Finance (No. 2) Bill (Second sitting)

Blake Stephenson Excerpts

Committee stage
Tuesday 27th January 2026 Public Bill Committees

Some of the issues I have highlighted have straightforward solutions, which our amendments address. The Government claim they want to simplify our tax system—the Minister and my hon. Friend the Member for Wyre Forest were hurrahing that earlier—and encourage investment in Britain, yet they produce legislation that is complex, sometimes retrospective and riddled with unintended consequences. We need tax law that is clear, fair and progressive, not a compliance minefield that catches the unwary while sophisticated advisers find ways around it. I listened carefully to the Minister’s response, in particular on the TRF issues that I raised, but my intention is to press my amendments.

[Blake Stephenson (Mid Bedfordshire) (Con)]

I will speak to amendments 1 and 2 in the name of my hon. Friend the Member for Windsor. The Government and those of us supporting the amendments are trying to achieve the same outcome. The aim of the amendments is simple: to enable the Government to achieve their goal of raising billions in tax revenues from former non-doms—money that is needed to pay for public services, as the hon. Member for Burnley said earlier.

The Government set out the policy intention to replace non-dom status with a UK residency tax to raise more tax from those with the greatest capacity to pay, while simplifying the system. They introduced the temporary repatriation facility—or, given that we like three-letter acronyms, the TRF—as the central part of that strategy. It is designed to encourage people to remain in the UK, to come to the UK and invest in the UK, and to bring historically offshore capital into the UK tax net. The TRF offers a reduced rate of taxation of 12% on all non-UK assets brought into the country as an incentive to do just that. We all want the same thing: we want the TRF to work, because if it does not, the money does not come here and the Exchequer and the public lose.

The Government are relying on the reforms to raise very substantial sums—about £34 billion overall. The concern I express is not ideological or about the tax rate; it is about legal certainty and deliverability. The problem is that a number of the wealthiest people have left the country, and many more are doing so as we debate these amendments. Why? Odd as it may seem, it is not because they are unwilling to pay more tax; it is because of the legal uncertainty in the Bill as drafted.

Using the TRF as set out in the Bill exposes people to serious legal uncertainty. First, they are subject to double taxation through double counting of the same economic value. Secondly, they are vulnerable to retrospective taxation. Thirdly, they face allegations of tax avoidance simply for using a scheme that Parliament itself has created. Fourthly, they expose themselves and their families to potentially decade-long investigations into arrangements that were entirely lawful at the time they were entered into. That is why they are watching this Bill proceed with their bags packed, waiting to see if it will fix the problems.

The advisers of such people are warning them to leave, but I know that the Government’s intention is not to drive them away. We need their taxes, fairly paid, to fund the renewal of our public services. That is why amendments 1 and 2 were tabled, in a constructive spirit of co-operation, as my hon. Friend the shadow Minister mentioned. Amendment 1 would stop double counting; and amendment 2 would ensure that retrospective and unfair action does not continue. Had amendment 49, which goes further, been selected for debate, I would have spoken to it as well, but I will resist doing so because it has not been selected.

Amendments 1 and 2 would provide the needed certainty and make the TRF usable in practice, not just in theory. I hope that the Minister can give me some assurance that the Government recognise some of the technical problems highlighted by the amendments and intend to resolve them. I noted earlier that the Minister rejected amendments 1 and 2, giving a brief reason why, but given the representations, certainly by the Opposition, a more detailed response as to why the amendments have been rejected by the Government would be worthwhile.

Much careful work has gone into the construction of amendments 1 and 2. Again in the spirit of co-operation, I am sure that Conservative Members would be happy to provide input to the Minister and officials as they consider how best to address the issues. With that, I commend the amendments to the Committee.

[Lucy Rigby]

A criticism of complexity has been made. The aim of these reforms is, of course, simplicity. I think it is recognised across the House that in matters of taxation, simplicity is better. We are ensuring that the legislation works as it is intended to do. The shadow Minister, the hon. Member for North West Norfolk, referred to the Chartered Institute of Taxation. It is important to note this quote from the institute:

“Moving from domicile to residence as the basis for taxing people who are internationally mobile makes sense.”

As well as being a major simplification, it is a fairer and more transparent basis for determining UK tax. Residence is determined by criteria far more objective and certain than the subjective concept of domicile. Replacing the outdated remittance basis is sensible, and the temporary repatriation facility offers a helpful transition.

Another criticism is retrospection. In this instance, the Government feel that a retrospective change is a proportionate response to protect revenue, which, as the hon. Member for Mid Bedfordshire said, is essential for public services. This change will prevent taxpayers from benefiting from unintended windfalls and promotes consistency in the application of rules, bringing the capital gains position into line with the income tax provision. In most cases, trusts will not yet have made capital distributions, meaning that beneficiaries and trustees will have advance notice and can plan their affairs.

A further topic that that came up is the reporting of every element of FIG. I have a note on that somewhere, so I will come back to it. I will deal first with the suggestion that restrictions on the TRF are arbitrary. The position of someone who is temporarily abroad arose. The TRF is designed to encourage people to be UK-resident and bring funds into the UK economy. Allowing non-residents to use the TRF would let individuals benefit from the reduced charge without living here or contributing to the UK economy, which would reduce the incentive to become or remain UK-resident.

As I said, I reject amendment 1 because there are already measures in place that prevent double counting. I have dealt with amendment 2. I want to deal with the reporting of every element of FIG, which I have a note on, as I said. [Interruption.] That is the wrong note. I will have to come back to that.

Finance (No. 2) Bill (Third sitting)

Blake Stephenson Excerpts

Committee stage
Thursday 29th January 2026 Public Bill Committees

[James Wild (North West Norfolk) (Con)]

It is a pleasure to see the Exchequer Secretary in his place. Some Committee members may have felt that his ministerial colleague the Economic Secretary dealt with some clauses rather briefly in our earlier sittings, so we look forward to the loquaciousness that the Exchequer Secretary displayed on the Floor of the House the other day.

I shall speak to clause 55 and to amendment 41 and new clause 10 in my name. The clause is about clawing back the winter fuel payment from anyone whose total taxable income is above £35,000. According to the Budget costings, this measure will cost about £1.8 billion in 2025-26, settling at £1.3 billion the year after, but overall the changes that the Government have made with the removal of winter fuel payments will save £450 million.

However, the Chartered Institute of Taxation and the Low Incomes Tax Reform Group have raised concerns about the potential complexity of the clause; about how it could cause anxiety for people who have not had to navigate tax rules before; and about how the £35,000 per year cap will only diminish over time as inflation eats away at it. I have therefore tabled new clause 10, which would require the Government to review the case for uprating the £35,000 threshold by CPI each year, ensuring that it retains its value. I have also tabled amendment 41, which would go further and put that commitment squarely on the face of the Bill so that there can be no ambiguity about whether the level will increase.

The Minister skated over a bit of the background to the clause. The measure flows from one of the Chancellor’s first political choices, which was to remove the winter fuel payment from all pensioners except those in receipt of pensioner credit. That meant that pensioners living on incomes of around £13,000 a year lost their winter fuel support. Vital support was pulled from millions of pensioners across the country. In my constituency, 22,000 pensioners lost their entitlement overnight; the figure may have been similar in your constituency, Mr Efford. It was a deeply damaging move, which is why organisations such as Age UK and my party campaigned against it, and the Chancellor was forced to come back to the Dispatch Box to perform one of her U-turns. In response to the pressure, the Government announced that everyone would get the payment but that it would be clawed back.

I turn to the points that the Chartered Institute of Taxation and the Low Incomes Tax Reform Group have raised about the clause and the schedule. If a pensioner’s income is £1 over the threshold, they will lose the entire winter fuel payment; there is no taper. Unlike other income-related charge-backs, such as the high-income child benefit charge or the tapering of the personal allowance, the winter fuel payment is based on total income, not adjusted net income. It will affect pensioners who are seeking relief on their charitable contributions. Will the Minister explain why the Government have opted for a system that measures income in inconsistent ways, with different rules from similar income-dependent clawback schemes?

The Bill sets out that the Government’s approach relies heavily on data sharing between the DWP, devolved social security bodies and HMRC. There are some exemptions, for example for those who have been on means-tested benefits during the qualifying week or who have opted out of receiving the payment, but if that information is not shared swiftly and accurately, instances may occur of administrative issues causing distress and financial loss. Pensioners could also see an unexpected tax code on their pay slip, clawing back money that they should never have been charged. That might lead them to have to fight through an appeals process just to claim what is rightfully theirs.

The plan to collect the charge through PAYE, as is set out in the clause, brings its own issues. From 2027-28, HMRC will move to in-year coding, meaning that pensioners could start paying back a benefit that they have not even received yet, based on HMRC’s best guess at their income. As we all know, the winter fuel payment is a one-off payment that is usually paid in November, but PAYE collection is spread throughout the year, so pensioners could be having money clawed back that they have not yet received. If that estimate turns out to be wrong, they will have money taken off and refunded later. That is a recipe for potential confusion and hardship, and it could lead to more calls to HMRC that may go unanswered. In the year of transition, some pensioners could face being charged twice in a single tax year. That is not a minor administrative issue. It needs to be addressed.

We all know that any fixed monetary threshold in legislation loses its real value over time, but if Ministers believe that £35,000 is the right level today, surely they accept that uprating in line with inflation is only fair. If the Minister will not support that principle outright, perhaps he will commit to supporting new clause 10, which simply asks for a review of the impact of doing so. Schedule 10 allows for the alteration of the limit, but there is no obligation on Ministers, as there is for other benefits, to review the level or uprate the limit.

[Blake Stephenson (Mid Bedfordshire) (Con)]

My hon. Friend talks about fairness in relation to amendment 41 on uprating in line with CPI. Is it also worth considering the importance of certainty, particularly for people on fixed incomes who will benefit from this measure? Uprating by CPI would give them certainty into the future that they are not going to fall into fuel poverty.

[James Wild]

My hon. Friend makes a valuable point. We want more certainty within the system, as far as possible. On earlier clauses, we debated the uncertainty that can come from having administrative rules that HMRC can interpret. Our amendment would give people confidence that their income and the benefit they receive would continue in real terms.

Nobody disputes the need to focus support on those who need it most. Where the Chancellor got it wrong was in taking it away from people who are just over the £13,000 income threshold. If the Government insist on recovering payments, they need to get the fundamentals right, with clear definitions, robust data sharing and a simple route for challenging any mistakes that may have been made.

Let us be clear. We welcome the Chancellor’s latest U-turn, reversing the very first decision she took in office. She was wrong to remove the benefit from millions of pensioners. This clause helps her to correct her poor political choice.

--- Later in debate ---

[Dan Tomlinson]

I thank the hon. Members for North West Norfolk and for Maidenhead for their remarks and my hon. Friend the Member for Burnley for his enjoyable intervention.

In response to the point made by the hon. Member for North West Norfolk, we believe that total income is a reasonable way of assessing income. There are other ways of making that assessment, but we think that in this instance total income is appropriate.

[Blake Stephenson]

The Minister says that the measures that the Government are using are appropriate, but can he explain, in response to the question from my hon. Friend the Member for North West Norfolk, why adjusted income was not used and why it is not appropriate?

Finance (No. 2) Bill (Fourth sitting)

Blake Stephenson Excerpts

Committee stage
Thursday 29th January 2026 Public Bill Committees

[James Wild]

It is a pleasure to see you back in the Chair presiding over our proceedings this afternoon, Mrs Harris. I will speak to amendment 42, which stands in my name and that of my hon. Friends, along with clause 79 and new clause 14.

Clause 79, which many are already calling the taxi tax —that is certainly what people in the industry are calling it—changes the way VAT is applied to taxi and private hire vehicle journeys. Currently, under the tour operators’ margin scheme, VAT is charged only on the operator’s margin—that is, the difference between what the operator charges the customer and what it pays the underlying provider. The clause will remove taxi and private hire vehicle transport from the scope of the tour operators’ margin scheme.

The clause is being brought forward following a defeat for His Majesty’s Revenue and Customs on precisely this point. The tribunal rejected HMRC’s claim that ride-hailing services do not qualify for TOMS, although I understand that there is still an appeal, which is due to be heard in March. Perhaps the Minister can explain how much money is being spent preparing for that, if this legislation is going to make the question moot.

In practical terms, the clause means that drivers and businesses now have to charge VAT at 20% on the fare paid by the customer—taking, for example, a £20 fare to £24. The measure took effect from 2 January this year. The Labour party promised in its manifesto not to increase VAT. It is true that it has not increased the rate, but it has certainly expanded the scope of its application through this measure. According to the Government’s own Budget policy costings document, the change will raise about £190 million in 2025-26, rising to some £675 million a year by 2031. That strikes me as a significant new burden—a significant new tax—on private hire and taxis, hence the “taxi tax” sobriquet. It is passengers who will ultimately end up paying the bill.

Industry bodies have warned that fares could increase by double-digit percentages in some areas. Every penny of extra VAT will be passed on to passengers who rely on these services because they have no viable public transport alternatives. That is particularly the case in rural areas and among disabled and elderly passengers, women wanting to get home safely at night and workers on early shifts. They are the people who will be affected by this taxi tax.

[Blake Stephenson (Mid Bedfordshire) (Con)]

Like quite a few members of the Committee, I represent a rural constituency. We have a lot of villages that are not connected to our towns, and a lot of elderly people who need to get to appointments. There are also a lot of children with special education needs and disabilities who get to school via taxis. Does my hon. Friend agree that the increase in fares, which will be passed on to our vulnerable constituents, is unacceptable, and that a charge will be passed on to local authorities, which is not fair to our local taxpayers?

[James Wild]

My hon. Friend, like me, has a very rural constituency that spends tens of millions of pounds on this. I think Norfolk spends around £30 million or £40 million a year on taxis to transport pupils with special education needs to school. That is a huge proportion of the money that is spent on special educational needs, and potentially adds to the burden and costs of councils who are struggling, particularly in rural areas. They have been—I will be polite—disadvantaged by the latest local government settlement and the way that the Government have skewed the formula against rural areas, having already removed the rural services grant, which we had come to rely on.

What is the Government’s estimate of the average fare increase for passengers as a result of this measure? How can the Treasury justify raising the transport costs at a time when families are already struggling and the Government claim that the cost of living is their priority?

The charge in this clause will not only hit passengers. Operators will face new administrative burdens as they try to account for VAT under far more complex rules. That creates uncertainty—this Committee has discussed the need for certainty on many occasions—and increases the costs for local businesses that operate on relatively small margins. As one operator of a private hire vehicle firm said, rather starkly,

“a 20% VAT hike would hit the elderly, disabled and rural passengers hardest. Businesses cannot plan, invest or grow while uncertainty remains.”

The places most exposed are those with limited public transport networks and a consequently high reliance on the use of taxis and private hire vehicles. That is why we have tabled amendment 42, which proposes to exempt rural communities. It is a simple and fair way to protect those most affected. It would amend clause 79 so that the charge does not apply to journey by private hire vehicle or taxi in rural areas.

If the Minister refuses that limited relief, will he at least commit to supporting new clause 14? It would require a proper impact assessment of the effect of the measure on the taxi and private hire industry, driver earnings, vulnerable passengers, rural communities and passenger fares.

There is a practical problem with clause 79, as with so many clauses that we have debated. Some major operators, including Uber, have reclassified themselves or are exploring ways to reclassify themselves as technology platforms rather than transport providers. That seems to be happening in cities outside London already. If they succeed, the VAT liability would shift from the company to the individual drivers, many of whom are not VAT-registered owing to their earnings level. What is the Minister’s response to that shift, which is already taking effect in parts of the country?

Concerns have also been raised by the Institute of Chartered Accountants in England and Wales that the list of qualifying services in proposed new subsection (3A) in section 53 of the Value Added Tax Act 1994 is too narrow. The institute contends that the list excludes other key designated travel services, most notably trips, excursions and the services of tour guides. That creates a genuine issue for tour operators who supply day-trip packages, whether to the coast of North West Norfolk or to other parts of the country. A lot of small, often family firms provide these services.

For example, if the package consists of a private car transfer, picking up someone from King’s Lynn station and taking them up to sunny Hunstanton, and that is combined with a professional tour guide or excursion ticket, under the clause the private hire element will fall out of TOMS while the guide or excursion will remain in it. What will that do? It will add considerable complexity, forcing the unbundling of a single commercial package. It will require changes to systems and changes to invoicing.

If the intent, as the Minister will no doubt tell us, is simply to go after taxis and private hire vehicles, this is a glaring example of where the drafting is wrong and goes too far. The ICAEW contends that the existing ancillary tests are robust enough to avoid any obvious attempt to dodge paying the tax that is due.

This is a tax rise that will increase fares, hurt rural and vulnerable passengers and create fresh uncertainty in a vital sector. In my constituency, the funding that has been provided for buses is reducing in comparison with the funding provided by the last Government. I expect that that position is being replicated across the country. People in my constituency do not have the luxury of the regular services that I am sure the Minister has in his Chipping Barnet constituency, with maybe three an hour. In parts of my constituency, three a day would be frequent.

I hope that the Minister recognises the points that are being made on behalf of rural areas; I am sure that other hon. Members who represent rural areas will not sit silently when the issue is being discussed, but will speak up for their constituents.

As I say, this is a tax that will increase fares, hurt rural areas and vulnerable passengers and create uncertainty. It will also add to the cost of living. The Office for Budget Responsibility has forecast that real living standards will increase by 0.25% in each year of this Parliament, which is a staggeringly low figure when the average has been 1% in each of the past 10 years. That is not a great record—no wonder the Government are cancelling elections left, right and centre.

If the Government are intent on pressing ahead, the very least the Minister can do is agree to review the measure, looking at fare levels, passenger numbers and any reduction in service availability. Otherwise, I look forward to pressing to a vote my amendment, which would protect rural areas.