the world. We have the third largest tech economy, after the United States and China. We have the largest film, TV and creative industries sector in Europe, and one of the world’s leading biotech and life sciences industries—again, it is the largest in Europe.

We are leading the world in renewables, with the first, second, third and fourth biggest offshore wind farms in the world. I could go on, but I will not detain the Committee too much longer, Dame Eleanor. If the hon. Gentleman could recognise just one or a few of those success stories, he might have greater confidence in the UK economy and be able to talk it up. Anybody aspiring to be in government must champion the UK around the world, instead of talking us down. Otherwise, the impact they would have on investment in the UK economy is appalling.

Let me deal with the scaremongering in what the hon. Member for Ealing North and others have been declaring in the past few days about national insurance and the impact on pensions—I found that behaviour deplorable. It could be complete scaremongering because, as we have said, he is not aware of how NI impacts health and pensions. The amount of money spent on pensions is about £130 billion. Welfare spending is £260 billion. NHS spending is £160 billion. That is far higher than the total amount paid for by NI. So to try to suggest some direct correlation and say that reducing NI puts pensions at risk all of a sudden is either economically utterly incompetent or it is sheer scaremongering—neither are particularly attractive attributes in somebody aspiring to be in government. I therefore hope that he will have the decency to take that back. As I said, this scaremongering of pensioners, from the whole Opposition Front Bench, is despicable, although we can perhaps expect it from the Opposition.

Moreover, it is utterly hypocritical, because when we had the NI debate not so long ago, the Opposition spokespeople, the Opposition Front Benchers and the Leader of the Opposition said that they supported our NI cuts, but when it came to a vote they did not. That should make the British people ask: why would the Opposition say one thing and do another. First, I should say that is not a surprise to me, but could it also be that at some future point they might hope to be in a situation where they could reverse that decision and say, “We did not actually vote for it, after all”? Again, they should be straight with the British public.

I thank hon. Members for their contributions—some more than others. The debates will continue, but I hope that I have explained why we do not accept the new clauses. I ask that the clauses we have put forward should stand part of the Bill.

Question put and agreed to.

Clause 1 accordingly ordered to stand part of the Bill.

Clauses 2 to 4 ordered to stand part of the Bill.

New Clause 1

Review of impact of section 2

“(1) The Chancellor of the Exchequer must, within three months of this Act being passed, publish a review of the expected impact of section 2 of this Act.

(2) The review must include analysis setting out the number of individual taxpayers facing a marginal tax rate in the tax year 2024-25 of—

(a) the basic rate of 20%, and

(b) the higher rate of 40%.

(3) For comparative purposes, the review must take account of—

(a) equivalent actual figures to those in subsection (2)(a) and (b) for the tax years 2021-22, 2022-23 and 2023-24, and

(b) equivalent projected figures to those in subsection (2)(a) and (b) for the tax years 2025-26, 2026-27 and 2027-28.”—(James Murray.)

This new clause requires a review of how many people will be liable to pay income tax at 20% and 40%, and would compare figures for the current tax year with those for the three preceding and three subsequent tax years.

Brought up, and read the First time.

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

Oral Answers to Questions

Nigel Huddleston Excerpts

Tuesday 7th May 2024 Commons Chamber

[Paul Blomfield (Sheffield Central) (Lab)]

17. What recent assessment he has made of the potential impact of his tax policies on living standards.

[The Financial Secretary to the Treasury (Nigel Huddleston)]

Thanks to a combination of national insurance cuts and above-inflation increases to thresholds since 2010, the average worker on £35,400 will pay more than £1,500 less in personal taxes this year. In addition, maintaining fuel duty rates at their current levels represents a further £13 billion benefit to households over the three years since the introduction of the freeze.

[Kerry McCarthy]

The Minister will know that people are still really struggling with the cost of living crisis. One way that the Government could help is by seeking a bespoke veterinary agreement with the EU. That would not only cut costs for businesses but stop food prices rising even more. A future Labour Government would do that, so why will the Government not commit to it?

[Nigel Huddleston]

The hon. Lady’s first comment was correct: everyone in this House recognises the extreme cost of living challenges over the past few years, and that is precisely why the Government have adopted the strategy of a laser focus on inflation, combined with tax cuts and, recently, national insurance cuts. We have a very constructive and positive relationship with the EU, and are always engaging with it on a variety of matters.

[Paul Blomfield]

In the run-up to last week’s elections, the Prime Minister never stopped talking about national insurance cuts, and the Minister talked about them again today, but the Government have been giving with one hand and taking away with the other. Does the Minister recognise that according to the Resolution Foundation, the combined impact of all the Government’s tax changes leaves workers who earn less than £26,000 a year worse off? Will he apologise to workers in South Yorkshire, whose average earnings are close to that level, for misrepresenting the position?

[Nigel Huddleston]

Of course we recognise the challenges for those on the lowest incomes, which is precisely why we have adopted a whole bunch of other measures, including on housing allowance. If the hon. Gentleman is so opposed to the national insurance cuts that we introduced, why did the Leader of the Opposition support them?

[Mr Speaker]

Congratulations, Mr Chishti, on your engagement at the weekend. You are not crossing the Floor, I understand.

[Rehman Chishti (Gillingham and Rainham) (Con)]

Most definitely not!

It has just been said that there is a real cost of living challenge, and that is absolutely correct. A key part of that relates to the war in Ukraine, which poses real challenges for energy supplies to the United Kingdom. As a former Minister who applied sanctions to Russia and looked at the oil price cap, I know that we need to ensure that what happens in Ukraine is offset by actions that hold Russia to account and address the cost of living. The US has seized Russian assets to pay for the reconstruction of Ukraine; the UK should do the same. That would help ease the burden on the UK economy and the taxpayer.

[Nigel Huddleston]

It is always a pleasure to see my hon. Friend in his place. He raises a variety of really important issues that show precisely why we work across Government—there are multiple Departments involved—on matters relating to sanctions. The invasion of Ukraine has had an incredible impact around the world, not just in the UK. Everybody in this House should welcome the fact that, because of action taken by this Government and the Bank of England, and other measures, inflation is now falling and will soon hit target.

[Mr Speaker]

I call the Opposition spokesman.

[James Murray (Ealing North) (Lab/Co-op)]

The Conservatives’ decisions in this Parliament mean that the average family will face a tax bill that is £870 a year higher, and pensioner taxpayers will pay £960 a year more. The director of the Institute for Fiscal Studies said:

“This remains a Parliament of record tax rises.”

Higher taxes, squeezed living standards and weaker public services—that is the Conservatives’ legacy. Does the Minister understand why the country has lost confidence in them?

[Nigel Huddleston]

Many people in this country remember the abysmal economic performance of the last Labour Government. The tax-free allowance was £6,475; it is now £12,570. More than 1.5 million people have been taken out of paying income tax altogether. The Government have a focus: now that the economy is turning, we want to put more money into people’s pockets. That is exactly what we are doing with the national insurance cuts and other measures, and I am surprised that the hon. Gentleman does not welcome that.

[John Penrose (Weston-super-Mare) (Con)]

5. If he will use outcome evaluations to assess the effectiveness of the Public Sector Productivity Programme.

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[Andrew Rosindell (Romford) (Con)]

14. Whether he plans to reintroduce VAT-free shopping for international visitors.

[The Financial Secretary to the Treasury (Nigel Huddleston)]

As stated in the spring Budget, the Government are considering the findings of the review by the Office for Budget Responsibility of VAT-free shopping, alongside industry representations and broader data. We continue to welcome further submissions and representations in response to those findings.

[Andrew Rosindell]

Data from Heathrow, the United Kingdom’s largest and busiest airport, shows that despite a near-full recovery in passenger volumes post lockdown, retail spend on affected goods is 32% below pre-pandemic levels. That figure is shocking. Heathrow airport joins hundreds of businesses in calling on the Government to reintroduce VAT-free shopping for tourists, or similar incentives. Will the Minister acknowledge the figures, listen to the industry and reinstate that popular policy, as British businesses are demanding?

[Nigel Huddleston]

My hon. Friend will be pleased to know that I will not only listen to the industry, but I met Heathrow just last week to hear its representations. The challenge is the way that modelling, and forecast and behavioural changes can be confidently assessed. Government estimates suggest that a worldwide scheme could cost as much as £2.5 billion. The challenge is the so-called deadweight cost that could happen by subsidising spending that otherwise would exist anyway, versus the incremental benefit that we could get from new visitors coming to the UK. Of course that is a behavioural change based on a tax change. It is based on a variety of assumptions, and therefore the modelling and assumptions underlying it vary, but I am listening to all representations.

[Mrs Heather Wheeler (South Derbyshire) (Con)]

16. What assessment he has made of the impact of raising the high income child benefit charge threshold on household incomes.

[The Financial Secretary to the Treasury (Nigel Huddleston)]

The high income child benefit charge threshold was raised to £60,000 on 6 April 2024. The point at which child benefit is fully withdrawn was also increased to £80,000, and the Government estimate that that will take 170,000 families out of paying the charge in 2024-25. The Government also plan to administer HICBC on a household rather than an individual basis by April 2026.

[Mrs Wheeler]

I have been contacted by many South Derbyshire parents who are caught in this unfair situation. Can the Minister be even more precise about the savings that this will now mean for my affected constituents?

[Nigel Huddleston]

I thank my hon. Friend for her comments and continual interest in this area. The changes to the high income child benefit charge mean that almost half a million hard-working families will gain an average of £1,260 towards the cost of raising their children in 2024-25. She will recognise that that is a meaningful difference for her constituents, and for those across the country.

[Debbie Abrahams (Oldham East and Saddleworth) (Lab)]

T1.   If he will make a statement on his departmental responsibilities.

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[Richard Burgon (Leeds East) (Lab)]

T2. We have all seen it: the richest Prime Minister in history has spent the weekend telling the public that his plan is working. Well, it is not working for people in Leeds East, whose taxes are going through the roof while our public services are on their knees. Would a better plan not be to go after the tax dodgers, rather than making ordinary people pay the price for this Government’s abject failures?

[The Financial Secretary to the Treasury (Nigel Huddleston)]

I have to say that I find this hypocrisy astounding. First, if the Opposition objected to the national insurance cuts, why did the Leader of the Opposition say that he supported them? If the Opposition are so keen on abolishing tax dodging, why did they not support our Finance Bill, which had measures in place to do just that? They did not support it; they abstained on it.

[Sir Jacob Rees-Mogg (North East Somerset) (Con)]

The Bank of England has said that quantitative tightening is not an official part of its monetary policy targeting, yet it is at risk of costing, fiscally, £179 billion in losses underwritten by the Treasury. That is having a major effect on the fiscal situation of the country. Will His Majesty’s Government encourage the Bank of England to hold these bonds to maturity, taking the carry cost rather than taking the hit from selling them in the market and crystallising an enormous loss?

--- Later in debate ---

[David Mundell (Dumfriesshire, Clydesdale and Tweeddale) (Con)]

May I encourage my right hon. Friend the Chancellor to revisit his decision to change the tax arrangements of furnished holiday lets in rural constituencies such as my own? Those businesses make an important contribution to the local economy, provide jobs and enhance the tourism offering. Indeed, they stop depopulation rather than adding to it. His decision is creating much concern among those who operate such businesses.

[Nigel Huddleston]

We recognise the important role that FHLs play in the tourism ecosystem right across the country. The problem was that there was not a level playing field with long-term lets. We are making sure that there will continue to be tax incentives and benefits from such letting, but they need to be on par with short-term and long-term lets.

Furnished Holiday Lettings: Taxation

Nigel Huddleston Excerpts

Wednesday 1st May 2024 Westminster Hall

[The Financial Secretary to the Treasury (Nigel Huddleston)]

It is a pleasure to serve under your chairmanship, Dame Siobhain. I thank my hon. Friend the Member for Waveney (Peter Aldous) for raising this issue today. It is a topic that I have discussed previously with him and with many hon. Members who have participated in the debate, and I am happy to continue to discuss it. I should say up front that there are no plans for a consultation, but that does not mean that hon. Members cannot engage with me.

At the moment, there is broad recognition that the current system is contributing to some distortions. My hon. Friend mentioned having a bit of déjà vu. In my former capacity as Tourism Minister, I travelled around the country and stood in this Chamber discussing the issue. I had colleague after colleague and industry after industry making claims for and demanding the exact policy that we are introducing, so hon. Members need to recognise that there is another side to the argument.

Although my hon. Friend outlined a different pattern in his part of the country, there are parts of the country where the current regime, with beneficial rates for FHL properties, creates an incentive for a disproportionately large number of properties to be FHL—short-term rentals, rather than long-term rentals—which is causing problems. I have heard hoteliers and owners of B&Bs say that the current system is not fair and reasonable. I have heard owners of pubs, bars and restaurants complain that the large number of short-term lets and FHL properties is undermining their value proposition.

I gently say to hon. Members that we all have colleagues from different parts of the country and there is another side to the argument, although I understand the vehemence and strength of feeling in the Chamber today. I know the pattern is mixed across the country, but the problem is that we cannot do tax treatment, such as income tax relief, ward by ward or constituency by constituency. As hon. Members know, we have a whole range of other initiatives to encourage the supply of housing more broadly and limit the impact, including through local taxation and restrictions on housing.

We are proposing not to abolish FHLs, which play a vital role in our tourism ecosystem across the country, but to change their tax treatment to put them on an equal footing and create a level playing field with long-term lets. The problem is that if I were an investor thinking of buying a property in a certain area, it would make pure economic sense for me to get a short-term let rather than a long-term let. Therefore, in certain communities across the country, when a new property becomes available, there is an incentive for an investor to straightforwardly go for a short-term let rather than a long-term let because there is beneficial tax treatment. We are not eliminating the tax incentives but levelling the playing field so that the perverse incentive no longer exists.

[Anne Marie Morris]

If the Minister is unwilling to undertake a consultation, is he willing to look at a carve-out—an exemption—for properties that cannot be used in the private rented sector because of covenants on them? That was discussed by the Office of Tax Simplification. Will he look at that seriously?

[Nigel Huddleston]

I thank my hon. Friend for that point, which she has raised with me previously. I should put on the record that many hon. Members in the Chamber have raised concerns about the implementation of this proposal with me. The challenge is that one of the goals is simplification, and when we start moving into the area of carve-outs and exemptions, it opens up the system to challenges and potential abuse. I hear what my hon. Friend has to say. She will always hear from Ministers that we keep tax policy under review, but as soon as we start moving to an exemption here and an exemption there, it causes great difficulties. I also thank PASC for its constructive engagement with me on this issue and for giving me information.

I have had lots of correspondence and have engaged with colleagues, and I want to make this very clear. There is a belief that when we said we were abolishing the FHL tax regime, that meant we were abolishing FHLs. No, of course we are not. As I said, they play a vital role in the visitor economy, but we want to change the tax policy. The intention is for the tax reform to apply to all properties.

There will continue to be benefits. After the abolition of the FHL tax regime, a higher rate paying landlord with mortgage interest costs of £12,000 per year would still get up to £2,400 taken off their income tax bill through the relief. If they spend a further £8,000—for example, on insurance, letting agent fees and replacing domestic items such as sofas, fridges, washing machines—they could save a further £3,200 in income tax by using the reliefs that are available for all landlords. It is about levelling the playing field. There will still be tax incentives, but we do not want that distortion. When somebody buys a new property or an existing property, there is a false incentive that is causing some problems, because human behaviour that naturally seeks a better return on investment leads them towards short-term lets, rather than long-term lets. That is what we are trying to correct.

[Mr Carmichael]

On a point of order, Dame Siobhain. When I intervened, I should have pointed out that I have a declarable interest registered. I apologise to the Chamber for not doing so at the time and I hope the position is now clarified.

Tax Administration and Maintenance: Spring 2024

Nigel Huddleston Excerpts

Thursday 18th April 2024 Written Statements

[The Financial Secretary to the Treasury (Nigel Huddleston)]

At spring Budget, the Government cut taxes for working people and announced a range of reforms to support the ambition for a tax system that is simple, fair, and supports growth.

The Government also committed at spring Budget to launch a consultation on the impacts of recent High Court rulings on the private-hire vehicle sector and provide an update on the recent consultation on tackling non-compliance in the umbrella company market.

Today, the Government deliver on these commitments, supporting businesses and consumers, protecting workers and ensuring fair competition.

The Government are also announcing two further technical tax policy proposals that make the tax system fairer and tackle non-compliance.

The announcements today are:

Consultation on the VAT treatment of private-hire vehicles: The Government are publishing a consultation on the potential tax impacts of the recent High Court rulings on the private-hire vehicle sector. This consultation also invites views on potential Government interventions that could help to mitigate any undue adverse effects on the PHV sector and its passengers.

Tackling non-compliance in the umbrella companies market: The Government will publish a response to their consultation on reducing tax non-compliance in the umbrella company market in due course. To support workers and businesses that use umbrella companies, His Majesty’s Revenue and Customs will publish new guidance later this year which includes an online pay-checking tool. The Government are minded to introduce a statutory due diligence regime for businesses that use umbrella companies and will continue to engage with the recruitment industry and other key stakeholders on the detail of this.

VAT treatment of charitable donations: In order to encourage charitable giving, the Government will consult on introducing a targeted VAT relief for low-value goods that businesses donate to charities for them to give away free of charge to people in need. The consultation will be launched later this year.

Mandating postcode provision for freeports and investment zones NICs reliefs: The Government are announcing their intention to bring forward a legislative change to mandate employers operating in a freeport or investment zone special tax site to provide their employee’s workplace postcode to HMRC if they are claiming the relevant secondary class 1 NICs relief through their payroll, in due course. To support this, it will also publish a four-week technical consultation on draft regulations.

The publications and announcements can be found at https://www.gov.uk/government/publications/summary-of-tax-administration-and-maintenance-spring-2024.

[HCWS414]

Finance (No. 2) Bill

Nigel Huddleston Excerpts

2nd reading
Wednesday 17th April 2024 Commons Chamber

[The Financial Secretary to the Treasury (Nigel Huddleston)]

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

Last month, my right hon. Friend the Chancellor of the Exchequer set out a Budget to deliver on the priorities of the Prime Minister and his Government, in the context of an improving economic picture. Inflation has more than halved, down from its peak of 11.1% to 3.2%. Real wages have increased for the ninth month in a row and are now growing at an average annual real rate of 1.9%. The Finance (No. 2) Bill builds on these improvements by seeking to reward work, boosting the housing market, improving the tax system and strengthening the economy. This follows on from our national insurance cuts that, when combined with the autumn reductions, mean 27 million employees will get an average tax cut of £900 a year and 2 million self-employed people will get a tax cut averaging £700 a year, all made possible because we have a plan for growth and for better and more efficient public services. The Bill covers 24 different measures in total and I will outline its most substantive powers.

[Sir Desmond Swayne (New Forest West) (Con)]

Will the Minister consider a further measure to right a historic injustice? In Committee, will he entertain an amendment to allow those caught up in the loan charge access to a tribunal?

[Nigel Huddleston]

I thank my right hon. Friend for his comments. We have had a discussion about the loan charge previously. I do not believe an amendment would be in order on this Bill, but I say to my right hon. Friend and others that I am always open to hearing concerns about the loan charge. I have done previously and will happily continue to hear information, evidence and concerns from colleagues.

[Jim Shannon (Strangford) (DUP)]

I thank the Minister for coming to the House to present the Bill. Over the last six months, particularly the last few weeks, farmers have been under exceptional weather pressure, with the implication that they will be unable to cultivate or plough their land or sow their crops. The Minister referred to inflation coming down. By the way, I am glad that it is dropping; we all should be, and if we are not there is something wrong with us. At the same time, inflation cannot come down if the cost of foodstuffs starts to rise. Has the Minister had the opportunity to consider that issue? How can we help farmers to keep food prices down at this difficult time, and thereby ensure inflation continues to drop?

[Nigel Huddleston]

I thank the hon. Gentleman for his positive welcome of today’s news about inflation. He is right that it is welcome but we always need to keep an eye on it. I join him in thanking our farmers, who have played a pivotal role in helping food prices to come down. The supermarkets have a role in that area as well. He raises some points that are slightly outside the remit of the Bill, but I assure him I will continue to have conversations with ministerial colleagues and others, and I am sure he will as well. We always listen to the important farming community in this country, who do so much to create employment and provide us with food.

The Bill covers 24 different measures. I will not go through every single one of them, but want to focus on a few key areas. First, I turn to how the Bill rewards work. We all recognise the simple truth that work should pay. We understand how hard many people up and down the country work. This Government want to ensure they are recognised for that because that approach not only benefits individuals and families, but overall growth and the economy. As I mentioned, that is why we have already taken two Bills to cut national insurance through Parliament, but this Bill goes further.

A key measure in the Bill is to increase the high-income child benefit charge threshold from £50,000 to £60,000. In addition, the rate of the charge will be halved, so that individuals continue to receive child benefit until one household member earns £80,000, taking 170,000 families out of paying this tax charge. These changes are a well-earned reward for working families up and down the country and put pounds back into parents’ pockets.

[Sammy Wilson (East Antrim) (DUP)]

While the changes in the child benefit allowances are important, especially helping parents who want to get into work and have their children looked after, does the Minister accept that one of the biggest impacts of the Budget on people who are working is the way in which they are being dragged into higher tax rates because thresholds have not been raised? That is having a huge disincentive effect on working families.

[Nigel Huddleston]

The right hon. Gentleman will be aware that, back in 2010, the tax-free allowance was, I think, £6,475. Actions taken by this Government since then have increased the tax-free allowance to more than £12,500, a significant real-terms increase, which means that take-home pay is higher than it otherwise would have been. When taken in combination with other measures, it is a really important move.

Furthermore, I am sure the right hon. Gentleman would not want to detract from the significant changes in national insurance, which have put money back into people’s pockets. We have eliminated by a third a whole category of taxation—national insurance—and that will help working people in this country as well.

[Richard Fuller (North East Bedfordshire) (Con)]

Just to reinforce this point about the increase in thresholds, the Minister says that it has been a significant real-terms increase, but it is actually a 21% increase, which is very significant indeed. My question is on the part of the HICBCs that were announced in the Budget but that he did not quite mention, which was the plan from 2025-26 to base the benefit on the household budget rather than the individual budget. Can he just reassure the House that His Majesty’s Revenue and Customs will be up to speed to be able to implement that part of what the Chancellor has outlined?

--- Later in debate ---

[Nigel Huddleston]

I thank my hon. Friend for his question, but he has jumped ahead to a later part of my speech. I will get on to that point in a moment, because the movement to a household budget is an important part of the announcements.

I should just reiterate the first points on the changes that we have made. Overall, we estimate that 485,000 families will gain an average of £1,260 in child benefit in 2024-25 from these changes to HICBC. And, of course, what is good for families is also good for the economy at large, as my hon. Friend pointed out. The Office for Budget Responsibility estimates that, through these child benefit changes, the economy will gain additional hours work equivalent to around 10,000 full-time equivalents by 2028-29. Going forward, we want to ensure that the child benefit system fairly rewards families in all their diversity, including those who, for example, have only one working parent. The Government will end the unfairness, for example, of single earner families in the child benefit system by administering the HICBC on a household rather than an individual basis by April 2026. We shall be consulting on this in due course, as my hon. Friend quite rightly highlighted. This is something, we know, that many people have been calling for.

[Nigel Mills (Amber Valley) (Con)]

Can the Minister give us an indication of what level of household income the Treasury has in mind for that consultation? I presume that it will be much higher than £80,000; otherwise, it would be a more punitive situation. Will it be £100,00 or £120,000? What will it be?

[Nigel Huddleston]

I appreciate my hon. Friend’s inquisitiveness, but this is the point of the consultation. We will be having a consultation and I am sure that his views and opinions and those of others will be taken into account.

I shall now turn to how the Bill will drive investment in our economy. We all recognise that investment in the economy is crucial for economic growth. It supports everyone across the country and ensures our competitiveness in international markets. That is why, through this Bill, the Government are taking decisions for the long term to support that investment. For example, our creative industries contributed £126 billion in gross value added in 2022 and supported more than 2 million jobs.

By announcing more than £1billion of new reliefs for the UK’s world-leading creative industries at the spring Budget, we have signalled our commitment to ensuring the sector’s continued growth. For example, we will make current tax reliefs for theatres, orchestras, museums and galleries permanent, at a rate of 45% for touring theatres and touring productions by museums and galleries; 40% for non-touring productions; and 45% for orchestras. That will ensure that our creative industries have the support they need after the unprecedented economic shock of the pandemic.

We will also further support the UK’s independent film sector through a new UK independent film tax credit at a rate of 53% for films with a budget of up to £15 million, which is worth about £80 million a year. This will support the production of UK independent films and, of course, the incubation of UK talent, which is admired around the world. This Government are committed to supporting UK businesses and these measures deliver on that.

--- Later in debate ---

[Neale Hanvey]

Can the Minister not see the perversity of spending Scottish revenue abroad while jobs in Scotland are wilfully put at risk by this Government?

[Nigel Huddleston]

I could not disagree more with the hon. Member’s premise. If anybody has shown support for the sector, this Government have. We have shown huge support for the sector, in an appropriate and proportionate way, while also encouraging the industry to decarbonise. As I said, we are taking fiscally responsible decisions to extend the energy profits levy for one year. We are also providing confidence and certainty to businesses in the sector by legislating for an energy profits levy price floor. That is what is in the Bill. That will effectively abolish the energy profits levy if the six-month average for both oil and gas is at or below a set threshold. Doing so was the sector’s main ask in the 2024 spring Budget, and it could help to unlock around £9 billion in uncommitted investment spend, according to Offshore Energies UK, which welcomed the decision. I am sorry that he feels unable to welcome it as well.

Those measures will ensure that investment in our economy continues to grow. I will now outline some measures in the Bill’s property package. The Bill will cut the higher rate of capital gains tax on residential property from 28% to 24%, encouraging landlords and second home owners to sell their properties, which could increase revenues because there would be more transactions.

[Dr Luke Evans (Bosworth) (Con)]

The capital gains tax cut is very welcome, but will the Minister outline whether it will come into play retrospectively? Hypothetically, if a Labour Front Bencher happened to owe some capital gains tax, would they benefit from a Conservative tax cut?

[Nigel Huddleston]

I think I know where my hon. Friend is heading. Of course I cannot comment on individual tax situations. His point, though, is an important one: everybody should always pay the taxes that they owe. I think that principle is shared across the House. The measure will be implemented from 6 April 2024, so some people may be disappointed that there is no retrospectivity, but as I say, it will make more homes available to purchase for a variety of buyers, including first-time buyers.

We also need to ensure that the property system is fair and working as intended. The Government are clear that where policies are not meeting their policy objectives, we will take action. That is why we are abolishing multiple dwellings relief, a bulk purchase relief in the stamp duty and land tax regime, from 1 June 2024. That follows an external evaluation that found no strong evidence that the relief is meeting its original objective of supporting investment in the private rented sector, and because HMRC has recorded high and clear instances of its abuse. We are also amending rules to ensure that victims of domestic abuse are not unfairly penalised if they wish to buy their first homes anonymously, and that those in difficult circumstances do not face additional barriers to purchasing homes. We will ensure that registered providers of social housing in England and Northern Ireland are not liable for stamp duty land tax when purchasing property with a public subsidy, and exempt public bodies from the 15% anti-avoidance rate.

Finally, I turn to measures that will simplify and modernise our tax system, making it easier to engage with the tax system and closing loopholes that could be used for avoidance. The negative impacts of inefficient, complex taxes on both businesses and the wider economy cannot be overstated. That is why the Government are taking action to ensure that the system works for everyone. As a starting point, we are amending two primary VAT interest provisions in legislation to ensure that they apply to all cases intended by the policy. That will mean that the interest payments that HMRC recovers are correct, and it will save time and resources for HMRC and businesses.

The Government recognise that it is everyone’s responsibility to pay their fair share of tax to support our vital public services, so we are closing another anti-avoidance loophole—one that enables individuals to avoid tax by moving assets abroad via a company. That is one of 200 measures that we have undertaken since 2010 to close loopholes and reduce the tax gap, which now sits at just 4.8%—down from 7.5% under Labour. Yes, that is an inconvenient truth for the Opposition, who recently claimed to be so enthusiastic about tackling tax avoidance yet did not take the actions that we have taken when they were in power. Importantly, Labour failed to support the last Finance Bill, which included further measures to tackle tax avoidance. However, Labour was in good—or, rather, bad—company, because the Lib Dems and the SNP did not support it either.

It is not the first time that we have seen such—how should I put it?—distance between what the Opposition say and what they do. Recently, the Labour party even said that it would support our national insurance tax cuts, but when it came to the vote, I did not see a single Labour MP in the Aye Lobby with the Conservatives. Nor were there any Lib Dems, while SNP Members were in the No Lobby actively voting against tax cuts for their constituents.

The Government are getting on with delivering on our plan to cut taxes, grow the economy and boost investment, but the Labour party would put all that at risk and send us back to square one. Instead of taking the responsible decisions to back businesses, the Labour party wants to saddle them with new regulations. Labour’s so-called new deal for workers is in fact a bad deal for jobs, workers and businesses. The 70 new regulations from the deputy leader of the Labour party and the unions would ban flexible working, disincentivise small businesses from making new hires and unleash waves of low-threshold, zero-warning strikes.

[Sammy Wilson]

The Minister is quite right to point out the dangers of Labour being in charge of finances and the impact that that is likely to have on tax, but does he have the humility to accept that tax is higher under this Government than it has been for decades?

[Nigel Huddleston]

I certainly have the humility to accept and recognise that. Taxes are higher out of the obvious and widely accepted necessity of paying for massive amounts of intervention because of the pandemic and in response to supporting families and businesses through the cost of living challenges. We make no apology for intervening to support lives and livelihoods to the extent that it was necessary. It was absolutely vital that we intervened because not doing so would have been a disaster for the UK economy. However, the general level of taxation, as the right hon. Gentleman is probably aware, is much lower in the UK than in many other countries that also had to significantly increase taxes and Government intervention out of necessity in response to the pandemic. We have much lower levels of taxation than Germany, France, Italy and many other countries. As I said, we had high levels of taxation out of necessity, but we are now in a position to start reducing those levels of taxation out of policy intent and choice, and that is exactly what we are doing.

To conclude, this Finance Bill absolutely rewards hard work, supports our vital industries, boosts the housing market and continues to create a fairer, simpler and more modern tax system. It delivers on the Government’s commitment to prioritise economic growth and will ensure a brighter future for our country. For those reasons, I commend it to the House.

--- Later in debate ---

[James Murray]

I fear that the hon. Gentleman is slightly out of date. Going into the general election, we have set out very clearly our plan to invest in the transition that we need in our energy supply and our economy, and how we would pay for that—through a strengthened windfall tax, alongside prudent investment. He may scoff at what we say about the non-dom tax loopholes, but we are talking about £1 billion in the first year and £2.6 billion over the course of the next Parliament. That money should go to our public services, rather than intentional loopholes allowing some people to get away with paying hundreds of millions of pounds less in tax.

The Conservatives are not just out of ideas, but out of touch with reality. They made that very clear in last month’s Budget, from which this Finance Bill arose. At the end of his Budget speech, the Chancellor made an astonishing £46 billion unfunded commitment—leaving a gaping hole in the public finances—when he pledged to abolish national insurance altogether. Since then, Government Ministers have had countless opportunities to row back from or U-turn on that commitment, but they have been determined not to. Earlier today, the Prime Minister had three chances to rule out cuts to the NHS, cuts to the state pension or tax rises to pay for his £46 billion unfunded tax cut. Each time, he refused to do so.

[Nigel Huddleston]

Will the hon. Gentleman give way?

[James Murray]

I will in a second. It is quite astonishing that the Conservatives are content to go into the general election with a £46 billion black hole in their plans, and that they refuse to say whether that £46 billion commitment will be funded by tax rises elsewhere or cuts to spending. I give way to the hon. Gentleman, so that he can confirm exactly how the Government will pay for that £46 billion black hole.

[Nigel Huddleston]

I very rarely intervene from the Dispatch Box, but I cannot help myself this time. The hon. Gentleman and I have had multiple conversations about this. He cannot differentiate between an aspiration and a policy commitment. His £28 billion was a policy commitment; what we have laid out is an aspiration. They are two different things.

As for the hon. Gentleman’s scaremongering about the possible hit to pensions or the NHS, he knows full well that those suggestions are absolutely not true, because national insurance does not wholly pay for health, benefits, or indeed pensions. He is either scaremongering or exhibiting complete and utter financial illiteracy. Total spending on the NHS is over £160 billion, and welfare spending is over £260 billion, massively dwarfing the total amount raised by national insurance. He either does not understand that, or is irresponsibly scaremongering, because he has known for a long time that national insurance and other payments are topped up by general taxation. He should know better.

[James Murray]

I thank the hon. Gentleman for his mini-speech. I feel I may have touched a nerve. He talks about people being scared; yes, I think people are scared when they hear the Government making a £46 billion unfunded spending commitment and not saying how they will pay for it. When the previous Prime Minister made an unfunded tax cut commitment of a similar order of magnitude, we know what havoc that caused in the economy, and people are still paying the price in higher mortgage payments and rent payments. I will just say to the hon. Gentleman that I gave him a chance to rule out cuts to the NHS or the state pension, or tax rises elsewhere, to pay for this black hole. I am not quite sure if he did that—maybe he has not got the line from his boss in No. 10 Downing Street—but the truth is that until the Government rule those things out, people will rightly worry about the impact his unfunded commitment will have on the economy.

The pledge the hon. Gentleman was speaking about sounds like exactly the sort of pledge that the right hon. Member for South West Norfolk (Elizabeth Truss) would approve of, because it comes to almost exactly the same amount as her Government’s unfunded tax cuts. Of course, the previous Prime Minster has been touring the TV studios and talking to newspaper journalists in recent days, saying, among other things, that people who claim that she crashed the economy are

“either very stupid or very malevolent”.

I wonder if the Minister would like to intervene to say whether he shares that view. No? He is not leaping to his feet now. I would have thought he would; I would have thought that Treasury Ministers would want to put as much distance as possible between themselves and the previous Prime Minister. Instead, with their £46 billion unfunded commitment, they seem determined to be a tribute act. Frankly, whatever the previous Prime Minister says, people across Britain know what impact her time in office is having on all of us, as we face higher mortgages and higher rents as a direct consequence of her economic recklessness.

That is the context in which we are debating this Finance Bill. The context is one of a Government who are out of time, out of ideas and out of touch with reality, and of a country that is feeling the impact of 14 years of Conservative economic failure. Even a simple clause such as clause 2, which sets the main rates of income tax, highlights the impact on ordinary people of decisions taken by this Government. Although the basic and higher rates of income tax are unchanged by this Bill at 20% and 40%, the tax burden on working people is rising as a result of the income tax personal allowance and the higher rate threshold being frozen from 2021-22 to 2027-28. Those tax thresholds would ordinarily have risen this April, but instead they are in the middle of a six-year freeze. According to the Office for Budget Responsibility, which I assume the Minister has respect for, these freezes will create 3.7 million extra taxpayers by 2028-29 and mean that 2.7 million more people will be paying the higher rate.

The truth is that, even taking into account any reductions to national insurance rates, the freezes in thresholds and the rises in council tax mean that by the end of the forecast period, the average family will still be £870 worse off. As the Resolution Foundation noted at the time of Budget, despite the reductions in national insurance, there will still be a net rise of £20 billion a year by 2028-29 in personal taxes. It pointed out that those over the state pension age, who do not benefit from national insurance cuts, will be particularly badly hit, and will face an average tax rise of £960 a year. The reality has been summed up by Paul Johnson, the director of the Institute for Fiscal Studies, who said following the Budget:

“This remains a parliament of record tax rises.”

That is the record of the Conservatives in government.

Draft Major Sporting Events (Income Tax Exemption) (2024 UEFA Champions League Final) Regulations 2024

Nigel Huddleston Excerpts

Tuesday 16th April 2024 General Committees

[The Financial Secretary to the Treasury (Nigel Huddleston)]

I beg to move,

That the Committee has considered the draft Major Sporting Events (Income Tax Exemption) (2024 UEFA Champions League Final) Regulations 2024.

It is a pleasure to serve under your chairmanship, Sir Robert.

The draft regulations will provide an income tax exemption for UEFA-accredited overseas individuals who participate in the 2024 UEFA champions league final at Wembley stadium in June. The exemption will apply to any UK income that a UEFA-accredited individual receives for participating in the event, or for duties and services performed in connection with the final.

The Government recognise the great benefits and rewards that all sports bring to this country. I championed that in my previous role as Minister for Sport at the Department for Culture, Media and Sport, and I am pleased that another former Minister for Sport, my hon. Friend the Member for Chatham and Aylesford, who was equally a champion of major sporting events, is present in Committee. Indeed, such events generally receive cross-party support.

The UEFA champions league final is UEFA’s flagship club football competition, where the world’s greatest football players demonstrate their elite skill. The home of football, Wembley stadium, is one of the greatest stadiums in the world. I am therefore greatly looking forward to the final there in just a few months’ time. Nearly 90,000 people will attend in person, and more than 100 million people will watch on televisions across the world. The UEFA champions league final being hosted in the UK will have a range of benefits: inspiring a new generation of young footballers; bringing communities together; and boosting the UK economy. That reflects the importance of promoting grassroots-level football, which is a key priority of the Football Association.

Back in 2020, Wembley stadium was awarded the right to host the 2024 UEFA champions league final. That was part of the Government’s wider strategy to make the UK an attractive location for world-class sporting events. Successive Governments have provided income tax exemptions for hosting major sporting events. The UK has a long track record of showcasing its excellence as a host of major events, including the UEFA champions league finals in London in 2013 and in Cardiff in 2017. More recently, statutory tax exemptions have been provided for events including the UEFA men’s and women’s Euro football championships in 2021 and 2022, the 2022 Birmingham Commonwealth games and the 2023 women’s finalissima football match. All, again, received cross-party support.

I am therefore confident that Members will agree that it is in keeping with the Government’s policy and precedent to provide an exemption for the 2024 UEFA champions league final. Furthermore, as in this case, such an exemption is often a requirement of the bidding process. Tax exemptions are reserved for exceptional events, and I am sure that the Committee will agree that the 2024 UEFA champions league final is a fine example of that.

The draft regulations make use of the powers that were introduced in the Finance Act 2014, providing a UK income tax exemption through secondary legislation. This exemption will apply to non-resident players, officials and individuals designated by UEFA on income earned in connection with the final. The exemption will run from 28 May to 2 June 2024, allowing a short period either side of the event, so that the exemption covers any other duties performed in connection with the final. Being exposed to taxes in two countries is administratively difficult to deal with, and consideration would need to be given to the application of withholding taxes, filing self-assessment tax returns and understanding the terms of existing double taxation treaties. I therefore have no doubt that the exemption will be welcomed.

The income tax exemption for the 2024 UEFA champions league final further supports our ongoing commitment to make the UK a global leader for hosting world-class major sporting events. I commend this draft statutory instrument to the Committee.

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[Nigel Huddleston]

I join the hon. Gentleman in wishing the best of luck to England’s teams. He made an important point about the significant achievement of hosting the Euros again in 2028, which shows that we can host such things. We can host such events extremely well, and they are very good for the UK economy, being a good return on investment. It is clear that there is support for the draft regulations across the Committee.

The 2024 UEFA champions league final will promote football at home and abroad. It will be a highlight of the sporting calendar and will be guaranteed to delight football fans across the globe. Hosting the event will strengthen the UK’s proud record of hosting sports and leisure events of that scale, enhancing our reputation across the world. For those reasons, I commend the legislation.

Question put and agreed to.