Finance (No. 3) Bill (Third sitting)

Anneliese Dodds Excerpts

Thursday 29th November 2018 Public Bill Committees

[Mel Stride]

I assure the hon. Gentleman that in these tax matters—as with all tax matters—given our firm commitment to honour our climate change commitments, we are in regular contact with car manufacturers and those producing electric vehicles, through my hon. Friend the Exchequer Secretary.

As with all policy changes, the fiscal impact of the measure will be monitored by HMRC, and the Office for Budget Responsibility may request for it to be reviewed as the new out-turned data becomes available. The fiscal impact on taxpayer compliance has been considered and is included in the overall costing of the measure. HMRC publishes annual updates to its tax gap analysis, which will reflect the effect of capital gains tax policy changes. I therefore urge the Committee to resist the amendments and I commend the clause and schedule to the Committee.

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

It is a pleasure to serve on this Committee with you in the Chair, Mr Howarth. I am grateful to the Minister for his introductory comments and for his comments on our amendments.

As the Minister explained, the clause and schedule extend, from 6 April next year, the existing capital gains tax requirements in relation to reporting and payment for non-UK residents who are disposing of UK property, in order to include new interest that will henceforth be taxed. They also introduce, on the same date the following year, reporting and payment-on-account obligations for residential property gains for UK residents and UK branches and agencies of non-UK resident people.

The measure has been quite a long time coming. Back in 2015, the Government signalled their intention to introduce from April 2019 the requirement that capital gains tax on gains from selling or disposing of residential property be paid within 30 days of the disposal being completed. As the Minister intimated, that will be a payment on account towards the person’s tax liability for the tax year in which the disposal is made. However, the measure was deferred until 2020, and the consultation on it undertaken earlier this year, as the Minister mentioned. As I understand it, there is already a payment-on-account scheme for non-UK residents, so these measures will just extend that approach to UK residents, as well as expanding the range of taxable interest for non-UK residents.

We have tabled two amendments. Amendment 31 would delay commencement of the provisions in paragraph 3 of schedule 2 until the Government have released further details of HMRC’s consultation with representative bodies concerning awareness of those provisions among those who may be covered by them. The rationale for the amendment is that the proposed measures, as we have just discussed, introduce a new payment-on-account scheme for capital gains tax on residential property that requires filing of a return far earlier than is currently required, and far earlier than the potential 22 months to which the Minister referred, right down to 30 days after the disposal of that property.

During the consultation on the proposals, some respondents expressed their concern that taxpayers, not expecting that they needed to make such a return until the end of the tax year, might fail to inform their accountant and thus miss the deadline. Of course, in doing so they would incur interest on non-payment. Our amendments would enable details of HMRC’s discussions with representative bodies to be asked for in order to ensure that potentially affected taxpayers were forewarned of the new measures and therefore did not fall foul of them and incur that interest on non-payment.

I understand why respondents to the consultation might have been concerned by that. Their responses were summarised in the consultation response document as concerning the fact that

“taxpayers may not be aware of the new rules until after the end of the tax year when they tell their accountants about their disposals, resulting in late filing penalties.”

Some of those making that argument pointed out that HMRC charges interest for those filing late, set at 3%. That, of course, contrasts with the repayment interest of 0.5%. I completely understand why there is a difference in rates, but that difference surely adds some grist to the mill of needing to ensure that all potential taxpayers are definitely made aware of the change. After all, 30 days is not that long a period within which to act.

The Government’s response to the consultation maintains that where information needed to be obtained from third parties for the purposes of calculating the capital gains tax that should be accommodated within the periods required for marketing and conveying any such property, and that estimated declarations could be corrected later, as the Minister mentioned. I am a little concerned by some of the ambiguity in the language used in the consultation response about what will happen if a taxpayer cannot make the payment on time. This is a question not of the amount of tax owed, but of the calibration of when it will be paid.

--- Later in debate ---

[Sir Robert Syms]

Another slight problem is that when someone is selling a property, it is not unusual for them to renovate it or do some work on it. When they report their CGT liability, they offset their legal fees, builders’ fees and other fees. The 30-day reporting window is quite tight. With my solicitor, I tend to get a bill long after I have forgotten that I owe it.

I am sure the Minister will pick up on this question when he sums up, but is the 30-day period just for reporting the possibility of CGT, or is it for reporting the actual figures? It is quite a tight period to collect all the bills, work out the profit or offset the allowance and pay the right amount, given how people do business in this country.

[Anneliese Dodds]

I am grateful for that intervention, which underlines the fact that in practice some of the calculations may be relatively complex. The response to the consultation sets out the Government’s view that in practical terms it should normally be possible for those involved to come up with the appropriate figure, but if not, an estimate would be acceptable.

While the hon. Gentleman was making his very relevant point, I was wondering whether there might be room for people to proffer a low estimate, which would obviously have a financial benefit, and then correct it later on. Will HMRC genuinely have the capacity to understand whether such an estimate was bona fide—as he says, evidence such as relevant bills may not have been fully available at the time—or whether it was intended to reduce liability? I agree that a specific reply from the Minister to that pertinent point would be helpful.

Clearly, in this case the length of time for any deferral of capital gains tax beyond the 30-day period, up to 22 months, would presumably need to be quite a bit shorter than the length of time we are talking about in relation to time-to-pay agreements. It would be helpful if the Minister confirmed that and whether his Department will be setting out criteria similar to those I have just mentioned for time-to-pay agreements to guide HMRC on this matter. Were these matters covered in the existing consultation that occurred with interested parties and just not reported in the Government’s response?

Amendment 32 would require a review of the effects on public finances if the provisions in this schedule were introduced from 6 April 2019. It would require the Secretary of State to

“lay a report of that review before the House of Commons within six months of the passing of this Act”.

We believe that the amendment is necessary—first, because from what I can see there are two effective start dates in the schedule and it is quite unclear why; and secondly, because we need to understand the anticipated impact of the measures to a greater degree than is surely possible with the information supplied to us.

We have already had a little discussion about the payment on account system. Arguably, it enables the smoothing of outgoings for individuals and individual businesses, and of revenue for HMRC, so to that extent it can help with financial planning. However, we are surely talking about quite a different process when it comes to the payment of capital gains tax. We are not talking about someone who is self-employed, who is very unlikely to have payment just in one big lump sum; it is likely to be in a number of different sums or continuous payments.

One could argue there is more of a rationale for payment on account in those regards than potentially here, aside from the fact that these measures will ensure more security of revenue for HMRC. Surely they could potentially have a revenue impact because, as the hon. Member for Poole mentioned before, without this 30-day limit individuals could be keeping that sum, effectively earning interest on it and paying it later.

I appreciate what was said about the interest rate being low now, but that will not always necessarily be the case. Surely it would be useful for us to have a review on the effects on public finances of these provisions, as requested in amendment 32. Amendment 33 from the Scottish National party pushes in the same direction, so we also support that.

[Mhairi Black (Paisley and Renfrewshire South) (SNP)]

It is a pleasure to follow the hon. Member for Oxford East; we are also happy to support the Labour party’s very sensible amendments.

Our 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. In 2016-17 the income tax, national insurance contributions and capital gains tax gap was 4.2%, or £13.5 billion—quite a significant amount of money for a Government to be short-changed on. It seems only sensible, then, that the Chancellor informs us of how he expects these changes to impact that tax gap. That would enable us to have a record of what the intentions are and what he expects to be the conclusion.

Only then can we coherently and clearly assess whether the measure is working or not. Especially given how unpredictable the current future is with Brexit and things, it surely only makes sense to put this stuff down in writing—“Here’s what we think is going to happen”—so that we can then assess it. Ultimately, it cannot hurt to be more transparent, so I urge the Government to accept the amendment.

--- Later in debate ---

[Mel Stride]

Thank you, Mr Howarth; I am sure the Committee has taken note of your guidance. I say to my hon. Friend the Member for Poole that there is another aspect to that, and while 30 days is 30 days—not a year or more as has been the case under current arrangements—there are two points that I will make.

One is that, clearly, there is typically a moment of exchange before property transfer completes, which is an additional period of time in which paperwork is brought together. The second point is that, to the extent that it is not possible to immediately complete the information with absolute certainty within the 30 days—perhaps because of third-party valuation issues, for example—it is possible, as I said earlier, to have a balancing arrangement further on down the line in the future. That could work either way: the Revenue might owe the individual money or vice versa. That is facilitated within the arrangements.

I point my hon. Friend to the HMRC website where, should he have any more specific questions about how CGT operates, there is a user-friendly interface. He can put in all the numbers and variables, and the website will provide him with the answers.

The hon. Member for Oxford East raised the time-to-pay arrangements. Clearly, where tax is due, the Revenue takes a measured and responsible approach towards those who find it difficult to pay any tax, perhaps for reasons of personal financial difficulty or otherwise. I know from conversations that those at a senior level at HMRC have always been very keen to ensure that it operates in a sympathetic and responsible manner to negotiate the very difficult line between being sympathetic, responsible and helpful, where appropriate, and equally, making sure that we are all treated the same and that, where tax is due, individuals and companies actually pay it.

Another point that has been raised is HMRC capacity. The premise of those concerns is the assumption that, to a significant degree, the changes might generate lots of additional work for HMRC. I suspect the contrary, for the reasons that I have given. If, when the capital gain is crystallised, there is a shorter period for people to hand in the paperwork as required, it means that they will get on and do it, rather than delaying and discovering that, as a consequence, they have to contact HMRC to get involved in negotiations and discussions.

On the overarching point about HMRC and capacity, as the hon. Lady will know, we have of course invested an additional £2 billion in HMRC since 2010. We have 24,000 individuals or full-time equivalents in HMRC who are focused on tax collection. The total head count of HMRC, which stands at around 70,000, is the highest that it has been for some years. I commend the clause and the schedule to the Committee.

[Anneliese Dodds]

I am grateful to the Minister for his comments. We on this side do not oppose the measures and are willing not to press our two amendments to a Division. I will, however, make two points. It would help if the Minister provided some information on the criteria that would be used by HMRC for adopting deferred arrangements with individual taxpayers. Such criteria exist for time-to-pay arrangements, but none has been set out in relation to this clause, so it would be helpful to know what they are. I agree with him that there needs to be a balance between sympathy and responsiveness, to enable people to pay the tax that is due. On the other hand, there is the matter of equal treatment.

[Peter Dowd (Bootle) (Lab)]

I know that my hon. Friend has been doing remarkable work on making connections with the representative bodies, and visiting offices all around the country. My constituency has about 2,700 members of HMRC staff. There seems to be incongruity between what the Minister says about capacity and resource in HMRC and my experience from speaking to my constituents. Does my hon. Friend feel the same in that regard?

--- Later in debate ---

[Anneliese Dodds]

I am grateful to my hon. Friend for making that point. I do agree. Certainly judging by the conversations that I have had in a number of different parts of the country where the consolidation programme for HMRC is occurring, there is enormous concern, particularly about the expertise that is being lost by HMRC in some very important areas.

I would hazard the argument, relating this to the previous point, that when one is talking about, for example, tax officials having appropriate discretion to offer slightly different payment plans and so on to individuals, one needs to have experienced staff who can make those kinds of decisions, but we are seeing many such staff leaving. HMRC currently has the lowest morale, I think, among its staff of any Department. That reflects concern about the regionalisation programme, but also about other matters.

As I mentioned, it would help if we were provided with the set of criteria for deciding to apply a slightly different approach and allow latitude beyond the 30 days. It would also help if we were given, perhaps in written form, more information in order to reassure us that, because the window is still open for a balancing payment to be made later, the issue that we were talking about before does not arise.

Obviously, the vast majority of taxpayers will wish to make a truthful and accurate return, but if that process is manipulated, it could default in effect to what we have already, so it would be useful to hear about some of the anti-avoidance aspects of this measure. However, as I said, we are certainly willing to withdraw the Labour amendments.

[Mhairi Black]

I appreciate everything that the Minister said. However, I think that our amendment is as sensible as it is transparent and therefore I still insist that it be part of the Bill.

--- Later in debate ---

[Mel Stride]

Clause 17 and schedule 5 provide that a non-UK resident company that carries on a UK property business will be charged corporation tax, rather than income tax as at present. The provisions will deliver equal tax treatment for UK and non-UK resident companies that carry on UK property businesses. They will prevent persons from using the existing difference in treatment to reduce their tax bill on UK rental property or land through offshore ownership.

Until 1965 all companies were subject to income tax on their profits. When corporation tax was introduced in that year for UK resident companies and for non-resident companies trading in the UK through a UK permanent establishment, other non-resident companies remained chargeable under the income tax rules. From July 2016, non-resident companies that deal in or develop UK land were brought within the UK tax net under corporation tax, but for UK property businesses, two companies, one domestic and one offshore, currently have different rules for calculating tax from a UK property income, even if their property businesses are otherwise identical.

The clause provides for a more coherent and fair tax regime by bringing the UK property business income of non-resident companies into the corporation tax regime from 6 April 2020. The transition will mean that those companies will be subject to the recently implemented policies to combat tax avoidance, including the corporate interest restriction, hybrid mismatch rules, carried-forward income loss restriction and the carried-forward capital loss restriction announced at Budget 2018. The businesses will now be taxed at the corporation tax rate and, in combination with clause 24, they will be eligible for the loss relief rules available to companies and groups. The latest estimate by the Office for Budget Responsibility is that the changes will raise £365 million over the next five years.

Amendment 39 would require the publication of a register of named individual non-UK resident companies who are charged corporation tax rather than income tax as a result of the measure. The Government do not identify specific individuals or companies that are brought within the scope of particular tax charges, and it would be inappropriate to do so. Amendments 35 and 38 would require a review of the impact of schedule 5 on corporation tax receipts. The OBR certified impact of the measure on tax receipts is set out in table 2.2 of Budget 2018. It will be updated in table 2.2 of Budget 2019 before the schedule comes into effect on 6 April 2020, so the amendments are unnecessary.

New clause 4 would require the Government to undertake a review of the effects of schedule 5, specifically to consider the effect of not bringing schedule 5 into effect and increasing the corporation tax rate to 26%. If schedule 5 was not brought into effect, non-UK resident companies with income from UK property would remain chargeable to income tax. In that situation, raising the corporation tax to 26% would create a clearly enhanced incentive for companies with a UK property business to set up offshore in order to benefit from paying the basic rate of income tax.

I urge the Committee to reject the new clause, along with the amendments, and I commend clause 17 and schedule 5 to the Committee.

[Anneliese Dodds]

I am grateful to the Minister for that explanation of the clause and schedule. As he explained, they set out new arrangements for non-UK resident companies that carry on a UK property business or that have other UK property income. The clause and schedule will shift those companies from the income tax regime into the corporation tax regime. The Government appear to intend the measure to deliver more equal treatment for UK and non-UK resident companies in receipt of similar income, and to prevent those that use the difference to reduce their tax bill on UK property through offshore ownership.

The measures were subject to consultation from March last year and the Government released their response in autumn 2017. In that Budget the Government announced they would make the change in two years’ time, in 2020. I anticipate that in our discussion we will return to some of the themes that characterised our discussion on clauses 13 and 14. The measure seeks to align the treatment of non-UK investors with that of UK investors in the field of real estate. On Tuesday we discussed some of the limitations that the Opposition believes there are with the Government’s approach.

--- Later in debate ---

The hon. Member for Oxford East also mentioned the register of the businesses that would come within the scope of the measure. She raised the figure of 22,000 businesses. There is a general principle about going out and publicly holding up those who fall within the scope of particular taxes, but there is also an element of proportionality. She raised the figure of £160,000, as the cost of making the technology changes that would be required to introduce the measure. [Interruption.] I apologise—the hon. Member for Aberdeen North made that point. Perhaps I can unite the Opposition parties by saying that clearly there has to be an element of proportionality when it comes to getting all this information together, then getting the register together and keeping it up to date, and asking the question, what is the particular value of doing so?

[Anneliese Dodds]

The Minister is trying to suggest that it would be a great cost, but I made it clear that HMRC would have to compile a list of these individuals anyhow in order to inform them of their tax liabilities. There would not be a collation cost. There may be a cost from other aspects of it, but not from the collation.

[Mel Stride]

The hon. Lady is right that HMRC will be privy to the information, but there is a difference between being privy to the information and treating with individuals and companies in terms of their tax return. Collating all that information and presenting it in the form that she envisages is a distinct activity.

I undertake to write to the hon. Member for Aberdeen North about the online number that she discovered and the numbers that were provided in the policy document. I wish I was so good that I just knew all the answers and was over the detail to that degree, but I will certainly write to her on that, and on the cost of making the changes to the system. I am happy to have a look at the £160,000 figure that she raised and see how it breaks down.

[Mel Stride]

I think I am right in saying that over the longer term, in revenue terms the measure is likely to be broadly neutral. The OBR, of course, will only cast out across the scorecard period. It will not analyse the fiscal impacts beyond that, but if the hon. Lady would care to write to me with any questions on that, to the extent that I can answer them of course I will do so.

I commend the clause and the schedule to the Committee.

[Anneliese Dodds]

I am grateful to the Minister for his comments, but we will press amendment 38 to a vote. Although I took on board his responses, I am concerned that we have a lack of clarity about the revenue impact of a measure, which means that as a Committee it is difficult for us to make a judgment on it. When he tried to explain why there might be a negative amount on some projections of the impact in subsequent years, he stated that that was due to the different timing of reporting of corporation tax revenue and income tax revenue. That would explain a difference for one year, but not for subsequent years, so I am still concerned about why there might have been a negative suggested figure into subsequent years.

In addition, it is not clear to me whether the figures that have been set out, whether that is one set or another, take into account the impact of coming within the scope of anti-avoidance measures and so on. That would obviously just be a projection in any case, but we surely need to have more information before we can take an informed view.

[Peter Dowd]

On a slightly wider but, I think, pertinent point, in the Red Book for this year, corporation tax for 2019-20 is £60 billion and by 2023 it is £66 billion. Does the hon. Lady find that her concerns about this specific thing are compounded by the uncertainty about, for example, the deal we will be debating in the not-too-distant future?

[Anneliese Dodds]

I agree with my hon. Friend. When we are talking about this sector in particular, we must always bear in mind the impact not only on revenue but overall on investment and the need to ensure that high-quality infrastructure is provided. I know that that is enormously important and something that the Minister is concerned with and working on. For the reasons I have set out, we will press amendment 38 to a vote.

On new clause 4, I say in response to the hon. Member for Aberdeen North that there may be some agreement on some issues, but on corporation tax rates there is a difference to the extent that Labour feels that we need to work with other countries to prevent a race to the bottom. That is something we have already been doing. A race to the bottom is damaging, particularly when many businesses tell us that the corporation tax rates do not drive their decision to locate in the UK; they may be one of a basket of factors, but other matters, particularly sunk costs, are important. Therefore, we are happy for our proposals to come under scrutiny at every point, and we hope that in doing so we might persuade the SNP to come to our view as well.

[Kirsty Blackman]

To be totally clear—I am sure the hon. Member for Oxford East did not mean this—we do not support a race to the bottom either. Our manifesto position was that we supported no further reductions in corporation tax, which is slightly different from the Labour party position.

In the spirit of trying not to take up too much of the Committee’s time and the fact that amendments 35 and 38 are broadly similar and we have covered the ground of both amendments quite a lot during the course of the debate—although the answers we received could have been clearer—we are happy not to press amendment 35 and to support Labour party amendment 38.

Question put and agreed to.

Clause 17 accordingly ordered to stand part of the Bill.

Schedule 5

Non-UK resident companies carrying on UK property businesses etc.

Amendment proposed: 38, page 210, line 45 [Schedule 5], at end insert—

“Part 2A

Annual review of effects of this schedule

34A (1) The Chancellor of the Exchequer must undertake an annual review of the effects of the provisions of this Schedule on corporation tax receipts.

(2) The report of the review under sub-paragraph (1) must be laid before the House of Commons before—

(a) in respect of the first review, within 12 months of this Schedule coming into force, and

(b) in respect of each subsequent review, within 12 months of the date on which the report of the previous review was laid before the House of Commons.”—(Anneliese Dodds.)

This amendment requires an annual review of the revenue effects of this Schedule, in each year following the Schedule coming into force.

Question put, That the amendment be made.

--- Later in debate ---

Clause 18 and schedule 6 make amendments to ensure that DPT continues to prevent multinationals from pursuing aggressive tax planning that diverts profits, and hence tax, from the UK. I commend the clause and schedule to the Committee.

[Anneliese Dodds]

I am grateful to the Minister for his explanation of the clause and schedule. Colleagues will be well aware that DPT was introduced back in 2015, following enormous pressure from campaigners, the Public Accounts Committee and the Opposition to ensure that large, multinational companies pay their fair share of tax. DPT focuses on two forms of tax avoidance. The first is where

“a company with a UK taxable presence uses arrangements lacking economic substance to artificially divert profits from the UK.”

The second is where

“a person carries out activities in the UK for a foreign company that are designed to avoid creating a Permanent Establishment”

and becoming taxable through that route.

As the Minister set out, the Bill makes a number of changes to DPT. First, the changes attempt to ensure that the rules work more effectively to prevent avoidance arrangements giving rise to planning opportunities from October this year. The changes clarify that diverted profits will be taxed under only DPT or corporation tax from 1 April 2015 onwards; obviously, this is a retrospective tax.

The measures also extend to 38 months the period in which HMRC can issue a preliminary notice stating that it intends to apply DPT in the first category of cases —that is, where taxpayers are believed to be using arrangements lacking economic substance in order to expatriate profits. The Opposition will certainly support that change. As mentioned, however, the measures also extend very substantially—by 25%, from one year to 15 months—the review period for HMRC to work with a company to examine how much profit has been diverted.

Finally, the measures enable the amendment of corporate tax returns to include diverted profits during the first 12 months of the review period, and to allow the inclusion of diverted profits on the corporation tax return of the affected party for the first 12 months of the review period, in cases where a foreign company is believed to have attempted to avoid permanent establishment through artificial methods.

We have tabled a number of amendments to clause 18 and schedule 6. Amendment 45, as was mentioned, would require a public register of firms that have paid the diverted profits tax. Colleagues will remember, I am sure, that when that tax was introduced, it was widely described by the Government as a Google tax. Indeed, journalists were briefed by Government spokespeople using that term. The Minister has argued that DPT is not targeted at any particular sector; that is not how it was described and promoted at the time.

It is not clear to the Opposition whether Google has actually been covered by DPT. Back in January 2016, the then Chancellor of the Exchequer maintained that DPT provided the context for HMRC’s £130 million settlement with Google. Of course, that was announced to great fanfare, but very quickly there was a lot of concern that it was actually a very poor deal for taxpayers, because Google’s settlement with HMRC in January 2016 covered a whole 10 years, from 2005 to 2015, and constituted £117 million in back taxes and £13 million in interest. Fairly obviously, it was not the Google tax, DPT, that led to that settlement, because it had applied for only a twentieth of the time for which the settlement was achieved—just six months of that time. Also, the so-called Google tax had not led to any appreciable unwinding of complex tax structures. Of course, we need to put the £130 million settlement in the context of the then £4.6 billion-worth of UK sales by Google. I appreciate that that is comparing apples with pears, but it does put things in context.

In concluding the deal, HMRC accepted Google’s claim that its UK staff only supported their colleagues in Ireland—something that the PAC discussed at length and which I will not go into here. Suffice it to say that it is contested. Interestingly, that great radical Rupert Murdoch stated that the tax payments by Google were

“token amounts for PR purposes”.

Our amendment is designed to shine a light on which taxpayers have actually been subject to this tax, given the way in which it was presented when it was introduced, so that the public can judge its effectiveness for themselves. It would also provide a first step towards the country-by-country reporting for multinational companies that the Government were forced to accept as a possibility through an amendment to the 2016 Finance Bill, although they have not yet enacted that. They have the power to enact it through that amendment, but have not yet gone ahead with it. This amendment would at least take us a step along the way.

Amendment 40 would require a review of the diverted profits tax against its stated aims; that would include the extent to which it has raised revenue for the Exchequer. It is very similar to amendment 37 from the SNP. The Minister intimated that the revenues coming from DPT were higher than forecast, and that does appear to be the case, but it would be helpful if the Minister could delineate for us the different components of his Department’s assessment of the value of DPT. That is because, as I understand it, there are two components to its reported value: the direct tax take from DPT itself and the additional tax resulting from altered company tax practices. It is not clear to me whether that is just about the extra corporation tax or something else, so perhaps the Minister can illuminate it for us.

It would also be helpful if we could understand why there has been such an increase in the projected number of taxpayers coming under the measure. Anecdotally, many tax practitioners have told me that they do not think that it is necessarily covering the very biggest firms—many had anticipated that it would do so—particularly digital firms, but it is covering a large number of other firms. To that extent, it seems to be quite different from the initial prospectus, so can the Minister explain why, on this issue, George Osborne seems to have got things wrong? I admit that that was not an isolated occurrence, but it would be helpful if the Minister could explain it.

George Osborne, when DPT was introduced, said that it would also act as a catalyst for the restructuring of companies that were seeking to avoid permanent establishment in the UK and to claim false economic substance in low or no-tax jurisdictions to avoid UK corporation tax. We have not, from what I can see, had any evaluation of DPT’s impact in connection to that. I have not heard of many significant changes in corporate structure that can be specifically attributed to DPT. They may well exist, but we need to know about them in order to have an appropriate understanding of the efficacy or otherwise of the measure. That is what is called for in amendment 41. Related to discussion around our previous amendment, if increased tax from alterations in corporate structure is counted as part of the revenue from DPT, surely it is important for us to know what those alterations in corporate structure are in the first place. I think that would be helpful for the Committee.

Amendment 42 requires a review of DPT’s effectiveness as against the Government’s proposed digital services tax—DPT versus DST, as it were. Colleagues will, of course, be aware that DST has not been included in the Bill; it is only being consulted on. Strangely, at the same time as saying that that tax would impel other countries to implement similar provisions by starting a conversation on the merits of novel approaches to taxing digital giants, the tax includes some weaknesses that, it seems to me, do not apply to the European approach. It is set at 2% of revenues, rather than at 3%. It also includes the so-called safe harbour provision, which means that it is not paid by companies that do not indicate that they are making profits. That is exactly how many of them have avoided corporation tax, so how such a measure would catch many of those companies is unclear to me.

Our amendment would ask for an explicit comparison of DPT with DST. That is surely necessary given that they embody fundamentally different assumptions about the appropriate basis for corporate taxation. DPT assumes that transfer pricing is still alive and kicking, and a tenable basis for assigning taxing rights, while DST obviously uses a particular form of revenue as the taxable quantum, rather than profit. That is surely necessary in a context where there are many discussions ongoing at an international level about the appropriate basis for corporate taxation, including whether there should be a greater focus on value derived from branding. I understand that has some support on the US side.

I will briefly describe our two additional amendments in the three minutes that remain. Amendment 46 removes the extension of the review period during which the taxpayer can make representations to HMRC about why its assessment is invalid. Despite what the Minister said, I do not think that we have been provided with sufficient evidence about why that is necessary. If there is a problem with companies providing evidence towards the end of that review period and HMRC is having difficulty crunching that evidence, surely it would be more helpful for those companies to be required to provide the evidence a bit earlier in the process. If evidence being provided later on in the existing review period was causing problems for HMRC, surely that would be one way of dealing with it.

Finally, as the Minister mentioned, amendment 43 would consider the impact of introducing the measures within this specific time period as against another. Again, we feel that we have not been provided with a sufficiently clear rationale for the timing, so it would be helpful to learn more about the implementation schedule set out within the Bill.

Ordered, That the debate be now adjourned.—(Craig Whittaker.)