Finance (No. 3) Bill

Anneliese Dodds Excerpts

2nd reading: House of Commons & Programme motion: House of Commons
Monday 12th November 2018 Commons Chamber

[Chris Philp]

The growth in the use of food banks is of course a phenomenon that we have seen across western Europe. After the Budget, people on universal credit will be £630 a year better off than they were before—[Interruption.] The hon. Lady shakes her head, but that is a simple fact: the allowance has been increased. As I was saying a moment ago, the Resolution Foundation has found that the Government will be spending more money on universal credit following the Budget changes than would have been the case under the old benefits system. I would further point out that the track record of getting people off benefits and into work is better under universal credit than it was under the old benefits system. The way to combat poverty and create prosperity is to get people into work.

[Anneliese Dodds (Oxford East) (Lab/Co-op)]

I am listening carefully to the hon. Gentleman, but he does not seem to be aware that many of the people on universal credit are working.

[Chris Philp]

I realise that many people on universal credit are working. It is, by definition, an in-work benefit. The point I am making is that it is encouraging more people to take more hours, and it is encouraging people who are not working at all—[Interruption.] I would be happy to take another intervention from the hon. Lady, but perhaps she would like to listen to the answer to her first one. Universal credit is encouraging people who are not working at all to get into work, which is why unemployment is at a 43-year low. A legitimate question that she might ask is whether work is paying enough. This Government have successively increased the level of the minimum wage. This Budget increases it to £8.21 as of next April. That is up from £5.93 in 2010, which is a 38% increase. As I said in my intervention on the Financial Secretary, when we combine that with the increase in the personal allowance, from some £6,500 to £12,500 from next April, the post-tax income of someone on the minimum wage working full time—40 hours a week—has gone up by 44% over that eight-year period. Over the same time, inflation was 25%. So the personal allowance changes and the minimum wage increase have helped people on low incomes more than any other group. That is why income inequality is at a significantly lower level today than it was in 2010.

I turn for a moment to Labour’s plans. Inevitably, they involve spending a great deal of money—more money than contemplated even in the Budget. There is no great merit in spending more than we can afford today if we send the bill to our children and our grandchildren, saddling them with debt and burdening the Exchequer with very high interest charges, which are already high, at some £45 billion a year. As for Labour’s mass nationalisation programme, which it says is fiscally neutral, I point out that the last time we had mass nationalised industries—up to the 1980s—they tended to be grossly loss-making and required taxpayer subsidy, rather than generating revenue for the Exchequer. To assume that a mass nationalisation programme would be fiscally neutral is a dangerous assumption.

It seems to be assumed that the only measure of a Government’s effectiveness—or compassion—is the total amount that they spend. Of course it is important to fund public services properly, but it is the outcomes that matter, rather than the amount of money spent. Gordon Brown’s mistake was always to confuse spending money with success, when what actually matters is outcomes.

In education, for example, 86% of pupils are now in schools rated good or outstanding, compared with 68% in 2010. Notwithstanding any points that may be made about the funding levels in schools—and finding room to spend more is always welcome—the fact is that children are getting a better education today than they were eight years ago, according to Ofsted, which we can agree is an impartial observer. To the extent that the opportunity to loosen fiscally allows us to spend a little more, especially on services such as the police, it will of course be extremely welcome.

When the SNP leader replied to the Budget, he made some points about Brexit and the risks it poses. Some 61% of Scotland’s exports go to the rest of the UK, and only 17% go to the European Union. The single market that is of the most importance to Scotland, by a factor of about 4, is the United Kingdom single market—[Hon. Members: “Hear, hear.”] I see that view has support from my colleagues. That is the single market that the SNP should focus on most, because it is the one on which their prosperity most depends.

As many hon. Members wish to speak, I shall conclude shortly—[Interruption.] However, I would not want to disappoint Opposition Front Benchers by concluding too soon, so before doing so I wish to thank the Chancellor for the business rate change that he announced in the Budget. Cutting business rates for 90% of the high street—any business with a rateable value of less than £52,000—is a welcome move, and will do something to level the tax playing field. High street stores, which use real estate intensively, suffer a tax disadvantage relative to online companies. Online multinational companies also use lawful, but creative mechanisms so that they do not pay as much corporation tax as our high street shops. The business rate cut for smaller shops will really help them and I strongly welcome it.

One measure on entrepreneurship that I commend to the Chancellor for future Budgets is something that is close to my heart. Before being elected, I set up and ran businesses for 15 years. I set up the first one when I was 24 and floated it on AIM four years later—[Interruption.] I thank Opposition Front Benchers for promoting my career, but I am happy where I am. In setting up and growing that business and others, we benefited from all kinds of relief, including the enterprise investment scheme and entrepreneurs relief. I particularly commend the seed enterprise investment scheme, which is very effective in getting money into complete start-ups—companies being started from scratch. It is a very effective tax break for getting individuals to invest in greenfield start-up companies. I should declare an interest as my wife recently set up a company that used SEIS to raise capital. The limit is low—£150,000 per company—but it is very effective in getting individuals to make investments. The fiscal cost is quite low: according to Treasury figures it is about £110 million a year. I suggest that future Budgets may have scope to increase the £150,000 per company limit to encourage further significant investment in start-ups at relatively low fiscal costs—I can see the shadow Chief Secretary getting his pen out to write this down. I commend that idea to the Chancellor for future budgets.

I thank the Chancellor for the welcome business rate cut. I commend him and the Financial Secretary for delivering record high employment, record low unemployment and getting our public finances firmly back under control. Had we listened to the Opposition Front-Bench team, we would still be facing financially ruinous debt bills. It will be my pleasure to vote for the Second Reading later tonight.

Finance (No. 3) Bill

Anneliese Dodds Excerpts

Committee: 1st sitting: House of Commons
Monday 19th November 2018 Commons Chamber

[Rachel Maclean]

I am sorry but I will not give way. I only have a couple of minutes left. Please forgive me.

The movement on the tax thresholds is a fundamental point at the heart of our Conservative philosophy, which is freedom of the individual to spend their own hard-earned money how they wish. What this Budget and this Finance Bill are doing is taking people out of tax. A basic rate taxpayer will pay £1,205 a year less than in 2010, when Labour left office, and that is, effectively, a pay rise for those people, leaving them with more money in their pockets.

Let me say this to the Opposition: they often talk about how they want people to pay more tax. Well, people are free to pay more tax voluntarily, but, surprisingly enough, that is not often what people do. What we do see as a result of our tax policy of lowering tax rates is a greater tax take coming into the Exchequer. We see that fundamental principle illustrated time and again because of the policies advocated and enacted by the Government. It is right to lower the tax thresholds for low and middle-income earners. In fact, the shadow Chancellor and the shadow Chief Secretary do not even oppose that; they agree that we should keep those tax thresholds low. We need look no further than corporation tax, as those receipts are up 50% to £53.6 billion because of the lowering of the rate that has happened under this Government. That is £53.6 billion more for this Government to spend on strong public services up and down the country.

[Anneliese Dodds (Oxford East) (Lab/Co-op)]

Surely, the hon. Lady is aware that just about every analysis that has been done regarding the reason for the increase in corporation tax revenue says that it is due not to the reduction in rates, but to factors such as the banks’ return to profitability after the financial crisis, so it is not right to link the two.

[Rachel Maclean]

I do not accept those comments because we have seen new businesses in my constituency and in the constituencies of many other hon. Members. In Redditch, we have record rates of business start-ups because of measures in this Budget, this Finance Bill and other Budgets. I am a great supporter of the Bill because it will drive more revenue into the Exchequer that I would like to see spent on strong public services in Redditch.

--- Later in debate ---

[Vicky Ford]

I too wish to speak about clause 89, which allows the Treasury to make minor amendments to tax legislation after we have left the EU.

EU tax issues are often extremely controversial. I think back to EU tax decisions I have seen in the past, such as the decision not to introduce a financial transaction tax, which this side of the House always strongly objected to but the other side would strongly have proposed at a European level. We objected to it because we felt it would have unintended economic consequences. Then there were the changes to the VAT MOSS—mini one-stop shop—situation for digital tax for small businesses. These decisions were taken without deep consultation or deep impact assessments, but were then found to have a huge number of unintended consequences. There were also the controversial issues to do with VAT on tampon taxes that sometimes came back.

[Anneliese Dodds]

It is important that Members are not misled, and it is important to say for the purposes of accuracy that a number of EU countries are looking to move forward with a financial transactions tax through the open method of co-ordination that I know the hon. Lady is very well aware of through her expert knowledge of the EU.

[Vicky Ford]

That brings me back to the point I was making: EU taxation matters can be hugely controversial, partly because decisions affecting tax at an EU level are often unanimous decisions, and therefore it would be very difficult for one member state to change them if a decision has gone wrong. Because they are so controversial it is worth thinking about the delegation of powers given to Ministers here. Indeed, during my time looking at European matters, I long argued for the concept of better regulation before decisions were made. People should be consulted and impact assessments published. Only after the assessments have been made public and the views of stakeholders who might be affected taken into consideration should decisions be made.

That is why I sit on ESIC, the European Statutory Instruments Committee, to which the hon. Member for Aberdeen North (Kirsty Blackman) referred. It was a Committee that I argued we needed. She suggested that when it decides to change a negative instrument to an affirmative instrument, that is because of some controversy with the Government’s decision, but by establishing that Committee, under the excellent chairmanship of my right hon. Friend the Member for Derbyshire Dales (Sir Patrick McLoughlin), we can ensure extra transparency in these complex decisions. I genuinely believe that we should think carefully before giving delegated powers to Ministers. However, clause 89 is very much about making minor decisions. It is tightly worded, and I do not believe that the amendments tabled by Opposition Members are necessary, as they would cause over-complexity. Amendments under clause 89 would be necessary, were we to leave the EU without a deal.

I am absolutely convinced that leaving the EU without a deal is not in the interests of this country, and I am glad to hear Ministers confirm that. However, I would also be glad to hear Ministers confirm that they will give Members a great deal more detail about the impact assessments of a no-deal scenario and a deal scenario, and also how that compares with remaining a member of the European Union, before our final vote on the withdrawal agreement, so that we can all be fully apprised of the impacts and make our decisions wisely.

Finance (No. 3) Bill

Anneliese Dodds Excerpts

Committee: 2nd sitting: House of Commons
Tuesday 20th November 2018 Commons Chamber

[Anneliese Dodds (Oxford East) (Lab/Co-op)]

It is a pleasure to participate in this debate and to follow the Financial Secretary to the Treasury. I will speak to Labour amendments 3, 4, 19 and 23 and to new clauses 5 and 6.

As other Opposition Members have noted, it is disappointing, to say the least, that the Government have been unwilling to allow proper scrutiny and challenge of their proposals in this Finance Bill, as they have failed to introduce an amendment to the law resolution. Members will be aware that this approach has been used six times in the past century, each time necessitated by Budget provisions needing to be passed quickly.

[Kevin Foster]

This is about scrutiny.

[Anneliese Dodds]

Indeed. When we are unable to table amendments on provisions within a Budget, it is a severe restriction on the House’s ability appropriately to challenge the Government’s policies. In any case, if the Government can muster backing for their approach to prevent a change in policy, they can do so.

[Kevin Foster]

If the Labour party is so committed to scrutiny of this Bill, how come the Opposition Benches are virtually empty? The hon. Lady says that it is because Labour Members cannot table amendments, but they could come along and make speeches.

[Anneliese Dodds]

The hon. Gentleman has made the point for himself. It is precisely because we do not have the ability to table meaningful amendments that we are in this position. I am sure that he is aware that, when it was possible for Labour Members, often with other Members, to table meaningful amendments to Finance Bills, there was a huge amount of participation, such as when amendments were tabled on country-by-country reporting. Sadly, despite those amendments, we have not yet seen the change in Government policy that we would have liked. When the House is given the power, we exercise it; when we are not given the power, we are unable to exercise it.

As “Erskine May” sets out very clearly, in these circumstances, the only permissible amendments are

“strictly limited to what is authorized by the specific resolutions on which the bill is founded.”

Because of those restrictions, the Opposition cannot expand the scope of measures against tax avoidance and evasion beyond the very limited scope presented in the Bill.

There is a whole host of areas in which the Government should be taking action but where the Bill is completely silent. There has been no new approach from the Conservative Government on the verification of information supplied by companies when they register, despite widespread evidence of tax avoidance and money laundering being facilitated through the registration of fake companies via Companies House.

On shell companies, the Government have provided only a consultation on partnerships rather than action, and they have failed to use to any great extent their legal ability to impose fines on partnerships that fail to provide beneficial ownership information. Despite their consultation on a new offence of failure to prevent economic crime finishing more than a year ago, we still appear to have no more progress on that. Although our Government now have, as I mentioned, the legal means to require country-by-country reporting wholesale, following that amendment to a Finance Bill two years ago, when we were able properly to amend the Bill, they have refused to take up that option.

Despite this catalogue of failure, the Government continue to talk up their record. We saw this elevated to the level of farce last night, when Conservative central office—I assume—released a graphic on Facebook with the laughable claim that Labour had just voted against cracking down on tax avoidance. Labour has consistently advocated much stronger measures on tax avoidance than this Government have done. Indeed, the weakness of measures in the Bill is one of many reasons why we oppose it. The graphic included a background of palm trees, presumably a bizarre reference to our overseas territories. It is bizarre, given the woeful lack of action by our Government in this regard.

[Chris Philp (Croydon South) (Con)]

Would the shadow Minister like to join me in congratulating the Government on having reduced the tax gap from 8% under the last Labour Government to 6% today, which is the lowest level in the developed world?

[Anneliese Dodds]

I will go on to talk about the assumptions that the Government currently use to calculate that tax gap, and the hon. Gentleman will learn that their claims to have massively reduced the amount of tax avoidance through that measure are potentially questionable, to say the least. Perhaps after we have had that discussion, we will see whether he still holds to that assessment.

[Julian Knight (Solihull) (Con)]

While we wait for the hon. Lady to congratulate the Government on closing the tax gap, will she recognise that many of the steps taken in the Bill have to be taken in a way that is mindful of how international tax systems work and how we need to ensure that the tax we are gathering does not lead to companies leaving the UK and trading to it from international jurisdictions?

[Anneliese Dodds]

Of course we need a business-friendly tax environment, but we should also recognise, just as I find when I talk to many international businesses, as I do in my shadow ministerial position, that the vast majority of businesses want to be compliant. Sadly, a small number of firms are not necessarily complying with the letter of the law and some are also not complying with the spirit of the law. That is leading to a situation where our public services are starved of the funding we need, which has a huge impact on business, as I am sure the hon. Gentleman is aware through his discussions with businesses in his constituency.

Let me return to the matter of overseas territories, which strangely appear to be referred to in pictorial form in material released by Conservative central office. This Government were forced kicking and screaming by this House to require our overseas territories to produce public registers of beneficial ownership, but I understand that all that has happened since the vote that forced that change in policy is one conference call, leading to a vague commitment to convene a technical working group—but it is not going to meet until 2019. So we have had many months since that vote in this House but almost no action. In addition, rather than fulfil the commitments the Opposition were given that our Government would work with Crown dependencies towards transparency, tax treaties were presented to this House last week that included no such provisions whatsoever.

The Minister has, as ever, opined that his Government have reduced the tax gap, and indeed other Members have just referred to that. I am sure, however, that he will not illuminate us with the fact that his Government’s tax gap measure excludes the costs of profit shifting and that it starts from the assumption that companies are declaring the correct amount of tax, which surely begs the question. The tax gap for this Government is assessed on the basis of whether Her Majesty’s Revenue and Customs has found errors or evidence of avoidance on tax returns, an approach that has rightly been criticised by the Public Accounts Committee, given that it leads to a situation where much of the tax lost through avoidance simply does not count as part of the tax gap. The Government’s tax gap does not appear to include cases of avoidance or evasion that do not fall under existing legislation, so it fails to capture numerous loopholes that continue to be exploited simply because they are exactly that: loopholes.

[Chris Philp]

Did I detect a sigh when the hon. Lady gave way? She is questioning the basis of the tax gap as a sign of progress, so let me try a different statistic that she might feel better about. The amount of corporation tax collected has gone up from £35 billion a year to £55 billion a year; is that not evidence that these tax-raising measures are effective?

[Anneliese Dodds]

I am always delighted to hear from the hon. Gentleman, but when he talks about the tax-gap measurement, he is talking about his Government’s tax-gap measurement, not one that is universally accepted. In fact, it is quite the opposite, and many alternative measures suggest that much larger amounts of tax are being avoided and, indeed, that larger sums could be rectified if tax evasion was dealt with. Yet again, we hear this comment about the cut to the corporation tax rate. I am sorry to sound like a stuck record, but I have to remind the hon. Gentleman that every expert commentator on this matter has intimated that the rise in the corporation tax take is not because of the cut to the rate and that, in fact, had the rate not been cut, more revenue would have accrued to the Treasury. As I will go on to discuss, that revenue could have been used to support public services and social security for our constituents.

[James Cartlidge]

rose—

[Julian Knight]

rose—

[Anneliese Dodds]

My goodness—who to choose!

[James Cartlidge]

The hon. Lady will be sighing a bit more when I point this one out. It is very kind of her to give way. She said that the tax take has not gone up because of the rate cut, and she is absolutely right: above all, the reason the tax take has gone up is that the economy has been growing very strongly.

[Anneliese Dodds]

I am sorry that the hon. Gentleman views as a badge of pride the recent growth statistics. I would never talk down the British economy—it has a huge amount of promise—but I am deeply concerned about the fact that our growth statistics, particularly for the future, have been revised down. For next year and the following year, I believe that they are 1.6% and 1.4%, so they have been revised down. In the past, in normal times, we would have viewed growth statistics of that kind as a failure. Of course I am pleased that our economy is finally growing again—it was, of course, growing when Labour left office—but I am none the less deeply disappointed that we are not reaching the same levels of growth as many of our competitor countries.

[Several hon. Members rose—]

[Anneliese Dodds]

With the Committee’s permission, I shall continue with my comments.

We need a far more serious and engaged approach to countering tax avoidance and evasion. Our amendments are an attempt to provide that—at least within the scope of the limited measures in the Bill. First, with amendments 3 and 4, we are calling for public registers for beneficiaries of trusts who have relocated or plan to relocate to other EEA countries and who seek to defer their corporation tax exit charges, or those relating to capital gains tax, through a payment plan, as the Minister intimated. The Government’s action in this policy area has been necessitated by recent decisions of the European Court of Justice, which considered the compatibility of member state exit charges with article 49 of the treaty on the functioning of the European Union.

As the Minister intimated, the measures in the Bill will enable those who adopt an exit charge payment plan to pay in six equal instalments, albeit with interest. Given that this approach is necessitated by EU law and applies to individuals and trustees who move to another EU or EEA country, and given that some Government Members sadly flirt recklessly with the prospect of a no-deal Brexit, I would have expected the Government to explain what might happen in this policy area as our relationship with the EU changes. That was not the case in respect of the information about these measures that we were given; nor does anything in the Bill lead us towards greater transparency for trusts, which is desperately needed.

As of January this year, all trusts that pay beyond a very modest level of tax have had to register with HMRC through its trust registration service, but that is a private register, not a public one. The new iteration of the EU’s anti-money laundering legislation will require changes in the UK approach. First, it makes business-like trusts and those managed in the EU subject to reporting requirements, so potentially enlarging the category of trusts that have to register. Secondly, it enables parties with a legitimate interest to access information about those trusts—not just law enforcement agencies as currently—although the decision on who qualifies as having such a legitimate interest will be under the discretion of member states. Finally, this new legislation requires trusts owning EU companies to disclose full information about trustees, settlors and beneficiaries.

--- Later in debate ---

[Helen Goodman (Bishop Auckland) (Lab)]

My hon. Friend is making a fantastically good forensic case this afternoon, but I am still not sure whether I fully grasp the point. Is she saying that the Government have still not set out how they intend to collaborate with the European Union on information sharing for tax purposes, and/or is she saying that this will be an excuse for a lighter tax regime in this country and in the other EU member states, which will no doubt be taken into account when the future framework is being negotiated?

[Anneliese Dodds]

I am very grateful to my hon. Friend for her comments. In fact, I will go on to say both, because that is precisely our concern. So far, the Government have been incredibly vague about what commitments they will make on tax matters in relation to preventing avoidance and evasion. Furthermore, we have had some very, very unhelpful comments—to put it extremely mildly—from the Government about whether they might seek to undercut the rest of the EU on tax matters. I know that my hon. Friend follows these matters very closely, as she does money laundering matters, where I argue that we have not been clear enough about how we will collaborate with others into the future.

Our new clause 5 is directed at another Government blank spot: the distributional impact of their tax measures. It would require an equality impact assessment of the Government’s tax avoidance measures in relation to child poverty, household income levels, people with protected characteristics, and our nations and regions. That assessment is necessary because of the continuing leakage from our tax system owing to avoidance as well as evasion. Failure to deal with avoidance has put pressure on the rest of the tax system, which, as I have just mentioned, has been exacerbated by unnecessary tax cuts to the very best-off people and to profitable corporations. As many independent observers have noted, these tax cuts have tended to benefit the very best-off people and often men rather than women, while £4 out of every £5 cut from Government budgets has fallen on women’s shoulders. The Women’s Budget Group has shown how, out of all household types, lone mothers have been the hardest hit by cuts to services and tax and benefit changes, followed by lone fathers and single female pensioners. Among lone mothers, it is black and minority ethnic women who have lost the most.

[Bim Afolami (Hitchin and Harpenden) (Con)]

Is the hon. Lady suggesting that we should have differential tax rates for men, women and different ethnic groups?

[Anneliese Dodds]

I am grateful for the intervention, because it enables me to make the answer clear. Absolutely not. We are asking for something very simple. Sadly, it is something that this Government have not been willing to provide, which is the information about tax incidence. We do not have that information to the extent that the House needs. The process of analysis has been left to bodies such as the Women’s Budget Group and the Child Poverty Action Group. They have to crunch the data. That is an activity that should be carried out by Government, so that we as Members are able appropriately to scrutinise their policy and practice. We do not have that information at the moment.

[James Cartlidge]

The hon. Lady is being very generous in giving way. As a rejoinder and as a follow-up to the intervention by my hon. Friend the Member for Hitchin and Harpenden (Bim Afolami), that is not the point he was making. He is saying that the implication is that, to change the system, we would need to have discriminatory tax policies to effect a different impact. We cannot just assess it; for it to be different in practice, the measures, by definition, would also have to be discriminatory.

[Anneliese Dodds]

I fear that the hon. Gentleman has yet again made the point for himself. This Government’s approach to taxation so far has affected different groups disproportionately. We can call that discrimination, unequal impact or whatever we like. The fact is that we found out about that not through Government figures, but due to analysis conducted by other bodies. We had a lengthy debate about this during the last Finance Bill, and I am very happy to run through all the arguments again. I suggest, however, that it might be easier for him to read analysis by those expert bodies, which will make the point more eloquently than I could.

[Rachel Maclean (Redditch) (Con)]

The hon. Lady is extremely generous in giving way. I wonder whether she will accept a point made by a member of one of the groups about which she is speaking—that is, by a woman. Does she accept that there are more women in work now due to this Government’s measures, making women better off compared with the legacy left by her party’s Government, of which I accept she was not a member?

[Anneliese Dodds]

I appreciate the hon. Lady’s comments, but is she aware that under her party’s Government, moving into work is sadly no longer the route out of poverty for huge numbers of working women? For example, two thirds of children living in poverty are in working households. Previously, someone who could obtain a job with enough hours would be able to climb out of poverty. That is no longer the case in the UK. Furthermore, as I just mentioned, those who have analysed the impact of tax and benefit changes on different genders have shown very clearly—it is simple to look at the statistics—that £4 out of every £5 cut by this Government have been cut from the pockets of women and from the services that women use.

[Rachel Maclean]

indicated dissent.

[Anneliese Dodds]

The hon. Lady can shake her head at me, but she should shake her head at the Women’s Budget Group, which has shown this very clearly.

[Chris Stephens]

On seriously tackling the tax gap and the lack of analysis that the hon. Lady is identifying, could one of the reasons possibly be the meat cleaver that was taken to the HMRC office network, meaning that there is now a lack of local knowledge? Also, should not the Government employ as many people to tackle tax avoidance as they do for Department for Work and Pensions social security fraud?

[Anneliese Dodds]

I know that the hon. Gentleman has worked on the issue of cuts to HMRC’s capacity, as have many Members across the House. I will return to that important issue soon, because sadly the reality does not reflect the rather rosy picture that we were provided with by the Minister on that subject.

I return to the distributional impact of this Government’s tax measures. We had an interesting discussion about fairness following some comments by the hon. Member for Beckenham (Bob Stewart), who is no longer in his place. The Minister intimated that he was in favour of a fair tax system and said that the wealthiest people pay a large proportion of all tax. He is absolutely right: the wealthiest people do pay a large proportion of income tax. That is because of how wealthy they are. However, if we look at the impact of the tax system on different income groups, we find—I should not say “we” because it is the Office for National Statistics that has discovered this—that the best-off 10% of people pay less of their income in tax than the worst-off 10%. I note that the Conservatives did not contest this statistic when it was mentioned in the House yesterday. Surely that is a ringing indictment of their approach to taxation.

[Chris Philp]

I am delighted that the shadow Minister has given way once again, without sighing this time. The poorest in society are not in tax at all thanks to the increase in the threshold. The richest 1% do indeed pay 28% of tax, but they only earn about 12% of all income, so she will see that the amount of tax they pay is a great deal higher than their share of income.

[Anneliese Dodds]

It is always a pleasure to hear from the hon. Gentleman, who is always a very friendly face. Sadly, however—I feel bad doing this—I do have to correct him on two of the points that he mentioned. He stated that the poorest people will not pay any tax at all. That is simply not the case. Of course, they will pay—[Interruption.] No, no—he said “any tax”. Let us be clear: of course, large numbers of very badly off people pay a lot of value added tax, which is a regressive tax, even with the exemptions that apply to it.

In addition to that, increasing numbers of low-income people across this country are now paying council tax, many of them for the first time, because of the swingeing cuts that the hon. Gentleman’s Government have delivered to local authorities’ budgets for council tax relief. So we now have very large numbers of very-low-income people being taken to court because they are unable to pay their council tax. That situation is novel in our country but some might say it approximates things that happened back in the 1980s, which I am sure that the hon. Gentleman is too young to remember but which the history books have certainly not forgotten.

We also need a thorough understanding of how the failure to tackle tax avoidance affects our different regions, given that austerity’s impact on incomes has been strongest in areas that were already struggling economically. We need a thorough impact assessment of the impact that the failure to deal with tax avoidance is having on child poverty. Yesterday Ministers tried to deflect attention from their record on poverty by using only figures on absolute poverty. They never speak about the measure that is instead used by most academics and experts—relative poverty—because they know that more children are now living in relative poverty under their watch: almost a third of children, in fact. The problem is such that the chief executive of the Child Poverty Action Group has described the Conservative Government as being “in denial” on child poverty.

I will explain why we need to look at relative poverty. We should not look simply at whether people are destitute, as measured by absolute poverty, even though, sadly, many are having to resort to food banks for bare necessities; we also need to look at what people’s incomes are in relation to the living standards that everyone else enjoys. That is why the concept of relative poverty measures whether people are poor in relation to median-income people. Relative poverty matters because it shows whether people can afford to live a decent life.

[Kevin Foster]

That is what absolute poverty measures.

[Anneliese Dodds]

No, it does not. Absolute poverty measures whether people can afford the bare necessities of life. To be able to participate in society—in their communities—they cannot fall so massively behind the median income. We are talking about families whose children cannot go to birthday parties for their friends because they cannot afford a card and a present. For me, that is a failure of our society, and it is to do with relative poverty, not absolute poverty. Over 4 million children in this country are classified as living in relative poverty, and that number is rising, not diminishing.

[Luke Graham]

rose—

[Bim Afolami]

rose—

[Anneliese Dodds]

I will press on for now.

Labour’s new clause 6 would require a review of the Government’s measures presented in this Finance Bill on tackling avoidance, evasion and the tax gap. It would enable us to consider whether the Government’s reactive approach is sufficient, when many of us suspect that it is anything but. Here we are reminded of one of the biggest gaps in this Bill. Despite much fanfare in the Budget, and indeed in the Minister’s comments just now, there is no digital services tax presented in this Finance Bill. Instead, there will be a consultation on the Government’s approach. Of course, even what is in that consultation is less stringent than European-level proposals, and it includes giant loopholes in its safe harbour and double threshold elements.

The hon. Member for Walsall North (Eddie Hughes)—who is still in his place, which is fantastic—talked about the regime for intangible assets. He is absolutely right that we need tax authorities to deal with these issues more appropriately. When I think about the major strides that have been made on taxing profits arising out of those intangible assets, I think of the cases that have been taken by the European Commissioner for Competition against Starbucks and others. She showed, for example, that Starbucks’ intellectual property relating to its roasting processes was not based in the Netherlands, as it claimed, and that that was just a ruse to avoid tax.

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[Bim Afolami]

Does the hon. Lady accept that, when we are dealing with the complexity of international tax treaties, judicial precedent and the rule of law, and given that those treaties and lots of judicial precedent were established at a time when we did not have multinationals in the way we do now, it is only prudent to consult properly before we put measures in place? Does she also accept that this Government have been a leader, according to the OECD and the IMF, in dealing with the problem that she outlines, and that she is not being fair at all?

[Anneliese Dodds]

I am grateful for the hon. Gentleman’s intervention. However, I am sorry to point out that he is slightly behind the times when it comes to the operation of tax treaties. Those are now multilateral, following the development of the OECD’s multilateral instrument, which aims to amend tax treaties for all signatories, including the UK, in a thorough manner.

[Bim Afolami]

I thank the hon. Lady for giving way again. The whole point is that this is all a work in progress, as she would accept.

[Anneliese Dodds]

That appears to be a slightly different point from the one the hon. Gentleman was making a moment ago. None the less, I agree that this is a work in progress. Sadly, our Government and Conservative Members in other jurisdictions have not always been promoting that process. I gently remind him that his colleagues in the European Parliament have consistently voted against measures that would increase tax transparency and have consistently not supported attempts to hold inquiries into, for example, the Panama papers and the Luxembourg leaks. I hope that, at some point, they will catch up with the need for more tax transparency and enforcement. Perhaps he could encourage them; that would be enormously helpful.

It is positive to see in this Finance Bill that the Government have adopted some of Labour’s proposed measures in our tax transparency and enforcement programme. They have finally seen the light on giving HMRC back preferred creditor status. They appear to be undertaking some action against umbrella agencies exploiting the employment allowance. They also appear to be looking towards creating an offshore property levy, although it is unclear to me, even following the Minister’s comments, how appropriately that will be targeted, given that it lacks the precision of Labour’s proposed oligarch property levy. But there are few additional measures in the Bill beyond what is already required by either the EU or the OECD, showing an abject lack of ambition and commitment from this Conservative Government.

Underlying all this, as the hon. Member for Glasgow South West (Chris Stephens) said, is the Government’s failure to appropriately staff HMRC to deal with tax avoidance and evasion and their determination to press ahead with its reorganisation, despite evidence that it is haemorrhaging experienced staff. Some additional money has been provided, which the Minister referred to in his speech. However, we still lack clarity on exactly where that money will go. The Government have committed to provide 5,000 additional customs staff. I still do not know where they will go. We are looking at a situation where, due to the regional reorganisation, there will not be a single HMRC hub along any of the south coast or beyond the central belt. Where customs officials will go is very unclear.

In addition, any additional money that is being provided by the Government, or at least much of it, will in any case just backfill what has been sucked out through the recruitment costs necessitated by the need to replace staff who have been lost due to the reorganisation process.

[Rachel Maclean]

The hon. Lady is painting a very negative picture, which I think is a shame. She should give this Government some credit for the fact that they have collected £71 billion more tax than would have been the case, given the tax regime, under Labour. That is £71 billion that has been collected. We all want to go further, but will she not welcome that money, which has gone into our public services?

[Anneliese Dodds]

I discussed a few moments ago how many of those measures are in fact disputed. It would be interesting if the hon. Lady could break down that figure. I suspect many of us would not agree that it reflects an accurate representation of the tax lost. In fact, as I mentioned, when profit shifting is taken into account, that figure is likely to be much larger.

I am very positive about the potential of our economy, and the potential of our tax officers, but I think they are being presented with an impossible task. I have talked to many of them—dozens of them—and they are very concerned about the future. They want to do a decent job, but they are being prevented from doing so a lot of the time, sadly, due to the Government’s determination to press ahead with this reorganisation programme.

[Eddie Hughes]

Is the hon. Lady aware that, following the Government’s consultation on their intentions for an increased tax take on intangible assets, they have introduced an allowance of £4 million to make amendments to computer systems and to employ more staff so that they can monitor compliance with these new tax regimes? Will she welcome that?

[Anneliese Dodds]

I am grateful to the hon. Gentleman for his intervention but, as I have said, some of the new staff coming in are replacing other staff who have been lost. In fact, when we look at those data, we see that over 17,000 staff years of experience in HMRC have been lost through redundancy. I find that many more experienced specialised staff are talking about leaving our Revenue in the future if the Government press ahead with their reorganisation scheme.

[Mr Jim Cunningham (Coventry South) (Lab)]

We have raised this many times and the hon. Member for Glasgow South West (Chris Stephens) has raised it as well. The Government are reducing the number of tax offices, in actual fact. They are closing the offices in Coventry. I do not know about the constituency of the hon. Member for Walsall North (Eddie Hughes), but people are having to go a long distance—16 miles to Birmingham—to deal with their tax problems.

[Anneliese Dodds]

As always, my hon. Friend has made an important point. We are seeing the loss of many experienced staff in these offices, which is not only a problem for HMRC, but an enormous problem for local economies.

Over the past couple of months, I have visited 10 of the locations where HMRC offices have either already closed or are set to close, and I must say that there is huge concern about the implications for those local areas. They are often ones where it takes a long time to travel to other destinations and where it is impossible to travel to work to the new regional centres. As a result, we are losing much expertise within our Revenue service.

That is reflected in the statistics from surveys of HMRC staff. We see that HMRC staff morale is incredibly low, but we have no recognition of that by the Government or any understanding of the implications of that for the services that HMRC provides. Indeed, as Members have mentioned, that would become even more of a problem if HMRC had to attempt to sort out the customs and VAT chaos that would be caused by a no-deal Brexit.

Our uncertain future relations with the EU are at the root of the penultimate Opposition amendment that I will speak to, amendment 23. The amendment requires a consideration of the implications for cross-border tax information sharing of no deal and of the Government’s withdrawal Bill arrangements. The European Scrutiny Committee asked for

“the Government’s view on the value of continued UK participation in the wider system of exchange of information created by the DAC Directive”—

the directive on administrative co-operation—

“after the post-Brexit transition period ends, and how it will seek to secure the desired level of cooperation when it becomes a third country for the purposes of EU law.”

The Financial Secretary to the Treasury, who is sitting on the Front Bench again today, sent a letter in response at the end of April. On this point, however, his letter simply said that

“the Government recognises the value of the exchange of information in tackling tax avoidance and evasion and will address procedures for ongoing administrative cooperation, including the exchange of information framework set up—”

under the directive—

“within the scope of the wider EU exit negotiations.”

It is one thing recognising the value of information exchange, but it is quite another ensuring that it will continue. We really need clarity from the Government, not only about administrative co-operation but about other forms of information exchange.

For example, will the Government continue to participate in the code of conduct group, potentially with observer status? I have asked about that repeatedly, but as of yet I have received no answer. Will we participate in the pan-EU database including information about trusts, which I referred to and which is due to be created as a result of the new iteration of the anti-money laundering directive? Will we continue to share information about tax rulings, those sweetheart deals concluded between HMRC and large taxpayers, which are not available to smaller taxpayers and which in some cases have rightly caused uproar when details of their provisions have leaked out?

The hon. Member for South Suffolk (James Cartlidge) referred to the need for a level playing field. Surely that applies in spades when it comes to transparency on tax rulings, so I am very disappointed that his Government have not yet provided that transparency. It is not clear how they will share that data with the EU27 in the future.

The Conservatives’ mood music on this issue so far has been worrying. Not only has the Chancellor damaged relations with the EU27 by threatening to turn our country into a tax haven, but his party’s MEPs—[Interruption.] He has. A number of Government Members are claiming, from a sedentary position, that that never happened, but many Opposition Members will recall precisely when he made those kinds of threats. I have talked to many colleagues from different political parties in EU27 countries who viewed those comments—

[Sir Hugo Swire (East Devon) (Con)]

Will the hon. Lady give way?

[Anneliese Dodds]

I will give way when I have finished my sentence. I am so pleased that the right hon. Gentleman is so excited about participating in this debate. As I have said, I have talked to many politicians in EU27 countries who interpreted those comments—discussing a shift towards a Singapore-style model—as a threat. Of course, often when Government Members talk about a Singapore-style model, they omit to mention the huge amount of social housing, for example, in that nation, and other aspects of its business model. I suspect they have a rather different approach in mind when they talk about it.

[Sir Hugo Swire]

The hon. Lady, who speaks for the Opposition, said she can specifically say when my right hon. Friend the Chancellor made these assertions or claims. When were they made?

[Anneliese Dodds]

I would be more than happy to look up that reference and send it to the right hon. Gentleman immediately. I regret that he cannot remember his own Chancellor’s words and that he is unaware that there have ever been comments from his Government suggesting that the UK may at some point shift towards a Singapore-style model. I regret that he is unaware of the comments that have so soured our relationship with the EU27, because I know that they have caused enormous problems for us. They have presented a picture of our country as seeking to undermine and undercut tax arrangements in the rest of the EU27. For that reason, it is enormously important that those comments should be counted.

If the right hon. Gentleman believes that his Government will no longer use that threat, I will be very pleased to hear it, and I would suggest that he perhaps has conversations with those members of his Government who have advocated that point of view.

[Chris Philp]

Will the hon. Lady give way?

[Anneliese Dodds]

I will not give way, because I fear that the Committee is losing patience with the length of my comments. [Hon. Members: “More!] It is wonderful to see so much interest in the topic of taxation; I only wish that were always the case.

The Conservatives’ mood music on this issue has been worrying, as I have said. As I have referred to previously, the Conservatives’ MEPs have consistently either voted against or abstained on EU-level measures to promote tax transparency, and the Conservative Government were, sadly, unwilling to meet representatives from the European Parliament’s Panama papers investigative committee when they came to the UK.

Our amendment 23 would force these issues into the open and require a proper consideration by Government of how they could act to ensure proper data sharing, in order to combat tax avoidance and evasion. It is paralleled by our amendment 19, which would require the Government to undertake a review of our controlled foreign companies regime, with particular consideration of how it would be affected in the event of a no-deal Brexit.

The Conservative Government appear to treat countering tax avoidance as a game of whack-a-mole, rather than the long-term strategic approach that is surely required. As a result, we wish to press new clause 5 and amendment 23 to a Division.

In conclusion, the Government have no long-term plan for protecting the revenue on which our public services rely and appear to have no clear idea of how they will co-ordinate, or otherwise, our measures on tax avoidance with the EU27. A different approach is needed and my party stands ready to implement it as soon as we get the chance.

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[Chris Philp]

My hon. Friend is quite right. Having low and competitive rates of tax does attract people to this country, who then pay corporation tax they otherwise would not pay. I will come on to precisely that point in a few moments.

The reason I was explaining why it was not surprising that our tax gap has reduced is that the Government have taken quite a large number of measures to combat tax avoidance and tax evasion since 2010. In this Budget alone, there are 21 such measures. I was rather disappointed that by voting against the Budget on Second Reading, Opposition Front Benchers were expressing their disagreement with those 21 anti-avoidance and anti-evasion measures.

[Anneliese Dodds]

I fear, very sadly, that the hon. Member did not hear what I said on that point earlier. It is because those measures are far too weak and do not go far enough that we are voting against them. I set that out very clearly in my previous remarks.

[Chris Philp]

I am not sure that that is a very good basis for voting against something. A move forward is a move forward. I have yet to hear a detailed and coherent set of proposals that would take these measures further forward. I am sure that those on the Treasury Bench are always eager to receive ideas on measures that would raise revenue. If the hon. Lady wanted to propose ideas on the Floor of the House, I am pretty sure she would find a ready audience. One such measure, the diverted profit tax, has directly raised £700 million since 2015. In addition, it is interesting that businesses talk about not just the direct effect of the diverted profit tax. Some companies, realising that they might be caught by the diverted profit tax, choose to change their behaviour and effectively choose to pay ordinary corporation tax in a more compliant way. That does not appear in the diverted profit tax figures, but it is none the less successful in changing behaviour.

[Anneliese Dodds]

I am very grateful to the hon. Member for giving way; he is being very generous. I would like to mention, however, that I did refer in my speech to Labour’s tax transparency and enforcement plan. In fact, I referred to three cases where the Government have rightly learned from that plan, which is fabulous, and are either completely or partially adopting some of our suggestions. There are, however, many other areas where they need to take action. They should look at our plan and learn.

[Chris Philp]

The fact that the Government have adopted three measures shows that they are not only a Government who listen and adapt, but a Government who have taken more than 100 anti-avoidance and anti-evasion measures since 2010. That is a record the Government can be proud of, although there is always more that can be done. I will come on to one idea later.

The hon. Lady suggested in her very long and at times entertaining speech—perhaps inadvertently entertaining, but it was entertaining—that the Government had not shown leadership in the area of organising international co-operation to combat tax evasion. She also said it was a concern that we are leaving the European Union as we might lose that as a forum in which to combat tax evasion and tax avoidance. The most effective forum is the OECD’s BEPS initiative—the base erosion and profit shifting initiative. The UK Government have been a leader in this area—for example, on action five, which limited the deductibility of interest payments against corporation tax. That is another area where the UK Government have shown genuine global leadership.

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[Chris Philp]

My hon. Friend is right to draw attention to the way in which very favourable tax systems can indeed attract companies to this country. We should be proud of the fact that we are attracting the world’s leading companies to the United Kingdom.

I am sorry to refer to the speech by the hon. Member for Oxford East so often, but it was a very full speech and there was a great deal to reply to. She suggested that the Chancellor of the Exchequer said that our plan was to become a tax haven. He never used the words “tax haven”, but he did say that we could be a tax competitive economy. There is nothing to apologise for in saying that we will be a tax competitive economy and attract companies to locate here. If there is a tax haven in Europe, it is Luxembourg, so the hon. Lady should reserve her ire for that jurisdiction.

[Anneliese Dodds]

I am very grateful to the hon. Gentleman for giving way; he is being very generous. I have not been reserved in showing my ire for Luxembourg; in fact, I have campaigned for a long time in relation to its tax practices. I am very glad that he has given me the opportunity to respond on this point, because I looked up exactly what the Chancellor did say. He was asked by the newspaper Die Welt in January 2017 whether the UK would become a “tax haven” for Europe, and he responded that the UK could be “forced” to abandon its European economy with European-style taxation. When the Prime Minister’s spokesperson was asked if she agreed with this assessment, she confirmed that the Prime Minister was in agreement and would stand by him.

[Chris Philp]

The words “tax haven” were not his, and what he clearly confirmed in response was the he intended to create a tax competitive economy, which we can all be proud of, and I will certainly support him in creating it.

I feel that I should move on—although I will happily take more interventions—to new clauses 14 and 15, which were spoken to by the hon. Member for Glasgow Central (Alison Thewliss), the SNP’s Front-Bench spokesman. In her speech, she drew attention to the importance of transparency, and she was right to do so. We have already made significant moves on limited companies and limited liability partnerships. Persons of significant control now have to be disclosed on the Companies House register, and I fully agree with her that that should be comprehensively enforced.

Finance (No. 3) Bill (Second sitting)

Anneliese Dodds Excerpts

Committee Debate: 2nd sitting: House of Commons
Tuesday 27th November 2018 Public Bill Committees

[Peter Dowd]

It would be. That goes to the heart of the point. We want to tease this issue out and have a review. I know we have raised a million and one issues for review, but that is as much as we can do in the current climate. That is what we want to do: we want to tease all these matters out.

[Anneliese Dodds (Oxford East) (Lab/Co-op)]

Does my hon. Friend agree that a review would enable us to tease out some of the matters that were presented to us and to explore some of the expert information that has been provided to us? For example, the Institute of Chartered Accountants in England and Wales tax faculty said that the clause will lead to a tax charge so, for example, emergency repairs will be initially paid for or arranged by an employee and then met by the employer. If we had a review, we could look into that matter and others in more detail.

[Peter Dowd]

That organisation is always helpful, and it points us in the direction that the Government should go in. That goes to the point I am making.

Many proposals have come back to bite us, so we need a proper review to see how they are bedding in. For example, according to the Society of Motor Manufacturers and Traders, the automotive industry employs 168,000 people directly in manufacturing, and more than 856,000 are employed across the wider industry. It accounts for 12% of total UK exports of goods, and invests £3.65 billion each year in automotive research and development. More than 30 manufacturers build in excess of 70 models of vehicle in the UK, supported by 2,500 component providers and some of the world’s most skilled engineers. The automotive industry represents 1% of all employment in the UK and 7% of all manufacturing. It is also one of the few industries in the United Kingdom that has had a huge productivity increase since the financial crisis. The manufacturing of motor vehicles went from 5.4% of UK manufacturing in 2007 to 8.1% in 2017. Those figures do not, however, reflect the role that the automotive industry play in communities across the nations and regions of the UK, and the impact that a fall in sales or rentals relating to optional remuneration might have.

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[Kirsty Blackman]

This is a process question for the Minister about going forward and ensuring that we scrutinise legislation in the best way. It would have been helpful if, in the explanatory notes, there had been some comment provided by the Scottish and Welsh Governments because both measures involve making changes that affect devolved benefits.

Given the devolved and reserved aspects of many of the matters we are discussing, I again make the case for a geographical split in the changes that the clause makes. There could have been specific Scottish, Welsh, RUK or whole UK sections, which would have made effective scrutiny easier. I emphasise that it would have been incredibly helpful to have that. I suggest for next year’s Finance Bill that, if the Government make changes of this nature, they could make both changes to ensure the most appropriate scrutiny.

I am happy to support the Opposition amendment. The hon. Member for Bootle made a powerful case about the gendered impact of the social security changes of recent years and the fact that women have been disproportionately hit by them. We do not want to see those changes exacerbated by a tax system that amplifies the issues faced by women as a result of the Government’s policies on social security. I am comfortable supporting the Opposition’s amendment and I plead with the Minister to consider making the changes that I have requested for future years.

[Anneliese Dodds]

It is an enormous pleasure to be in this Committee with you in the Chair, Ms Dorries, and to make my first brief speech here. I would like clarification from the Minister on the specific issue of tax treatment of council tax reduction schemes. Subsection (5) on page 8 of the Bill refers to “a” council tax reduction scheme, stating that

“Payment under a council tax reduction scheme”

is exempt from income tax. However, page 26 of the explanatory notes refers to

“the” council tax reduction scheme.

I am sure that colleagues will know that there is no longer one council tax reduction scheme across the UK, since central Government decided to top-slice that form of social security and devolve the design of it to different local authorities, albeit with the stipulation that the protection should be maintained for older people. Only a very small number of local authorities still provide full council tax relief, including council tax relief for low-income families. I am enormously proud that Oxford City Council is one of those.

Central Government have washed their hands of responsibility for this benefit. They have refused to provide figures on take-up, for example, in response to parliamentary questions that I have tabled. They have also refused to provide figures on the number of low-income people now being taken to court because they cannot pay council tax, because they are no longer provided with the relief. I am not cavilling over semantics when I ask the Minister to make crystal clear that the exemption from income tax provided in the Bill will apply to all council tax reduction schemes, not to some particular version of those schemes that the Government might wish to focus on.

Related to that, I heard a very worrying rumour that the Government might seek spuriously to argue that funds spent on council tax relief for families by local authorities should not be counted in central Government’s assessment of local authorities’ expenditures, because they are, in theory, discretionary. I disagree fundamentally with that position, because it would penalise those authorities that support the worst off. It would be helpful if the Minister confirmed that, just as I hope he will confirm that council tax relief for families is viewed as legitimate in the Bill, and for income tax purposes, it will be viewed as legitimate expenditure when it comes to the allocation of central Government support for local authorities.

[Mel Stride]

I start by addressing the specific points raised by the hon. Members for Aberdeen North and for Oxford East. On the explanatory notes and the value or otherwise of a specific reference to input from the Scottish Government, I will certainly be happy to look at that in the future. I assure the hon. Member for Aberdeen North that there were significant discussions on these measures between the Treasury and Scottish officials in the appropriate manner. On the technical point raised by the hon. Member for Oxford East around “the” scheme versus “a” scheme, the information I have is that the scheme came into force in April 2013. However, I will look into her specific question about whether the measures apply to “a” scheme or “the” scheme. I am afraid that I do not immediately have an answer to that, but I will get back to her as soon as I can.

Clause 12 clarifies and confirms the tax treatment of nine social security benefits. The income tax treatment of social security benefits is legislated for in part 10 of the Income Tax (Earnings and Pensions) Act 2003, which provides certainty about existing benefits and needs to be updated when new benefits are introduced. For example, the Scottish Government are introducing five new payments following the devolution of powers, including the young carer grant, the discretionary housing payment and the carer’s allowance supplement. Other payments covered by the clause have been in operation elsewhere in the UK for some time, such as the council tax reduction scheme and the flexible support fund, but are not yet covered clearly in legislation.

The changes made by clause 12 ensure that such payments are taxed appropriately, and that that is clear in legislation. The clause clarifies and confirms that such payments are exempt from tax, with one exception—the carer’s allowance supplement—which is taxable. That is in accordance with “The agreement between the Scottish Government and the UK Government on the Scottish Government’s fiscal framework”, which states:

“Any new benefits or discretionary payments introduced by the Scottish Government will not be deemed to be income for tax purposes, unless topping up a benefit which is deemed taxable such as Carer’s Allowance.”

Amendment 2 would require the Chancellor of the Exchequer to review the revenue effects of the clause and lay a report of that review before the House within six months of the passing of the Bill. Such a review is unnecessary. The Government have already published a tax information and impact note for this measure, and our assessment, supported by the OBR, is that the Exchequer effects are negligible.

On the carer’s allowance supplement, which was introduced in Scotland in 2018, as a general rule benefits are taxable if they replace lost income. The carer’s allowance has therefore always been taxable. The vast majority of those receiving the supplement have income below the personal allowance and would therefore not be expected to pay any income tax. That is an important point in respect of the point made by the hon. Member for Bootle. I will not dwell on each payment covered by the clause, but I reiterate that eight of these payments are exempt from taxation. HMRC has not and will not collect any tax from these payments.

As the tax information and impact note sets out, the taxation of the carer’s allowance supplement is expected to have negligible Exchequer effects because, as I have said, the vast majority of those carers receiving the additional payment do not earn sufficient income to pay any income tax at all. However, any income tax receipts from that will of course go to the Scottish Government.

The Committee will also know that taxable social security income is aggregated and reported to HMRC through self-assessment after the end of the tax year. This is an important point in the context of the amendment. That income will not need to be reported until January 2020. A review would therefore be impractical only six months after the Bill’s passing. I therefore ask the Committee to reject the amendment. I commend the clause to the Committee.

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The Government therefore reject the amendments, and I commend the clause to the Committee.

[Anneliese Dodds]

I am grateful to the Minister for that explanation. As he stated, this clause and schedule are intended to perform a variety of functions to level the playing field—the number of times that he used that phrase was interesting—between UK and non-UK residents when it comes to the payment of corporation and capital gains tax on gains from disposals of interest in UK land. They include, as he mentioned, the removal of the charge to tax on ATED-related gains, with ATED standing for the annual tax on enveloped dwellings. As was mentioned, these changes follow on from the imbalance in the tax treatment of the disposal of interests in property by individuals as against companies, artificial or otherwise, which has been gradually rectified over recent years.

Part 3 of the Finance Act 2013 introduced ATED as a principle and the concept of enveloped dwellings so that there would be a capital gains tax charge on non-natural persons who had owned properties worth more than £500,000, subject to a range of exemptions. That was followed three years ago by the extension of capital gains tax on gains arising on the disposal of UK residential property interests by certain non-resident persons, including individuals, trustees and closely held companies. However, that was not accompanied by a levelling of the playing field in relation to non-residential property wealth—land and commercial property—until now, although for reasons that I will explain, these measures are wanting in their current form, in particular because they involve a so-called trading exemption, to which I note the Minister, unless I misheard him, and he is normally very clear, did not refer in his comments. I shall speak first about that main and very significant problem with the clause and schedule, before moving on to describe the amendments in relation to them.

In an ideal world, we as the Opposition would have sought to remove the trading exemption for enveloped structures to avoid capital gains tax. Indeed, that is what some of the amendments that we had tabled set out to do. I completely understand why they were ruled out of order. There is absolutely no criticism of the decision to do that. I am sure that it was because of the restrictions imposed on us because of the Government’s failure to table an amendment to the law resolution, which my hon. Friend the Member for Bootle has already referred to. However, that trading exemption threatens to emasculate this measure.

I am sure that members of the Committee will be aware that almost all the measure’s projected yield is expected to derive from non-resident companies when they dispose of UK commercial property such as offices, factories, warehouses, shops, hotels, leisure facilities and agricultural—

[The Chair]

Order. Amendments 26 and 27 were not selected because they are charging, not because of a lack of an amendment of the law resolution.

[Anneliese Dodds]

I am grateful for the clarification. I am sorry if I got the situation wrong, and it is helpful to have heard that. However, I understand that it is appropriate for me to discuss the substantive matters in the clause, even if we do not have amendments tabled on them. Other hon. Members have done that, so I will continue to do so before I move on to my amendments, if that is acceptable. I am sorry if I mischaracterised the position and the decisions that were taken.

[The Chair]

That is fine.

[Anneliese Dodds]

To continue with reasons why the trading exemption is illegitimate to our mind, as I mentioned before, the yield that has been described as arising from the measure is expected to derive from non-resident companies disposing of the whole range of different types of UK commercial property that I listed. Unlike residential property, most of which is owned by individuals, almost all major UK commercial property is held by large corporates or collective investment schemes or trusts.

Those large corporate investors in property are sometimes known as property envelopes, which reflects the fact that the companies’ principal purpose is to operate as a synthetic wrapper for owning land. Since the property envelope has full title to the land, any individual or other corporate owning the property envelope—for example, by owning its shares—is the ultimate or indirect owner of the underlying land.

Typically, when selling the property, the ultimate owners do so indirectly, by selling their interests in the property envelope, rather than by a direct sale of the property itself. That form of disposal is often known as an envelope disposal, since the property envelope has full title to the land, and the transfer of its shares to a new owner is tantamount to a conveyance of the property to new ownership. There are often tax reasons for that form of conveyance, since the transfer of shares, rather than land, does not attract any stamp duty land tax charge, which results in a substantial saving for the purchaser.

Recognising that situation, the consultation on the proposed measures proposed charging non-UK residents capital gains on disposals of their interest in property envelopes in the same way as if they had sold the actual land. The consultation document proposed that a property envelope would be defined as a property rich entity if it had UK property assets that represented 75% or more of the value of the entity’s total assets, as the Minister mentioned. Given that the vast majority of high-value UK commercial property is owned through a property envelope, that element of the rules, which I will refer to in future as the anti-enveloping rule for ease of discussion, is critical to the measure securing significant yield.

In response to the consultation responses that the Government received, the draft legislation includes an exception to the charge on disposals of property envelopes if the property owned in that envelope is being used in an ongoing trade that continues after the disposal takes place. In effect, that means that non-residents who make a disposal of shares in a property envelope will not be subject to any charge, provided that the property is being used for a trade.

That condition will be met if the property is being used as an office, a factory, a warehouse, a shop, a hotel, a leisure facility, in a farming trade or for any other similar commercial purpose—I am sure the Committee gets my drift. As such, the exception is surely entirely contrary to the stated rationale for the measure, which is to ensure that non-residents are taxed on gains from the disposal of commercial property in the same way as UK residents. Again, I remind the Committee that the Minister used the phrase “having a level playing field” several times in his remarks. Commercial property will, almost by definition, be used in a trade.

I am sure that the entire Committee will be scratching their heads and asking why the change occurred. Well, there were 120 respondents in all to the consultation, a number of which focused on one question only, many of which came from the most significant actors in this arena, namely the big four and large property concerns, including representatives from the real estate and collective investment scheme sector.

The Government response to the consultation states:

“Many respondents were concerned by”—

what they described as—

“the ‘cliff-edge’ nature of the 75% property richness test. They noted that fluctuations in the value of property and other assets could lead to cases where an entity strayed in and out of property richness. Some were concerned that real-estate rich trades such as retail and hotel chains and utility companies could fall to be property-rich, or that investors in these trades might be concerned that they were, and be forced to go to lengths to explore the rules and test their situation, often finding that there was no impact. To ameliorate this, a number of respondents asked for a trading exemption to make it simple for smaller investors to understand when the rules did not apply to them. They noted that the main policy aim was to tax UK land, not interests in retailers or utility companies.”

The Government response went on to say that,

“the government will agree to add a trading exemption. When a disposal is made of an interest in an entity that is trading both before and after the disposal, as for connected parties under the Substantial Shareholdings Exemption rules, then it will not be considered to be an indirect disposal of an interest in UK land”—

That is, it will not be treated as an enveloped disposal.

“Although the government does not intend to provide a specific exemption for infrastructure, a trading exemption should also deal with instances where the infrastructure disposed of is in use as part of an ongoing trade being disposed of alongside it in the arrangement.”

Surely, that exemption will undermine the overall intent of the measure. First, the main target of the legislation is enveloped disposals of commercial property made by non-residents. Almost all commercial property will, as I mentioned before, by definition, be used in a trade. The examples of commercial property given in the consultation document—offices, shops, industrial units and hotels—are all examples where the property is used in a trade, yet these disposals will be outside the scope of the new rules, provided that the sale is an enveloped one, and that the trade continues under its new ownership.

That is in clear contrast to the situation for UK residents. An equivalent disposal made by a UK resident is chargeable to tax, unless it meets specific conditions laid out in those substantial shareholding exemption rules—the SSE rules, which the consultation response referred to. The original consultation document was clear that non-residents would be able to benefit from the substantial shareholding exemptions in the same way as UK companies. However, the response document, as I just described, goes further than that: it grants a blanket exemption available only to non-residents and in circumstances much wider than the SSE.

Frankly, I very much doubt that many property envelopes or large investors involved in them would go to the lengths of requiring ongoing trades in their ownership—say, a popular hotel—to close while they are selling that commercial property, just so that they can have the joy of paying stamp duty land tax. If the Government think otherwise, perhaps they can enlighten us, but I think the chances of that are fairly slim. That appears to be what would be necessary in order for them to be caught by this measure. Perhaps the Minister can enlighten us, if I have got that wrong.

This trading exemption undermines any claim that the measure creates a level playing field with comparable UK businesses, and also provides an avoidance opportunity that, worryingly, even UK businesses could exploit, if they arrange for their UK property to be held through chains of offshore envelopes. That is surely something that our Government cannot stand by and facilitate, yet they seem to be doing so—albeit unwittingly, I am sure.

The Government’s stated reason for making this change is to help smaller investors, but if that is the aim, surely it would be more appropriate to include an explicit small-investor exemption that would not apply to larger capital gains.

--- Later in debate ---

[Anneliese Dodds]

I am grateful to the Minister for those comments, but I would like to clarify a few points, so that we are not talking at sixes and sevens. In relation to the trading exemption, the point is not that it would exempt certain categories of business as opposed to others, but that it would exempt those businesses that are trading before and after the disposal, so it introduces a new concept that is not applied to UK-resident investors to the same extent. That is what is relevant, rather than whether we are talking about a supermarket or not. That would be relevant to the property richness test, but the trading exemption is a separate element of the Bill that I was trying to push on.

In relation to the 25%, the Minister always valiantly attempts to support his Government’s policies. He is right that a figure must surely be attached to any numerical proposition in a Bill. He tried to do that here and said that 25% had been arrived at. The suggestion was that any figure could be contested. Again, it is not the specific value of that figure that is problematic, but what the figure refers to. My contention was that the Government should focus not necessarily on the proportion of the gain, but on the value of the gain. His Government have decided to focus not on the value but on the proportion. As I said, 25%—or rather, 20%—of a gain could be £1 million, which is a tremendously large value, but it could be a smaller proportion if it is just 20%.

[Kirsty Blackman]

Does the hon. Lady agree that having both of those in the Bill would be useful, so we could have the 25% figure or gains over £200,000, or any such figure as the Government deemed appropriate?

--- Later in debate ---

[Anneliese Dodds]

The hon. Lady is absolutely right. The Government are quite keen on double thresholds in other contexts, so this is a case where a double threshold could be introduced if they were concerned about protecting those small investors. One could have both a measure related to the proportion of the gain and one related to the value of the gain. That could be very sensible.

I am grateful to the Minister for his comments on tax treaties, but I was trying to get at whether he feels that the reference in the legislation—I cannot remember the exact term used in the explanatory notes, but it is something like referring to the “intent” or “spirit” of the tax treaty, rather than the letter—is sufficiently legally watertight. I am concerned that it would not be, because many people who have moved their tax affairs to Luxembourg to avoid tax are quite adept at reading just the letter and not conforming with the spirit, when they want to.

Finally, in response to the question from the hon. and gallant Member for Poole—

[Sir Robert Syms]

I am not gallant.

[Anneliese Dodds]

I am a new Member and I am always getting my fingers rapped about how to refer to other Members. I never want to upset anyone, so I hope I have not upset the hon. Gentleman.

If we look at the proportion of the commercial property market owned by non-UK investors, we see that there has been a change over time. We should surely consider that when we look at the impact or otherwise of Government policy, as well as the absolute amount of tax revenue that will go up since absolute figures go up because of inflation and so on. I do not wish to try the patience of the Committee, so we will not press our amendments to a vote.

Question put and agreed to.

Clause 13 accordingly ordered to stand part of the Bill.

[The Chair]

Ms Blackman, do you wish to move amendment 34?

Finance (No. 3) Bill (Seventh sitting)

Anneliese Dodds Excerpts

Committee Debate: 7th sitting: House of Commons
Thursday 6th December 2018 Public Bill Committees

[Clive Lewis]

My hon. Friend makes a very valid point. The point has not been lost on many people, including in my own city of Norwich, where some people are part of a court case against the Government on this issue and on others relating to climate change. It is something that many people are concerned about, especially given the impact on very young children, who are often lower to the ground and closer to the fumes. I welcome the point my hon. Friend has raised.

This issue is directly relevant, because an element of VED revenue take, including the extra amount raised by the clause, is ring-fenced to provide a fund of about £500 million for air quality. Londoners are contributing to this, in common with the rest of the country. The Government have allocated about £255 million of that funding for clean air zone implementation and another £220 million for the clean air fund, including supporting measures to soften the impacts of clean air zones on the poorest and on small businesses. They also allocated an extra £20 million to £25 million in the Budget for city air quality measures.

London, however, is excluded from all that funding. The Government previously said that this is because London received a generous air quality settlement in 2015 under the then Mayor, who is now better known as the failed former Foreign Secretary. Frankly, that is an absurd claim, and I hope the Minister will not stretch his credibility by repeating it to the Committee today. In reality, the Government reduced the revenue grant by a far greater amount than any extra funding for air quality, reducing it from £700 million to nothing in this financial year. The Mayor’s office received no air quality funding from the Government as part of the last comprehensive spending review. Unlike other cities, London is not getting help to implement the ultra low emission zone, and nor can the Greater London Authority access the mitigation funding to help small businesses and low-income people in other cities to meet new vehicle emission standards. That is perverse.

In addition, that predates the changes to VED, which Londoners are contributing to, and ignores the fact that, quite frankly, the current London Mayor has far greater ambition on air quality than his predecessor did. London is introducing the first, biggest and most ambitious clean air zone—the ultra low emission zone—on 8 April 2019. This is an essential part of the national air quality plan to achieve compliance with our legal obligations.

[Anneliese Dodds (Oxford East) (Lab/Co-op)]

Is my hon. Friend aware that my city, Oxford, is due potentially to be the first city in Europe with a zero emissions zone? We need more support for such initiatives from the Government—more than has been forthcoming up to this point.

[Clive Lewis]

Yes, I was aware of that. Labour local authorities in Oxford and across the country do fantastic work on the issue, but they often do so in isolation and with limited support from central Government. The Government should really be getting behind them, given the severe impact that poor air quality can have, not just on children, but on all of us—it is now believed to be connected to the onset of Alzheimer’s and other degenerative diseases.

The London Mayor has proposed a targeted scrappage scheme that uses camera data to ensure that only vehicles that are regularly in the ultra low emission zone receive scrappage funding. The proposal meets the criteria set out in the five-case model in the Treasury’s Green Book and has a positive business case ratio.

Will the Minister confirm that none of the general VED revenue will be spent in London, because the Treasury plans to give it to Highways England to maintain strategically important roads outside London? Strategically important roads in London are maintained by Transport for London without any Government support or a share of VED income. Frankly, I suspect that any assessment made under our amendments would reveal that money is available from the proceeds of VED, which of course will rise under the new rates proposed in clause 57. I am also confident that any assessment under amendment 111 would show that reducing harmful emissions in London is vital to our national effort on climate change and air quality, let alone the fact that it would address the suffering of ordinary people in our most congested city.

It is fair to say that there is a strong suspicion that the Government’s political refusal to support Londoners owes more to Londoners’ refusal to support them at the ballot box than to the best interests of the city or the country as a whole. If the Minister wants to dispel that impression, will he clarify what share of VED revenue comes from London now and what share he expects to come from London after the passage of the Bill?

--- Later in debate ---

[Clive Lewis]

I am pleased to be speaking—again—to our amendments relating to clause 58, on vehicle excise duty and taxis capable of zero emissions. The clause seems to rectify an obvious mistake made by the Treasury during the 2017 Budget, which saw electric vehicles fall into the luxury vehicle segment of the new VED regime for cars costing over £40,000.

VED rates are based on carbon emissions, and zero-emissions vehicles below £40,000 have a zero standard rate and a first year rate. Standard rate on zero-emissions vehicles above £40,000 is currently £310 a year for the first five years. To include electric vehicles in that policy was clearly a major oversight by the Treasury in last year’s Budget. The correction, although somewhat late in the day, is none the less welcome and, indeed, essential if we are to seriously encourage the uptake of electric vehicles, specifically taxis.

[Anneliese Dodds]

I am sure that my hon. Friend is aware that back then, Opposition Members warned about the potential unintended consequences of those measures, including for the private hire and taxi industries. Those warnings were not heeded at the time. It is rather frustrating that they have only now been dealt with.

[Clive Lewis]

My hon. Friend makes a very good point; that is one lost year of support.

To include electric vehicles—ah, I have already said that. I will recap, though. [Laughter.] To include electric vehicles in that policy was clearly a major oversight by the Treasury in last year’s Budget. The correction, although somewhat late in the day, is none the less welcome and, indeed, essential if we are to seriously encourage the uptake of electric vehicles, specifically taxis.

That is particularly pertinent as local regulations are tightening around clean air and greenhouse gas emissions, as we have seen with the implementation of the ultra low emissions zone in London. Amendments 112 to 114 require the Government to undertake a review that we believe is essential to understand the consequences of the clause, which range over the impact that it is likely to have on the Exchequer, on the taxi and private car rental industry, and on CO₂ emissions and climate change targets. Amendments 112 and 113 focus on the economic impact of the clause, both on the Exchequer and on taxi and private car rental companies. Can the Minister provide an assessment of the revenue implications of the measure?

Similarly, while we understand from the published documents relating to the clause that industry response to the Government consultation was supportive, will the Treasury do further analysis of the potential economic impact on taxi companies and the private car rental industry, should the change come into effect? The Minister may wish to resist the amendments, but regardless of any legal obligation, will he commit to conducting such an analysis and presenting it to the House in due course?

Amendment 114 refers to carbonisation and improving air quality. It would seem, in that respect, that taxis are low-hanging fruit. They are used frequently, often in urban areas with poor air quality. Similarly, according to the Mayor of London, drivers stand to benefit from lower fuel costs—by around £2,800 a year—and from avoiding present and future congestion and air quality charges. We believe, however, that the Government have failed to put in place necessary fiscal incentives to encourage the transition to the electric vehicles needed to ensure a reduction in CO₂ emissions. Simply removing the excess tax for luxury vehicles, as the clause would do, does not go far enough to encourage the uptake of zero-emission vehicles.

The primary driving forces behind the reluctance to take up electric vehicles are cost and an anxiety about range. The costs of electric vehicles are explained by high manufacturing costs, specifically of their batteries. The anxiety about range affects taxi drivers far more than private vehicle owners or private car hire companies, as they do not have access to the range in the ultra-low emissions vehicle segment of the market for mid-range to luxury. That is due to licensing conditions, as they need to fulfil accessibility requirements. In London, for example, that means that many drivers are mandated to buy a London-style hackney taxi in many districts. Will the Minister agree to assess the impact of clause 58 on CO₂ emissions and the UK’s climate change targets, and whether that policy goes far enough in encouraging the purchase of zero-emissions taxis?

I have a few questions on the clause. At present, a grant of £7,500 is available for new zero-emissions taxis. We believe that the Government should be looking to increase available grants and encourage the transition to electric vehicles, specifically taxis, in areas outside Greater London. There are currently only a few limited pots of funding, not all of which are available for taxis, and they are largely skewed towards Greater London.

Similarly, the Government have yet to invest a penny of the £400 million charging fund announced in the 2017 Budget, half of which should be public money, with the other half contributed by the private sector, as we have already heard. Will the Minister tell us whether the issue that the clause seeks to rectify will aid the Government in finally setting up the charging fund that they promised to deliver to encourage the use of zero-emissions vehicles? Will he give us a clear timetable of when that fund will be operational? Will he commit that he or another relevant Minister will come back to the House with more detail when it is due to launch?

Available charging infrastructure is a requirement of accelerating the transition. Outside London and a few select places, availability is poor. Drivers face a postcode lottery that is a barrier to electric vehicle growth. For example, there are more chargers available in the Orkney Islands than in Blackpool, Grimsby and Hull combined. Even if grants are available, drivers in some areas will be unable to perform their work using EVs, due to the unavailability of charging infrastructure. It could therefore be argued that even if the Government increased grants and ensured that availability, poverty of EV infrastructure would mean that a majority of taxis would not be in a position to benefit from the change suggested in clause 58. Will the Minister comment on that? What assessment has been undertaken of the availability and adequacy of the infrastructure, and what steps are being taken to ensure that it does not undermine the good intentions behind the clause? Although the current situation is a mistake, it should not have happened in the first place. The measure is important in seeking to undo the bias created by classing zero-emissions taxis as luxury vehicles, and in encouraging the uptake of zero-emissions vehicles.

We will support the clause—we ask only that the Government assure us that the right analysis will be done to assess the impact of the measure on the Exchequer, the companies that will be affected, and the environment. We urge the Government to take such matters into consideration. I hope the Minister can give us some assurance on those points.

Finance (No. 3) Bill (Ninth sitting)

Anneliese Dodds Excerpts

Committee Debate: 9th sitting: House of Commons
Tuesday 11th December 2018 Public Bill Committees

[Anneliese Dodds (Oxford East) (Lab/Co-op)]

It is a pleasure to see you in the Chair again, Ms Dorries. I agree with many of the comments of the hon. Member for Aberdeen North. I will first speak to our amendments that push in a similar direction to the Scottish National party’s, before moving on to those that highlight other shortcomings of the clause.

To address the effect of the extended time limits on vulnerable taxpayers, our amendment 139 would introduce a de minimis threshold of £50 for the extended time limits, pushing in a similar direction to SNP amendments 105, 106, 107, 137 and 138. It follows the advice of the Chartered Institute of Taxation’s low incomes tax reform group, which raised concerns about the clause. Its written evidence states:

“LITRG remain deeply concerned about the impact of these changes on low income, unrepresented taxpayers.”

Our amendment seeks to restore a sense of balance to the new procedures set out in the clause. Given the serious restrictions on amending this legislation, which we have raised many times in this Committee, we are not able wholly to reform the process, but we think our amendment would improve the clause by making a moderate change that has been requested by groups that have lobbied Committee members. LITRG’s written evidence continues:

“In order to reduce the impact of the measure, the Government should introduce a de minimis threshold for the extended time limits to apply. For example, the approach taken by HMRC in assessing trivial amounts under the Worldwide Disclosure Facility (WDF), e.g. where the net amount due after applicable reliefs is no more than £50, may be suitable.”

Why might a de minimis threshold be necessary? LITRG points out that the changes

“only affect those who have acted non-deliberately and they erode the distinction…between those who take reasonable care and those who are careless.”

It further notes:

“Threatening letters from HMRC cause a great deal of unnecessary distress”—

particularly to vulnerable people who may not understand why they have been contacted. Surely it would be sensible to focus HMRC’s resources on dealing with large-scale tax evasion, rather than on people—especially older people—who may accidentally have failed to pay a very small amount of tax. I hope that the Minister will consider accepting amendment 139 in the spirit in which it was intended: as a genuine improvement that would protect vulnerable people.

Amendment 140 would introduce a public register of companies included under the changes. It relates to Labour’s wider policy, which we have pushed several times in this Committee, of having a public register of offshore trusts. It would be wonderful if the Government decided that they wanted to accept that policy now. Perhaps they will do so in this potentially final sitting. Who knows? We can always hope.

To further address the potential effect on vulnerable people, amendment 141 would require the Chancellor to review the impact of the changes in relation to characteristics including age, income, primary language and legal status. That would help us to better understand how they may affect individuals or organisations, because we need to get a sense of who the measures focus on and who HMRC will be chasing as a result. It is essential that all tax owed is paid, but given the impact on the Exchequer of the large tax breaks and sweetheart deals that the Government have engaged in, it seems unlikely that the measures will affect those who have avoided the largest amounts of tax. It would be helpful if we understood more about that, which is what our amendment pushes for.

In its briefing, LITRG has some interesting information about this point. It says:

“Many people assume that ‘offshore’ tax matters relate only to the wealthy. However, 24% of daily enquiries to the charity Tax Help for Older People in September 2018 were related to the Worldwide Disclosure Facility. The average age of the callers was 76 and they had small amounts of foreign bank interests and/or pensions.”

It continues:

“In our experience and from insight garnered from THOP, the vast majority of taxpayers who have undisclosed liabilities related to offshore investments will want to be compliant upon simply being made aware of the error”.

LITRG also makes a point about accessibility for non-native English speakers:

“Migrants, whose first language is unlikely to be English and who may therefore struggle to navigate the complex rules on the taxation of offshore income and gains, are another group likely to be affected because they are more likely to have offshore investments prior to their arrival in the UK.”

The measures are significant because they change the conventions on how long taxpayers would anticipate having to save information about their tax affairs. The LITRG briefing states:

“The measure adds complexity to the question of taxpayer certainty on when a tax year is ‘closed’ and impacts on a taxpayer’s record-keeping obligations—effectively requiring people to keep records for 12 years just in case they need to make a disclosure to HMRC. This is well beyond the current statutory time limit for keeping records.”

Most of us, I think, would assume that seven years is the normal period for which one would be sure to keep those records, and 12 years is a significant extension. The Government’s equalities impact statement on the proposals makes no attempt to understand how those different individuals would be affected. We think it is necessary for the Government to look carefully at the question.

As to amendment 142 and amendment 145, which pushes in the same direction, more information is necessary about the proposed revenue effects of the clause. We have spoken many times in Committee about the importance of publishing full and transparent information on policy changes, to allow for proper opposition. We have often felt that there has not been adequate scrutiny of the Bill. Of course, I am saying this on the day that was set for the meaningful vote, which has been cancelled, when we were hoping for a chance to scrutinise another area.

The policy papers accompanying the clause point to “negligible” revenue effects from the change, for at least three years, along with some costs, also described as negligible. I have said many times that it is essential that all tax due should be paid, but one must wonder what the Government are doing when they say that there will be only a negligible impact on revenue from the changes, given the scale of the wider tax gap, and the avoidance going on in certain sectors. It would be helpful to have more information about that, so that we can understand why the Government are prioritising in this direction.

We also need an understanding of the measures in relation to incentives to comply with tax rules, which is what amendment 143 would provide for. The issue is once again eloquently set out by LITRG, which states:

“the proposals erode a general feature of the current law that the circumstances leading to the error determine the length of time which HMRC have in order to raise a discovery assessment. The incentive to take reasonable care is therefore reduced under the proposals, because an individual will have the same time limit applicable when they make a non-deliberate error, whether or not that error is careless.”

So it seems that, according to the experts, the changes may make it less likely that HMRC will collect its full due of tax, and that, instead, incentives not to comply will be created. It would be helpful to hear the Minister’s comments on the LITRG assessment. What provisions have the Government put in place to ensure that incentives are not weakened by these measures? If the Government have not put policies and protocols in place, they should accept the amendment and conduct the review the Opposition ask for.

Amendment 145 would apply a review of revenue effects to clause 80, which is similar to what amendment 142 would do. The two clauses need to be taken together, because both impose longer time limits, in relation to income tax and inheritance tax. However, a big area has arguably been missed out—corporation tax. As I understand it, both measures taken together are forecast to raise £15 million in the scorecard up to 2022-23, which is, as I have said, a quite small amount. We feel that that could be because of the decision to restrict this measure to income tax, inheritance tax and capital gains tax, and not to apply it to corporation tax.

That is peculiar, because there was a commitment in the consultation document to potentially apply the extended time limit to corporation tax as well, dependent on the result of the consultation. The consultation document stated:

“given that many offshore structures involve corporate entities, the government is considering, and would welcome views on, applying this proposal to CT”.

Doing so would have made a lot of sense, because there is currently exact alignment between assessing time limits for companies and individuals—four years for innocent error, six years for carelessness and 20 years for deliberate error or fraud.

However, the Government’s response to the consultation, issued this summer, said that, while the extended time period for assessment will apply to income tax, inheritance tax and capital gains tax, the Government would, as a result of feedback, not apply the measure to corporation tax at this stage. That leads to many surprising anomalies. In the future, assuming that these measures are enacted, HMRC will have at least 12 years to investigate the affairs of small, unincorporated businesses involved in offshore transactions, but it will have only four years to do so if identical transactions are undertaken by corporates. A small sole trader or partnership whose business involves offshore transactions will be subject to investigation for at least 12 years, while a huge company such as Google or Amazon that is engaged in similar activities will have finality after just four years, unless fraud or carelessness are involved.

At this stage we surely need to know why the Government decided to reject a longer assessment period for corporation tax. There were only 11 responses to the consultation in total, including from some very large firms that work with very large corporates. The response document stated that

“the majority of respondents were not in favour of applying ETL—

extended time limits—

“to corporation tax (CT) and raised concerns about the possible impact on increasing administrative costs if this was done.”

The document said that “12 years of uncertainty” were

“a particular concern for corporates with complex affairs.”

It added that some existing anti-avoidance measures relating to offshore structures do not apply to corporates—it did not state which ones, and corporates are generally subject to more stringent anti-avoidance rules for offshore transactions than individuals—and that applying them would create inconsistencies.

The response document also noted that respondents were concerned about the 12-year time limit applying to those groups subject to controlled foreign company—CFC—rules, even though such rules are designed to apply only to the most egregious avoidance structures, so not the kind that would be targeted by this measure. The document states:

“CFC legislation applies to corporates and their offshore subsidiaries. The application of a 12 year assessment time limit was seen by the majority of respondents as creating major complications for corporates with CFCs who might need to keep records for each subsidiary for many years as a precautionary measure.”

[Interruption.] Ooh, I am about to be beamed up. Anyway, I will continue. In the light of those concerns, the Government said in the response document that they would not apply the extended time limits to corporation tax.

The rationale offered for extended time limits for income tax, inheritance tax and capital gains tax in the original consultation document was that the existing time limits are inadequate for HMRC to investigate the full facts, because of the complexity of offshore structures. At the same time, the response document says that the reason the measure will not be applied to companies is that the affairs of large companies are so complex that it would represent an unacceptable administrative burden for them to be subject to the same time limits as smaller, unincorporated businesses. I hope the Committee is picking up on some of the paradoxes in this response document.

The response document also asserts that applying extended time limits to companies would create inconsistencies, yet at the moment, as I mentioned, assessing time limits for individuals and companies are aligned. It is this measure that creates the inconsistency by making small businesses subject to new time limits three times longer than those applicable to corporates.

In practice, complex offshore structures are rarely used by small businesses. However, they are routinely employed by multinational enterprises as a way of minimising their tax—for example, the type of structures known to be used by the likes of Google and Amazon that put their profits into territories where no or little tax is paid. Having extra time to investigate the affairs of such companies seems a proper response to their use of these offshore structures, yet they will be unaffected by the new extended time limit rules. On the other hand, small, unincorporated businesses will be subject to them, as well as, potentially, elderly individuals with few resources to draw on to fully understand the complex impact of tax rules.

As well as being unfair, the exception for corporates provides an easy way around the rules. Simply transferring an existing offshore structure into a corporate body means the measure will have no impact. This arguably makes the measures a trap for the poorly advised, while having no impact on those from whom any yield might be expected to derive—multinational enterprises and the wealthy, who can create corporations to avoid potential investigation.

Because of the limits within which the Bill has been set, we cannot directly table an amendment that would push in the direction of including corporates. However, we do ask for a review of revenue impacts because it would enable us to get further into the question of how much revenue this measure could raise as against other measures.

[The Financial Secretary to the Treasury (Mel Stride)]

It is a pleasure to serve again under your chairmanship, Ms Dorries. I thank the hon. Ladies opposite for their contributions, and I will deal with some of the specific points that were raised and then deal in more general terms with the measures and the amendments.

The hon. Member for Aberdeen North raised the issue of retrospectivity. I can assure her that the Law Officers have confirmed that there is nothing retrospective about the measures in the clause. It is the case that no investigation that has been closed, for example, will be reopened as a consequence of the measures here. At the point that the measures come into effect, no one who is, at that point in time, out of scope of the changes would be brought into scope.

On the issue raised by the hon. Members for Aberdeen North and for Oxford East on consultation, we held a public consultation on the details of the reform on 19 February 2018. The consultation closed on 14 May, and the response to the consultation and the draft legislation were published on L-day, on 6 July.

The hon. Member for Oxford East raised the issue of the de minimis amount and referred to LITRG. It is not true that we are not securing significant amounts from the most wealthy, whether individuals or corporations. For the last year for which we have records, 2017-18, HMRC secured £1 billion in tax from the wealthiest individuals and £9 billion from the largest and most complex businesses operating in the UK—tax that would otherwise have gone unpaid.

The hon. Member for Oxford East also raised at length the important issue of why corporation tax is not included along with inheritance tax and income tax. As she said, we consulted on this aspect at some length. The vast majority of responses did not support extending the measure to corporation tax and raised a number of new practical and legal issues with such an extension. The hon. Lady identified some of them, although I know she was not persuaded by the arguments that were put. However, there were a number of them.

For example, the rules that identify offshore issues were not designed for corporates and would result in a wide range of genuine commercial transactions being caught that were never considered when the rules were originally designed. Tax indemnity agreements on the sale or purchase of businesses could also be affected retrospectively, as a 12-year time limit was never anticipated. The 12-year time limit could create major complications for corporates with control of foreign companies—the hon. Lady spoke about that at length. Some corporates are also subject to other rules, such as the senior accounting officer rule, so it was seen as unnecessary to extend the measure to such companies.

The hon. Lady also specifically mentioned Google and Amazon, or a similar type of business, in this context. She should not overlook the fact that we are right at the forefront of looking at a digital services tax to make sure that those companies pay their fair share of tax in the United Kingdom.

[Anneliese Dodds]

Will the Minister explain whether those firms were strongly in favour of the measures that have been taken in relation to them and others, such as the diverted profits tax, or whether they have argued against them, potentially in consultations? Is consulting those who may, or whose clients may, have a revenue hit as a result of the measure and only listening to them really the appropriate way to make policy?

[Mel Stride]

I was making a slightly different point. It was not so much about what the response may or may not have been—I do not know the answer to that, regarding the measure that is under consideration by the Committee—but rather about our push to make sure that just those companies pay the appropriate level of taxation in the United Kingdom. Frankly, I think the businesses themselves want to be seen to be paying a fair level of tax. That is the impression that I get from the Treasury perspective. We are not on the back foot on this; we are very much on the front foot, pushing within both the OECD and the European Union to make sure that we can come up with a multilateral solution, which has particular advantages over going it alone. However, we have made it clear, as the Chancellor set out in the recent Budget, that in the event that there is not a multilateral solution, we will of course act unilaterally by 2020.

[Mel Stride]

Yes, of course. I would be very happy to do that and in some detail. As I have already suggested, the general point is that those businesses that would not be in scope of these new arrangements, at the moment that they come into effect, would remain out of scope of these arrangements. That is the important point, I think, but I will certainly write to provide further detail.

My final point is about whether we are going soft on larger businesses, which I think was the overarching implication of the hon. Member for Oxford East. She should bear it in mind that at any one time, about half the 210 largest businesses in the United Kingdom are under active investigation. That does not mean that they are doing anything wrong—it may be far from it—but I sincerely believe that HMRC are very good at making sure that those businesses are thoroughly engaged with, particularly the large ones, because that is where a lot of yield lies.

[Anneliese Dodds]

We are not talking about whether those large businesses are taxed at all, are subject to new tax measures or are investigated at all. What we are talking about are the time limits for that investigation. There is an anomaly in what the Government are presenting between the time limits for corporates against individuals. Surely that is what needs to be addressed.

[Mel Stride]

I am reflecting the fact that while corporation tax is not covered by these measures, that is not the same thing as saying that we do not have an appropriate regime overall for making sure that large businesses pay their fair share. I was giving some examples such as the diverted profits tax, common reporting standards and all sorts of things, including base erosion and profit shifting, that the hon. Lady will know feed into that particular argument.

To turn to the generality of the measures, clauses 79 and 80 make changes to help ensure that everyone pays the tax they owe. Individuals under inquiry by HMRC for offshore non-compliance will now face assessment for 12 years of back taxes for income tax, capital gains tax and inheritance tax. It applies only to cases where tax losses arise in respect of offshore matters or offshore transfers.

Those clauses will affect only individuals with offshore structures who are not paying the correct amount of tax. The measure is not retrospective as it does not give HMRC the power to reopen any currently closed cases. It is right and fair that everyone pays the tax they owe. It can take longer for HMRC to establish the facts where offshore non-compliance is involved. In some complex offshore cases, tax cannot be collected as the time limits for HMRC to assess the tax run out before the facts can be established.

The changes made by clauses 79 and 80 will ensure that HMRC is able to deal with offshore cases effectively, where the facts are often difficult to establish. The time limit for assessment by HMRC will be extended for non-deliberate behaviour from four years in ordinary circumstances and six years in cases where there was carelessness, to 12 years. The time limit for assessment will remain at 20 years for deliberate behaviour. This measure will help to prevent individuals from avoiding a full investigation by HMRC because of the difficulty in assessing information on offshore structures and investments.

The new extended time limits will not enable HMRC to assess any tax that can no longer be assessed under current rules at the time the legislation comes into force. That was the point at the heart of the concerns expressed by the hon. Member for Aberdeen North. The new time limits will not apply where HMRC has received information in accordance with certain international agreements from other tax authorities, on the basis that it was reasonable to expect an assessment to be made within the existing time limit. The clauses will raise £30 million by 2024.

Amendment 105 would unbalance the safeguards that ensure that the new time limits only apply if HMRC already has the information to make an assessment and could reasonably make it within the current time limits. If the amendment was passed, HMRC could receive information on a tax compliance case that it would be unable to act on. If, for example, information was provided from overseas immediately before the end of the current time limit, HMRC would be timed out of collecting the lost tax. That could incentivise slow responses from overseas intermediaries when partner jurisdictions gather information in response to HMRC requests.

Amendments 106 and 107 would change the years for which the clause would have effect. Where loss of tax is brought about carelessly, that would change from 2013-14 to 2019-20, and where brought about in any other case from 2015-16 to 2019-20. The amendments would water down the Government’s commitment to tackling offshore non-compliance now and delay, for at least a further four years, the additional time that the provision gives HMRC, so that the time limits would only begin to extend from tax year 2023-24. The Government are clear that the provision should start helping HMRC’s compliance work as soon as possible.

Amendment 139 would insert a de minimis threshold of £50 tax loss before the time limit applied. As currently drafted, the clause ensures that HMRC has the time necessary to conduct complex investigations. It is right therefore that HMRC can collect the tax due, regardless of the amount, once it has been calculated. It would be fundamentally unfair if the de minimis principle applied to offshore cases but not to onshore cases.

[Anneliese Dodds]

Forgive me, but is there a 12-year time limit for onshore cases for individuals?

[Mel Stride]

No is the short answer.

[Anneliese Dodds]

I am grateful to the Minister for very generously giving way again. He said that it would be unfair to create an anomaly between the tax affairs of those with offshore and onshore business, but we have just established that there is not a 12-year time limit for those onshore. Is there not therefore an anomaly?

[Mel Stride]

This is probably a classic case of me speaking too quickly and the hon. Lady not being given the fair opportunity to digest exactly what I said, which I will repeat, because it is a slightly different point. We are talking about the £50 de minimis, not the 12-year extension. I will reiterate exactly what I said for the hon. Lady’s benefit, so she is absolutely certain that I am not bamboozling her on this point. I said that it is right therefore that HMRC can collect the tax due, regardless of the amount, once it has been calculated. It would be fundamentally unfair if the de minimis principle—I am referring to the £50 threshold—applied to offshore cases but not to onshore cases. In other words, it is her amendment that would create the anomaly.

[Anneliese Dodds]

rose—

[Mel Stride]

I am happy to give way again if the hon. Lady desires.

[Anneliese Dodds]

I thank the Minister for allowing me to comment on this again. We are surely talking about very different cases. One deals with the normal process of tax collection and investigation, which most individuals assume would apply for seven years, and people need to keep papers for that long. The other is fundamentally different, and deals with the extension of the time limit to 12 years. If we were to do that onshore, then we may also wish to introduce a de minimis for that process, which would, as his measure introduces, go back between seven and 12 years. That is a point that needs to be made.

[Mel Stride]

I sense that the hon. Lady might have accepted my earlier point that my reference was actually to the £50 de minimis rather than the time limit. She has now introduced another argument, which she prosecuted during her opening remarks—that somehow we should not have a difference in the amount of time to investigate such matters pertaining to whether they are offshore or onshore-related. The whole crux of what we are doing rests on the, I think, fair belief that offshore transactions are less transparent. Those situations are more complicated and often involve dealing with different jurisdictions and intermediaries in order to establish the information that is required for HMRC to carry out its duties. That lies at the heart of why there should be a longer period for offshore entities than for those that are onshore.

[Anneliese Dodds]

I was talking about the application of a de minimis. I was trying to say that, if the Government were looking, for example, to extend the investigation period for domestic tax affairs beyond the existing time limits, they might even wish to consider a de minimis of £50. I was cognisant of the de minimis—my confusion was caused by the Minister’s remarks. He seemed to suggest that having a de minimis only in relation to offshore tax affairs and not to domestic affairs would be peculiar. We are talking about a de minimis only in those cases of that very long period, not in relation to general tax affairs. I would never say that we should have a de minimis on tax generally, which would mean that we could not pay tax on anything—VAT and so on. That is not what I suggested at all.

[Mel Stride]

This is probably a discussion for another day, in the sense that the hon. Lady is asking that, in the event that we revisit the issue of the time limits for onshore investigation, we should on that basis consider her amendment anew, because it might dispense with the different treatment between onshore and offshore. We might come to that in another world on another occasion, in another Finance Bill.

I am anxious to make progress—the hon. Member for Bootle sits there looking like he has got all day, but we have to make progress. Amendments 141, 142 and 143 on clause 79, and amendments 144 and 145 on clause 80, would require the Government to review the impact and effectiveness of the clauses within six months of the passing of the Act. Such reviews, however, would not have the intended effect: no data in relation to the characteristics of persons affected, the revenue effects of the changes, or the effects of the changes on incentives on persons to comply, will be available after six months. That is because it is unlikely that a full assessment of any relevant cases will be conducted within the six months after Royal Assent. Thus a report would likely be impossible or meaningless.

On that basis, I commend the clauses to the Committee.

[Kirsty Blackman]

If the Minister writes to me with the comments about retrospectivity, it may be that we will not press our proposal to a Division on Report, but I will not press it now in anticipation of receiving that letter.

[Anneliese Dodds]

I appreciate the Minister’s remarks, but we believe there is still an anomaly, and we remain concerned about the potential treatment of elderly taxpayers and so on. We will press our amendments to the vote.

[Kirsty Blackman]

I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Amendment proposed: 139, in clause 79, page 53, line 28, at end insert—

‘(7A) But an assessment under subsection (2) may not be sought by the Commissioners unless they are satisfied that the liability to tax is in excess of £50.’—(Anneliese Dodds.)

This amendment establishes a de minimis threshold for the extended time limits of £50.

Question put, That the amendment be made.

--- Later in debate ---

Construction industry scheme and corporation tax etc

[Anneliese Dodds]

I beg to move amendment 146, in clause 81, page 55, line 39, at end insert—

“(3A) No regulations may be made under this section unless the Commissioners have issued guidance on the conditions necessary for an officer of Revenue and Customs to be satisfied that the requirement for security is necessary for the protection of the revenue (for the purposes of the provisions of regulations made in accordance with the duty in subsection (2)).”

This amendment would require the Revenue and Customs Commissioners to issue guidance on how it is determined that security is necessary for the protection of the revenue.

[The Chair]

With this it will be convenient to discuss the following:

Amendment 147, in clause 81, page 56, line 25, at end insert—

“(3A) No regulations may be made under this paragraph unless the Commissioners have issued guidance on the conditions necessary for an officer of Revenue and Customs to be satisfied that the requirement for security is necessary for the protection of the revenue (for the purposes of the provisions of regulations made in accordance with the duty in sub-paragraph (2)).”

This amendment would require the Revenue and Customs Commissioners to issue guidance on how it is determined that security is necessary for the protection of the revenue.

Amendment 148, in clause 81, page 56, line 44, at end insert—

“(4) The Chancellor of the Exchequer must review the effects of the changes made by this section on the construction industry and lay a report of that review before the House of Commons within six months of the passing of this Act.”

This amendment would require the Chancellor of the Exchequer to review the effects of the provisions of Clause 81 on the construction industry.

Clause 81 stand part.

[Anneliese Dodds]

The overall aims of the clause appear sensible, providing HMRC with powers to make secondary legislation to require a person to provide security for corporation tax liabilities and construction industry scheme deductions that are or may be liable to HMRC. Under the clause, failure to provide security when required will be a summary offence and a person who has committed it will be subject to a fine.

As I understand it, securities may be required where a taxpayer has a poor compliance record, and in phoenix-type cases where a business accrues a tax debt, goes into liquidation or administration and the person responsible for the operation of the business sets up again, with the risk of running up further tax debts. Sadly, we have seen far too many of those cases.

The measure is effectively an extension of HMRC’s powers to require security in relation to some areas of business tax—the powers it has currently—to include VAT and PAYE, as well as national insurance contributions, insurance premium tax and some environmental and gambling taxes.

The Government maintain that the clause will be specifically targeted at the minority of businesses that seek financial gain from non-compliance with their tax obligations rather than those that are genuinely unable to pay. They argue that it will not affect those who are managing their debts with HMRC under agreed time-to-pay arrangements with which they are complying—we have touched on that subject previously.

The Government argue that the power will apply only where an HMRC officer considers that the provision of a security is necessary to protect revenue. None the less, we believe that the changes merit further scrutiny, and therefore have tabled a number of amendments.

Amendment 146 seeks to introduce a requirement for HMRC officials to issue guidance on their use of securities to protect revenue. It is a probing amendment that seeks to clarify the circumstances under which a security will be requested for revenue protection. We do not in principle object to the measures being taken to protect revenue—they appear essentially sensible—but we seek to understand better the scope offered to HMRC officials in making such a judgment or, conversely, the guidance they are offered by the Department in making such a decision.

Will the Minister clarify what guidance will be offered and undertake to publish it later? After all, in the Government’s consultation, the feedback was pretty clear. The feedback document stated:

“Most respondents wanted to see clear guidance put in place to support the introduction of the securities and ensure that securities will only be used where it’s appropriate and proportionate to do so. Two thought that legislation should be expanded to provide the rules under which the securities regime should operate.”

How have the Government responded to that point? It is clear that more transparency is needed.

With amendment 147, which follows the previous one, we are likewise seeking to determine what guidance HMRC commissioners would receive. As I said, we do not object in principle to the use of securities to protect tax revenues; we simply seek to understand how and when they will be applied and whether the guidance is determined by Government policy or subject to the discretion of officials. I hope the Minister will either provide that information to the Committee or accept our amendment, which would ensure that further information is provided before these powers are enacted.

The policy papers relating to the clauses suggest that that is necessary. They state:

“Experience from the existing securities regime has shown that, when used in a carefully targeted manner, securities can be very effective in changing the behaviour of non-compliant businesses and protecting future revenues against the risk of non-payment. Currently these powers apply only to certain taxes and duties.”

We need to understand how these powers will be targeted and which criteria will be used. I hope the Minister will respond to that reasonable request.

Through amendment 148, we seek to understand how the new measure will affect the construction industry. As I said, this is an extension of the security deposit legislation to the construction industry scheme and companies chargeable to corporation tax. The documents on the impact of the policy do not discuss the construction industry in detail. The expectation should be that anyone avoiding tax should pay, but it is clear that providing a security could reduce capital stock in some companies, so we need a sense of the impact on those who may be required to pay a security. Again, that was reflected in the Government’s consultation, which stated:

“Several respondents commented specifically on the implications for insolvency and commented that HMRC should give careful consideration in cases where viable businesses were struggling financially and a security could force the business into insolvency. Similarly, respondents did not want the use of securities to limit the rescue environment for financially distressed businesses. One respondent suggested that before extending the security deposit regime, HMRC should commission independent research into its current approach and the effect that demands for a deposit have on struggling businesses.”

The context is that HMRC has lost a large number of its experienced staff, who might have had expertise in security regimes in relation to other taxes. Therefore, we need to know what the impact is likely to be on businesses that may have to deal with HMRC officers who have less understanding of the construction industry than previously would have been the case.

Finally, I note that we are informed by the tax information and impact note that HMRC will need to make changes to its IT systems to process the new security cases. The cost of the changes is estimated to be in the region of £840,000. It will also incur operational costs currently estimated to be in the region of £5 million. Those costs seem fairly high to me. I hope the Minister will explain why they are of such a significant magnitude.

[Kirsty Blackman]

Very briefly, if the Labour party chooses to press these amendments to a vote, we will support it, because we think that what it is trying to achieve is very sensible.

--- Later in debate ---

Securities have been a feature of the tax system for many years and experience has shown that they can be a very effective way of driving change in customer behaviour and protecting revenue at risk when they are used in a targeted and proportionate manner. Clause 81 will help HMRC to tackle the minority of businesses that choose not to meet their tax obligations at the expense of the compliant majority. I therefore commend the clause to the Committee.

[Anneliese Dodds]

In the light of the Minister’s response, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 81 ordered to stand part of the Bill.

Clause 82

Resolution of double taxation disputes

[Kirsty Blackman]

I beg to move amendment 137, in clause 82, page 58, line 9, leave out from “section” to “may” in line 10.

This amendment provides for all regulations under the new power to be subject to the affirmative procedure.

--- Later in debate ---

[Kirsty Blackman]

I will come to amendments 137 and 138, but first I would like to speak briefly to Labour amendments 149 and 150.

We have seen the complete and total shambles over the past 24 hours—and not just over that period, but over the past two years. The past 24 hours have highlighted where we are in relation to EU withdrawal. Various people are suggesting that no deal is more and more likely, so it is incredibly important we know the potential effects of any changes that the Government propose to make to legislation in the event of a negotiated deal or no negotiated deal. We have a clear idea of the effect of retaining the status quo, which is the Scottish National party’s preferred position, and the revenue effects would be much easier to calculate. We are comfortable supporting Labour’s amendment 149 on that subject and amendment 150, which is about the expected revenue effect of the regulations.

I turn to the two SNP amendments. Amendment 138 is consequential on amendment 137, so I will focus on amendment 137. Given what has happened in recent times, trust in the Government is possibly at its lowest ever point. We are being asked to agree to give the Government power to make changes without going through proper scrutiny procedures. The Government are basically asking us to trust them, and we feel that we cannot trust pretty much anything they say right now, so more scrutiny is sensible.

When people who support leave talk about the European Union referendum and Brexit, they talk about taking power away from faceless bureaucrats in Brussels and returning it to Parliament. A lot of the legislation that is being considered just now does not return that power to Parliament in any meaningful way, and it does not allow Parliament proper scrutiny of the range of things that could come through. We are talking here about just one small area, but that problem has been highlighted in a huge number of things that have come out of the European Union (Withdrawal) Act 2018. There is massive concern from members of the general public, who now understand what Henry VIII powers are—we are in unprecedented times. There has been a power grab from the Scottish Parliament, and this is one more small thing the Government are trying to do to take power away from where it should sit.

Given that the Government cannot command a majority in the House; given that they folded on SNP amendments to the Bill—that was, clearly, because the SNP amendments were wonderful, rather than because the Government did not have a majority—and given that they cannot get legislation through, the level of Executive power needs to be tested. We need to make the Government use their majority if they want to get powers through the House, rather than relying on the fact that because they are the Government, they can do what they like. That is why the SNP has tabled amendment 137, which would require the Government to ensure that more of the regulations made under clause 82 go through the proper scrutiny procedure, rather than relying on the Treasury to make some of them without proper scrutiny.

[Anneliese Dodds]

I will speak briefly to the clause. The hon. Lady has set out the SNP’s reasons for tabling amendments 137 and 138. The official Opposition agree with those reasons, and it seems highly sensible to require regulations to be subject to the affirmative procedure. We have argued for that consistently in relation to our future relationship with the EU and the no deal process. We are concerned about the wholesale power grab that unfortunately appears to be continuing apace. We would support SNP Members if they decided to press their amendments to a vote.

We have tabled two amendments, and I am pleased to hear that the SNP support them. Under the Prime Minister’s proposed withdrawal agreement, the UK would initially, at least, continue to align itself with EU regulations, but little information has been provided alongside the clause to indicate how the Prime Minister’s Brexit deal would impact on Council directive 2017/1852, particularly if there was divergence later on. Similarly, the Treasury’s policy note offers no guidance about whether the EU’s resolution mechanism would be upheld for all future double taxation disputes in the event of a no deal Brexit.

That is of a piece with the general lack of information about the Government’s anticipated future relationship on tax matters with the EU. I have consistently asked whether we would seek to be a member of the code of conduct group, for example, and I have had no indication of the Government’s views on that matter. With that in mind, the Opposition have tabled amendment 149, which would require the Chancellor to publish a review of the impact of the powers under clause 82 in the event that the UK leaves the EU under a no deal Brexit or under the current withdrawal agreement—or whatever it becomes. It is unclear whether it will be changed or whether assurances will simply be produced in relation to it. Whatever happens, we may or may not be voting on it at some point, hopefully in the near future. Amendment 149 would require the Treasury to offer a clear indication of how the EU’s dispute resolution mechanism for double tax disputes would be maintained, and the likelihood of the different possibilities.

Amendment 150 would require the Chancellor to undertake a review of the revenue effects of the measure. The Treasury policy note states that the measure will raise no revenue and will have no economic impact on taxpayers. That is rather hard to believe, given that even the most benign change to the tax system can have far-reaching and unseen consequences. They may be unpredictable, but surely it would be better to say that than to say that the change will have no impact. The Chancellor would therefore be required to outline in the review the possibility of any unforeseen economic impacts, and the revenues that are likely to be raised from this measure after the Treasury makes regulations to use the powers.

[Sir Robert Syms (Poole) (Con)]

Had we had a meaningful vote today—we are not going to have one—I would have voted with the hon. Members for Oxford East and for Aberdeen North. However, I find it a little strange that those who intend to vote against the agreement should criticise the Government for a no deal Brexit, because ultimately that is not the Government’s position.

There are about 800 statutory instruments for leaving the European Union. About 600 of them are negative, and a hundred and something are affirmative. It is perfectly possible for the Opposition to pick any number of negatives to pray against. If the Opposition have a problem with something, they can pray against it when it appears on the Order Paper and get a debate. There is a remedy for hon. Members’ concerns, but the reality is that so many of these things are modest and technical, and there are more important matters of principle for us to discuss. I do not think we want to spend a lot of time in this Committee or others debating minor, technical issues.

--- Later in debate ---

[Kirsty Blackman]

I do not have much to add other than that I still want to press amendment 137 to a vote.

[Anneliese Dodds]

Briefly, the Minister referred to TIINs. I wonder whether, for the next Finance Bill, he will commit to ensuring clear linking from the Bill website to the different TIINs so that we can quickly see which one applies to each clause. It has been quite a waste of time having to search for them randomly.

As to the question whether the provisions should be examined using the affirmative procedure or should have to be prayed against using the negative procedure, I take on board the points made by the hon. Member for Poole. However, we all know that, when measures are dealt with by the affirmative procedure by default, much greater attention needs to be given to them. That is the reality. Generally, I fear that attention is not always paid to matters that may superficially appear technical but that, when one delves into them, may be discovered to have a concrete impact on different groups. Even with the affirmative procedure, the level of debate on taxation matters has, I would argue, traditionally been quite limited. I note that, for the first time in Parliament’s history, we have recently had votes in relation to tax treaties. I was pleased that we motivated those votes, yet UK tax treaties with other countries have never been subjected to proper scrutiny in the House.

Many matters covered by Delegated Legislation Committees are not purely technical. In fact, this has been talked about by my hon. Friend, who represents Leeds—help me out. [Hon. Members: “Stalybridge!”] I am sorry, I am not great at the memory game. In talking recently about some of the no-deal planning, my hon. Friend the Member for Stalybridge and Hyde has been talking about the potential for some of those measures to have such a significant impact that the Government themselves are not au fait with it. Given the time allotted, they seem to expect the Opposition to pass them with a rather cursory glance. I am afraid, therefore, that the suggestion that we already have a failsafe system for dealing with some of those significant matters is simply incorrect, so if the SNP presses amendment 137 to the vote, we shall support it. However, we will not press our amendments.

[Mel Stride]

Perhaps I may quickly respond, Ms Dorries, just to say that on the important matter of the TIINs, and the link from the website, I know that the hon. Lady raised that on a previous clause, and I should be happy to look into it for her. If she has any specific ideas that she would like to put to me in that respect, I should be grateful to receive them.

Finally, on the matter of negative SI procedure, and prayers against such measures, in the event that we have an effective, strong, organised, united and well led Opposition, I am sure that that will not be beyond them.

Question put, that the amendment be made.

--- Later in debate ---

[Mel Stride]

There is no need for consultation on this measure because, as the hon. Gentleman will know, it was just putting beyond doubt what has been established practice over a very long period. He raised the issue of retrospection. The measure is retrospective, inasmuch as it is putting beyond doubt the fact that these rates were appropriate in the past. We are just bringing the long-standing practice out of any sense of uncertainty.

The hon. Gentleman suggested that the loan charge was retrospective. It is not, because the arrangements entered into under the loan charge scenario were always defective. They never worked at the time when they were entered into, and therefore the tax was due in the past. It is being collected in the present.

[Anneliese Dodds]

In that case, when advisers advised individuals to undertake these schemes, were they promoting illegal schemes? It would help to have a clear answer on that.

[Mel Stride]

They were in many cases promoting schemes that did not work and were defective, and in many cases promoting schemes that had been taken through the courts by HMRC—and, in a case involving Rangers football club, through the Supreme Court. On each occasion, they have been found defective.

[Anneliese Dodds]

The Minister says those schemes were defective; is he saying that they were illegal?

[Mel Stride]

I am saying that the schemes were taken through the courts and were found defective; they were found not to work. As this is the third exchange between us, let us be clear about what lies at the heart of the way in which these schemes operate. If as an employer I said to an employee, “Instead of paying you normal earnings, from which you would pay your national insurance and your income tax—as the employer, I would pay the national insurance—I will pay you by way of a loan. You and I know it is not really a loan, as there is no intention of you ever repaying it. I may well send that loan to an offshore trust”—as many of these schemes do—“before sending it back to you. The consequence is you pay no, or next to no, tax, because it is treated as a loan, not earnings or income.” That lies at the heart of these schemes. That model never worked, and the schemes were always defective at the time they were entered into.

[Anneliese Dodds]

However, those taxpayers who are required to face the loan charge have been told that they have done something illegal. I am asking the Minister whether those who advised them to undertake these schemes were advising them to do something illegal, because the advisers have not faced anything as a result of this, whereas the taxpayers have.

[Mel Stride]

The enablers and promoters of those schemes have been subject to various pieces of legislation, going back a number of years. In almost every Finance Act, or every year, there has been legislation clamping down on them. They are subject to a penalty of up to £1 million as a consequence of that kind of behaviour. Where they have acted inappropriately, the legislation is there, and HMRC has the powers to pursue them.

Question put and agreed to.

Clause 87 accordingly ordered to stand part of the Bill.

Clause 88

Regulatory capital securities and hybrid capital instruments

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

Finance (No. 3) Bill

Anneliese Dodds Excerpts

3rd reading: House of Commons & Report stage: House of Commons
Tuesday 8th January 2019 Commons Chamber

[Mr Speaker]

The hon. Gentleman arrogates to me almost superhuman powers if he thinks that I can advise the media upon the imperative of first checking facts before printing a story. I appreciate his confidence in me, but I fear that he has an assessment of my capabilities that is sadly unmatched by the reality. Nevertheless, he has put his point on the record, and doubtless he will circulate it more widely amongst the people of Nuneaton.

New Clause 2

Review of the effectiveness of entrepreneurs’ relief

“(1) Within twelve months of the passing of this Act, the Chancellor of the Exchequer must review the effectiveness of the changes made to entrepreneurs’ relief by Schedule 15, against the stated policy aims of that relief.

(2) A review under this section must consider—

(a) the overall number of entrepreneurs in the UK,

(b) the annual cost of entrepreneurs’ relief,

(c) the annual number of claimants per year,

(d) the average cost of relief paid per claim, and

(e) the impact on productivity in the UK economy.”—(Anneliese Dodds.)

This new clause would require the Chancellor of the Exchequer to review the effectiveness of the changes made to entrepreneurs’ relief by Schedule 15.

Brought up, and read the First time.

[Anneliese Dodds (Oxford East) (Lab/Co-op)]

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

[Mr Speaker]

With this it will be convenient to discuss the following:

New clause 9—Review of changes to entrepreneurs’ relief—

“(1) The Chancellor of the Exchequer must review the impact on investment in parts of the United Kingdom and regions of England of the changes made to entrepreneur’s relief by Schedule 15 to this Act and lay a report of that review before the House of Commons within six months of the passing of this Act.

(2) A review under this section must consider—

(a) the effects of the provisions on business investment,

(b) the effects of the provisions on employment, and

(c) the effects of the provisions on productivity.

(3) In this section—

“parts of the United Kingdom” means—

(a) England,

(b) Scotland,

(c) Wales, and

(d) Northern Ireland;

“regions of England” has the same meaning as that used by the Office for National Statistics.”

This new clause would require a review of the impact on investment of the changes made to entrepreneurs’ relief which extend the minimum qualifying period from 12 months to 2 years.

New clause 10—Review of geographical effects of provisions of section 9—

“The Chancellor of the Exchequer must review the differential geographical effects of the changes made by section 9 and lay a report of that review before the House of Commons within six months of the passing of this Act.”

This new clause would require a geographical impact assessment of income tax exemptions relating to private use of an emergency vehicle.

New clause 16—Personal allowance—

“The Chancellor of the Exchequer must, no later than 5 April 2019, lay before the House of Commons an analysis of the distributional and other effects of a personal allowance in 2019-20 of £12,750.”

This new clause would require a distributional analysis of increasing the personal allowance to £12,750.

New clause 17—Review of changes to capital allowances—

“(1) The Chancellor of the Exchequer must review the effect of the changes to capital allowances in sections 29 to 34 and Schedule 12 in each part of the United Kingdom and each region of England and lay a report of that review before the House of Commons within six months of the passing of this Act.

(2) A review under this section must consider the effects of the changes on—

(a) business investment,

(b) employment, and

(c) productivity.

(3) The review must also estimate the effects on the changes if—

(a) the UK leaves the European Union without a negotiated withdrawal agreement

(b) the UK leaves the European Union following a negotiated withdrawal agreement, and remains in the single market and customs union, or

(c) the UK leaves the European Union following a negotiated withdrawal agreement, and does not remain in the single market and customs union.

(4) In this section—

“parts of the United Kingdom” means—

(a) England,

(b) Scotland,

(c) Wales, and

(d) Northern Ireland;

“regions of England” has the same meaning as that used by the Office for National Statistics.”

This new clause would require a review of the impact on investment, employment and productivity of the changes to capital allowance in the event of: Brexit with no deal; Brexit with single market and customs union membership; Brexit without single market and customs union membership.

New clause 24—Review of changes to capital allowances (No. 2)—

“(1) The Chancellor of the Exchequer must review the effects of the changes made by sections 29 and 30 of this Act within six months of the passing of this Act.

(2) A review under this section must include an assessment of—

(a) the cost to the Exchequer of these changes,

(b) changes to business behaviour that are likely to arise as result from these changes, including (but not limited to) levels of business investment in buildings, plant and machinery, and

(c) the impact of these changes on businesses in regions of England.

(3) A review under this section must compare these assessments, so far as practicable, with an assessment of the impact of replacing non-domestic rates in England with a tax on the value of commercial land.

(4) In this section, “regions of England” has the same meaning as that used by the Office of National Statistics.”

This new clause would require the Government to assess the effects on businesses and the public finances of new capital reliefs introduced by this Act and require the Government to compare these reliefs with replacing business rates with a tax on commercial land values.

Amendment 12, in clause 5, page 2, line 24, leave out subsection (4)

This amendment would delete provisions removing the legal link between the personal allowance and the national minimum wage.

Government amendment 2.

Amendment 34, in schedule 15, page 297, line 42, leave out “29 October 2018” and insert “6 April 2019”.

Amendment 34, along with Amendment 35, would remove the retrospective effect of the new qualifying conditions for entrepreneurs relief.

Government amendment 3.

Amendment 35, in schedule 15, page 298, line 10, at end insert—

“(6) In relation to disposals on or after 29 October 2018, the amendments made by this Schedule to the definition of “personal company” do not apply in relation to any day before 29 October 2018.”

See Amendment 34.

New clause 4—Review of late payment interest rates in respect of promoters of tax avoidance schemes—

“(1) The Chancellor of the Exchequer must review the viability of increasing any relevant interest rate charged by virtue of the specified provisions on the late payment of penalties for the promoters of tax avoidance schemes to 6.1% per annum and lay a report of that review before the House of Commons within six months of the passing of this Act.

(2) In this section, “the specified provisions” means—

(a) section 178 of FA 1989, and

(b) sections 101 to 103 of FA 2009.”

This new clause would require the Chancellor of the Exchequer to review the viability of increasing interest rates on the late payment of penalties for the promoters of tax avoidance schemes to 6.1%.

New clause 15—Report on consultation on certain provisions of this Act (No. 4)—

“(1) No later than two months after the passing of this Act, the Chancellor of the Exchequer must lay before the House of Commons a report on the consultation undertaken on the provisions in subsection (2).

(2) Those provisions are—

(a) section 15 and Schedule 3,

(b) section 16 and Schedule 4,

(c) sections 19 and 20,

(d) section 22 and Schedule 7,

(e) section 23 and Schedule 8,

(f) sections 46 and 47,

(g) section 83.

(3) A report under this section must specify in respect of each provision listed in subsection (2)—

(a) whether a version of the provision was published in draft,

(b) if so, whether changes were made as a result of consultation on the draft, (c) if not, the reasons why the provision was not published in draft and any consultation which took place on the proposed provision in the absence of such a draft.”

This new clause would require a report on the consultation undertaken on certain provisions of the Bill – alongside New Clause 11, New Clause 13 and New Clause 14.

Government new clause 6—Intangible fixed assets: restrictions on goodwill and certain other assets.

New clause 8—Review of changes to Oil activities and petroleum revenue tax—

“(1) The Chancellor of the Exchequer must review the effect of the changes to Oil activities and petroleum revenue tax in sections 36 and 37 and Schedule 14 in Scotland and the United Kingdom as a whole and lay a report of that review before the House of Commons within six months of the passing of this Act.

(2) A review under this section must consider the effects of the changes on—

(a) business investment,

(b) employment, and

(c) productivity.”

This new clause would require the Government to review and publish a report on the investment, employment and productivity impact of the Bill’s fiscal measures on the North Sea sector.

New clause 11—Report on consultation on certain provisions of this Act—

“(1) No later than two months after the passing of this Act, the Chancellor of the Exchequer must lay before the House of Commons a report on the consultation undertaken on the provisions in subsection (2).

(2) Those provisions are—

(a) section 5,

(b) section 6,

(c) section 8,

(d) section 9,

(e) section 10,

(f) Schedule 15,

(g) section 39,

(h) section 40,

(i) section 41, and

(j) section 42.

(3) A report under this section must specify in respect of each provision listed in subsection (2)—

(a) whether a version of the provision was published in draft,

(b) if so, whether changes were made as a result of consultation on the draft, and

(c) if not, the reasons why the provision was not published in draft and any consultation which took place on the proposed provision in the absence of such a draft.”

This new clause would require a report on the consultation undertaken on certain provisions of the Bill – alongside New Clause 13, New Clause 14 and New Clause 15.

New clause 14—Report on consultation on certain provisions of this Act (No. 3)—

“(1) No later than two months after the passing of this Act, the Chancellor of the Exchequer must lay before the House of Commons a report on the consultation undertaken on the provisions in subsection (2).

(2) Those provisions are—

(a) section 61, and

(b) Schedule 18.

(3) A report under this section must specify in respect of each provision listed in subsection (2)—

(a) whether a version of the provision was published in draft,

(b) if so, whether changes were made as a result of consultation on the draft,

(c) if not, the reasons why the provision was not published in draft and any consultation which took place on the proposed provision in the absence of such a draft.”

This new clause would require a report on the consultation undertaken on certain provisions of the Bill – alongside New Clause 11, New Clause 13 and New Clause 15.

New clause 23—Review of income tax revenue—

“(1) The Office for Budget Responsibility must review the revenue raised by income tax within six months of the passing of this Act.

(2) A review under this section must consider revenue raised by—

(a) the rates of income tax specified in sections 3 and 4, combined with

(b) the basic rate limit and personal allowance specified in section 5.

(3) A review under this section must also consider the effect on revenue of—

(a) raising each of the rates of income tax specified in sections 3 and 4 by one percentage point, and

(b) setting the basic rate limit for the tax years 2019-20 and 2020-21 at £33,850.

(4) A review under this section must also include a distributional analysis of the effect of introducing the policies specified in paragraphs (3)(a) and (3)(b).

(5) The Chancellor of the Exchequer must lay before the House of Commons the report of the review under this section as soon as practicable after its completion.”

This new clause would require the OBR to estimate how much money would be raised by increasing all rates of income tax by 1p and freezing the higher rate threshold.

New clause 26—Review of changes made by sections 79 and 80—

“(1) The Chancellor of the Exchequer must review the effects of the changes made by sections 79 and 80 to TMA 1970, and lay a report on that review before the House of Commons not later than 30 March 2019.

(2) The review under this section must include a comparison of the time limit on proceedings for the recovery of lost tax that involves an offshore matter with other time limits on proceedings for the recovery of lost tax, including, but not limited to, those provided for by Schedules 11 and 12 to the Finance (No. 2) Act 2017.

(3) The review under this section must also consider the extent to which provisions equivalent to section 36A(7)(b) of TMA 1970 (relating to reasonable expectations) apply to the application of other time limits.”

This new clause would require the Treasury to review the effect of the changes made by sections 79 and 80 and compare them with other legislation relating to the recovery of lost tax including specifically the loan charge provisions of Schedules 11 and 12 to the Finance (No. 2) Act 2017.

Government new schedule 1—Intangible fixed assets: restrictions on goodwill and certain other assets.

Government amendments 4 to 6.

Amendment 22, in clause 53, page 34, line 14, at end insert—

“(5) The Chancellor of the Exchequer must review the expected effects on public health of the changes made to the Alcoholic Liquor Duties Act 1979 by this section and lay a report of that review before the House of Commons within one year of the passing of this Act.”

This amendment would require the Chancellor of the Exchequer to review the impact of the revised rates on cider and wine on public health.

Amendment 23, in clause 60, page 44, line 17, at end insert—

“(3) The Chancellor of the Exchequer must review the effects of a reduction in air passenger duty rates from 1 April 2020 and lay a report of that review before the House of Commons within six months of the passing of this Act.

(4) A review under subsection (3) must in consider the effects of a reduction on—

(a) airlines,

(b) airport operators,

(c) other businesses, and

(d) passengers.”

This amendment would require the Chancellor of the Exchequer to review the effects of a reduction in air passenger duty.

Amendment 36, in clause 79, page 52, line 24, leave out “12 years” and insert “8 years”.

Amendments 36 to 45 would reduce the time limits HMRC have to make an assessment of income tax or capital gains tax (Clause 79) and inheritance tax (Clause 80) to eight years, rather than 12 years, where there is non-deliberate offshore tax non-compliance.

Amendment 37, page 52, line 27, at end insert—

“(2A) Where the loss of tax is brought about carelessly by the taxpayer, an assessment may be made at any time not more than 12 years after the end of the year of assessment to which the lost tax relates. This is subject to section 36(1A) above and any other provision of the Taxes Acts allowing a longer period.”

See Amendment 36.

Amendment 38, page 53, line 22, after “(2)” insert “or (2A)”.

See Amendment 36.

Amendment 39, page 53, line 28, at end insert—

“(7A) An assessment may also not be made under subsection (2) or (2A) if—

(a) before the time limit that would otherwise apply for making the assessment, information is made available to HMRC by the taxpayer on the basis of which HMRC could reasonably have been expected to become aware of the lost tax, and

(b) it was reasonable to expect the assessment to be made before that time limit.”

See Amendment 36.

Amendment 40, page 53, line 34, at end insert—

“(8A) Subsection (7A) will not apply in cases where the taxpayer is subsequently found to have failed to provide all relevant information available to HMRC, or to have provided misleading information.

(8B) For the purposes of subsection (7A), whether information has been made available to HMRC is to be determined in line with section 29(6) above.”

See Amendment 36.

Amendment 41, page 53, line 35, after “(2)” insert “or (2A)”.

See Amendment 36.

Amendment 25, page 54, line 1, leave out “2013-14” and insert “2019-20”.

This amendment, alongside Amendment 26, would mean that new section 36A of the Taxes Management Act 1970 did not apply retrospectively.

Amendment 26, page 54, line 5, leave out “2015-16” and insert “2019-20”.

This amendment, alongside Amendment 25, would mean that new section 36A of the Taxes Management Act 1970 did not apply retrospectively.

Amendment 42, in clause 80, page 54, line 19, leave out “12 years” and insert “8 years”.

See Amendment 36.

Amendment 43, page 54, line 20, at end insert—

“(2A) Where the loss of tax is brought about carelessly by a person liable for the tax (or a person acting on behalf of such a person), proceedings for the recovery of the lost tax may be brought at any time not more than 12 years after the later of the dates in section 240(2)(a) and (b).”

See Amendment 36.

Amendment 44, page 55, line 2, at end insert—

“(7A) Proceedings may also not be brought under this section if—

(a) before the last date on which the proceedings could otherwise be brought, information is made available to HMRC by a person liable for the tax (or a person acting on behalf of such a person) on the basis of which HMRC could reasonably have been expected to become aware of the lost tax, and

(b) it was reasonable to expect the proceedings to be brought before that date.”

See Amendment 36.

Amendment 45, page 55, line 8, at end insert—

“(8A) Subsection (7A) will not apply in cases where a person liable for the tax (or a person acting on behalf of such a person) is subsequently found to have failed to provide all relevant information available to HMRC, or to have provided misleading information.

(8B) For the purposes of subsection (7A), whether information has been made available to HMRC is to be determined in line with section 29(6) TMA 1970.”

See Amendment 36.

Amendment 27, in clause 82, page 58, line 9, leave out from “section” to “may” in line 10.

This amendment would provide for all regulations under the new power (EU double taxation directive) to be subject to the affirmative procedure.

Amendment 28, page 58, leave out lines 13 to 17.

See Amendment 27.

Amendment 18, in schedule 1, page 148, line 34, at end insert—

“21A The Chancellor of the Exchequer must review the expected revenue effects of the changes made to TCGA 1992 in this Schedule, along with an estimate of the difference between the amount of tax required to be paid to the Commissioners under those provisions and the amount paid, and lay a report of that review before the House of Commons within six months of the passing of this Act.”

This amendment would require the Chancellor of the Exchequer to review the effect on public finances, and on reducing the tax gap, of the changes made to capital gains tax in Schedule 1.

Amendment 17, in schedule 2, page 177, line 21, at end insert—

“Part 1A

Review of effects on public finances

17A The Chancellor of the Exchequer must review the expected revenue effects of the changes made to capital gains tax returns and payments on account in this in this Schedule, along with an estimate of the difference between the amount of tax required to be paid to the Commissioners under those provisions and the amount paid, and lay a report of that review before the House of Commons within six months of the passing of this Act.”

This amendment would require the Chancellor of the Exchequer to review the effect on public finances, and on reducing the tax gap, of the changes made to capital gains tax in Schedule 2.

Amendment 29, page 177, line 42, at end insert

“unless the amendment relates to a disposal of an asset or assets resulting in a capital loss between the completion date of the disposal in respect of which the return is made and the end of the tax year in which the disposal is made.

(2A) In that case, an amendment may be made to take into account any capital losses which have arisen after the completion date and within the same tax year.”

This amendment would allow UK residents to submit an amended residential property return where a capital loss on non-residential assets is incurred after the completion of the residential disposal and within the same tax year.

Amendment 19, in schedule 5, page 211, line 45, at end insert—

“Part 2A

Review of effects on public finances

34A (1) The Chancellor of the Exchequer must review the revenue effects of this Schedule and lay a report of that review before the House of Commons within six months of the passing of this Act.

(2) The review under sub-paragraph (1) must consider—

(a) the expected change in corporation tax paid attributable to the provisions in this Schedule, and

(b) an estimate of any change, attributable to the provisions in this Schedule, in the difference between the amount of tax required to be paid to the Commissioners and the amount paid.”

This amendment would require the Chancellor of the Exchequer to review the effect on public finances, and on reducing the tax gap, of Schedule 5.

Amendment 21, in schedule 6, page 221, line 26, at end insert—

“13 The Chancellor of the Exchequer must review the expected change to payments of Diverted Profits Tax and any associated changes to overall payments made to the Commissioners arising from the provisions of this Schedule, and lay a report of that review before the House of Commons within 6 months of the passing of this Act.’

This amendment would require the Chancellor of the Exchequer to review the effect on public finances of the diverted profits tax provisions in the Bill.

[Anneliese Dodds]

As my hon. Friends have set out a number of times already today, this is a Finance Bill that continues the Government’s previous programme of austerity for the many while the very best-off people are protected. This Conservative Government chose to tie the hands of this House with regard to amending the Bill, so there are very few means we can adopt to have an impact on any of these measures. None the less, new clauses 2 and 4 would require the Government to at least review their regressive policy approach. I realise that I need to compress my remarks, so I will speak briefly to each of those new clauses and then to new clause 26, which pushes in the same direction, and new schedule 1, which in many respects exemplifies this Government’s slipshod approach, particularly to tax policy making.

--- Later in debate ---

[Anna Turley (Redcar) (Lab/Co-op)]

Will my hon. Friend give way?

[Anneliese Dodds]

I do not believe I can, as I have been told that I have to proceed quickly.

For many years, the Government failed to take action, before clamping down purely on taxpayers and doing little to nothing to the enablers of this form of tax avoidance. I hope the Minister will be clear about this. He has talked about the promotion of defective schemes. When taxpayers are described as having done something illegal, which is what HMRC has said about the behaviour of those subject to the loan charge, why will the Government not say that those who promoted those schemes also promoted something illegal? They use this language about defective systems. I am sorry, but that is pusillanimous. Those who were unwittingly led into schemes that are now described as illegal must themselves be able to take action against those who wrongly advised them.

I hope that the Minister will look at that very carefully and accept the new clause. If he does not, I hope that he will accept my backstop, to coin a phrase, and have a meeting with me. I am glad he has intimated that he may be willing to do so to talk about how we can better help people who have ended up in a very difficult situation—some of them with their eyes wide open, but many of them not realising the impact of these schemes.

[Nicky Morgan]

I rise to speak briefly—I know time is short in this debate—about new clause 26. For the avoidance of doubt among those on the Treasury Bench, I will not be supporting the new clause, but, as Chair of the Treasury Committee, I want to put on the record some concerns about the loan charge on behalf of the many individuals who have contacted the Committee and of the Committee members who have expressed concerns about it. I hope that Ministers will listen and engage with MPs across the House on this issue.

The Committee has raised concerns about the loan charge in evidence sessions with my right hon. Friend the Chancellor, and with HMRC and the Chartered Institute of Taxation. As the hon. Member for Oxford East (Anneliese Dodds) said, it is right that people should pay their fair share of tax on their earnings, and we do not support anything that seeks to get around that. It is right that HMRC should act swiftly and firmly to close down such avoidance schemes.

However, tax law sets out time limits within which HMRC can open inquiries and make tax assessments. Normally, those time limits take account of whether a taxpayer has taken reasonable care to comply with their tax obligations, has been careless or has deliberately decided not to comply. They are seen as valuable taxpayer protections, giving a degree of certainty that takes appropriate account of taxpayer behaviour.

It is certainly concerning to me—I am not sure I can speak on behalf of the whole Committee, but I think it is fair to say that I speak on behalf of many of its members—that HMRC’s contractor loan settlement opportunity requires people who want to put their affairs straight to waive those protections, with the threat of the loan charge looming over them. It is not clear why it is necessary for that settlement opportunity to pressure people into paying tax for years that HMRC calls “not protected”—years where HMRC is out of time—even though it may have had the information it needed to open inquiries or raise assessments at the proper time.

--- Later in debate ---

[Anneliese Dodds]

This has been a Finance Bill of highs and lows. One high was the Government finally listening, albeit only when they were pushed to do so by the prospect of losing a vote, as we have just seen in relation to the loan charge. Another high was the fact that we saw the House seize the initiative to act to protect our country from the negative consequences of a no-deal Brexit for our economy and for our safety and resilience, as set out by the right hon. Member for West Dorset (Sir Oliver Letwin) in what I thought was an extraordinary speech.

I understand that the vote a couple of hours ago on the amendment tabled by my right hon. Friend the Member for Normanton, Pontefract and Castleford (Yvette Cooper) was the first time that a Government have been defeated at this late stage of a Finance Bill since the summer of 1978. At that stage I was only four months old, so I cannot exactly say that this is the only time I have seen a Government defeat on a Finance Bill in my lifetime, but I suspect it was the first time for many other Members. It was an appropriate defeat, because it shows that this House has adopted responsibility when our Government have sadly been unwilling to do so.

All this has happened in a context where Government have systematically attempted to reduce the opportunities for this House to influence the Finance Bill. Conservative Ministers’ decisions over recent years to prevent the House from substantively amending Finance Bills have been unprecedented. They have become a new norm and reflect the lack of confidence that this Government have in arguing their convictions. Surely that, above all, is the case with the Government’s approach in this Finance Bill, which preserves austerity for the many while the very best-off people and profitable corporations continue to benefit, our productivity gap yawns, regional inequalities widen and we see the creation of unprecedented phenomena in this country, such as the fact that getting into work is no longer the ticket out of poverty that it once was.

We have seen this Government’s unwillingness even to gather the figures and evidence about how their measures will affect child poverty or public health, in a context where life expectancy is for the first time going down in some of our communities. We have seen them bowing to lobbying pressure and introducing loopholes to protect many overseas investors from measures intended to level the playing field between them and domestic investors. Finally, we have seen the extraordinary contortion of a new schedule being inserted into the Bill just before Christmas to introduce a new tax relief for profitable corporations, not only very late in the day but without any information whatsoever about the cost that it will pose to the public purse. Indeed, we will not get that information before the measure is implemented.

The Government are spendthrift when it comes to profitable companies and the very best off, but miserly when it comes to the worst off. I see those on the Government Front Bench adopting a rather pantomime-style response to that. I am sorry to say that the overall package in this Finance Bill supports that contention, as do the figures, if only we could have them in front of us now.

Despite the considerable problems with this Bill, given the fact that it now contains provisions that militate against a no-deal scenario—surely the most significant risk currently to our economy and indeed to our security—we cannot and will not oppose it. I want to end by thanking all the civil servants and indeed staff of this House who have worked so hard on this Bill, and who have helped us in the Opposition—[Interruption.] I see that the Minister wants to thank them, too. I also want to thank all my hon. Friends who have contributed to our debates on this Bill.