David Gauke
Main Page: David Gauke (Independent - South West Hertfordshire)Department Debates - View all David Gauke's debates with the HM Treasury
Finance (No. 3) Bill
David Gauke Excerpts(13 years, 5 months ago)
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The Exchequer Secretary to the Treasury (Mr David Gauke)
I beg to move amendment 1, page 48, line 16, leave out subsection (4).
Mr Deputy Speaker (Mr Nigel Evans)
With this it will be convenient to discuss Government amendments 2 to 8.
Mr Gauke
Clause 87 and schedule 25 give effect to the new mutual assistance recovery directive, which comes into effect on 1 January 2012. The directive will improve the current mutual assistance provisions, which permit member states to recover and enforce tax debts and to exchange information across the European Union. This will improve tax compliance and make the tax system fairer. The directive extends mutual assistance to all national and local taxes. Local taxes are devolved, so consent is required from the Scottish Parliament and the Northern Ireland Assembly to legislate on their behalf. These consents could not be secured before those Administrations dissolved ahead of the May elections, so a number of exclusions were included in the Bill published on 31 March 2011. Agreement has now been received from Scotland and Northern Ireland that Westminster can legislate for these matters.
The amendments remove the exclusions included in the Bill in relation to Scotland and Northern Ireland. They also make an addition to the explanation of “relevant UK authority” in order to include a claim from another member state to recover an agricultural levy in Scotland.
Gavin Williamson (South Staffordshire) (Con)
I understand that my hon. Friend recently received the very prestigious award of tax personality of the year. I am somewhat concerned that this glorious award may be influencing his conduct as a Minister in carrying on his business in relation to tax policy. Is that a fact?
Mr Gauke
I am grateful to my hon. Friend for that intervention. I am trying hard not to let the award go to my head. I will endeavour to do my best, but it is of course a great honour. I take it as praise for what the Government are doing more generally on tax policy. Before I break into tears—I find it quite emotional to talk about the award—I shall return to the issue of mutual assistance.
HMRC’s data-gathering powers are modernised by clause 86 and schedules 23 and 24. It is important that the powers satisfy the international standards determined by the OECD and the global forum on transparency and exchange of information for tax purposes. The provisions in the Bill, which have been discussed in Committee, will ensure that HMRC can use its full range of existing powers to meet requests from overseas.
The global forum is currently conducting a peer review of the UK and a specific issue has been identified that we have to address. Schedule 36 to the Finance Act 2008 does not allow HMRC to require information from a third party when it does not know the full identity of the taxpayer but has some information from which their full identity can be ascertained, such as a branch code and a bank account number or a credit card number. At present, unless a serious loss of tax is suspected, HMRC is unable to issue a notice to a third party that can be reasonably expected to know the name and address of the person concerned. In the examples I have given, that would be a bank or credit card issuer. To meet our international commitments, we need to amend schedule 36 to allow a formal notice to be issued in those circumstances. However, we have made a clear commitment to consult on tax changes, so I have asked HMRC to consult over the summer on how best to achieve the changes, with a view to publishing draft provisions in the autumn and legislating next year. I envisage the changes taking effect from Royal Assent in 2012.
In conclusion, the amendments to clause 87 and schedule 25 will help to ensure that the new mutual assistance recovery directive is fully transposed into UK law by 31 December 2011. We fully support the aims of the directive and this implementing legislation. I therefore commend the amendments to the House.
Chris Leslie
The amendments look reasonably uncontentious. It is sensible to find ways to support mutual assistance between nation states in the recovery of tax debts and duties. I am glad that the consents have come from the devolved Administrations. Those justify the amendments, so we do not wish to oppose them.
May I, too, take this opportunity to congratulate the hon. Gentleman on the prestigious award of tax personality of the year. I am sure that there is more to his personality than tax. Perhaps in his speech, as well as thanking his parents and his agent, he could also thank his accountant.
Amendment 1 agreed to.
Schedule 7
Investment companies
Mr Deputy Speaker (Mr Nigel Evans)
With this it will be convenient to discuss Government amendments 23 to 29.
Mr Gauke
The amendments will ensure that clauses 34 and 48 operate as intended when companies make retrospective changes to the dates to which their accounts are drawn up.
Schedule 7 allows companies to elect prospectively to change the currency in which they prepare their accounts for tax purposes. That is often referred to as their functional currency. That change must be prospective to prevent companies from changing their functional currency with the benefit of hindsight to realise a foreign exchange loss for tax purposes. Following the Public Bill Committee debate on clause 34, a major accountancy firm disclosed an avoidance scheme that retrospectively creates a short accounting period to circumvent the new rules. The amendments will ensure that clause 34 operates as intended when a company retrospectively changes the date to which its accounts are drawn up.
Clause 48 and schedule 13 implement an optional branch exemption regime. Companies must elect into branch exemption in advance of an accounting period to prevent them from leaving known losses outside of exemption in order to retain loss relief. Retrospective accounting period changes create problems similar to those that arise in connection with clause 34, whereby decisions on election into branch exemption may be made with the benefit of hindsight. The amendments will ensure that clause 48 operates as intended when a company changes its accounting periods. In each case, the date on which an election comes into force will be fixed in advance at the time when the election is made.
The amendments that relate to clause 34 will protect the £60 million yield in the original measure, and together the amendments will protect an estimated £200 million that would otherwise be likely to be lost due to avoidance schemes. They will ensure that clauses 34 and 48 operate as intended when a company uses hindsight to alter its accounting periods. I therefore urge the House to accept them.
Mr Gauke
I beg to move, That the Bill be now read the Third time.
During the course of the debates on this Finance Bill we have spent some time combing through the details of our plans to put the economy back on course. It is a Bill that will help ensure the stability of our financial sector, protect the most vulnerable in society from the worst effects of the downturn, make Britain a better place to do business and stimulate private sector growth. We are clearly the Government who are setting the agenda on the need for a tax system that encourages growth, by cutting corporation tax, improving research and development tax credits, extending enterprise investment schemes and increasing the entrepreneurs’ relief.
To be fair, after three months of debate we have not seen much policy from the Opposition. Of course, the right hon. Member for Morley and Outwood (Ed Balls) proposed a temporary cut in VAT in the middle of our proceedings, although I cannot but draw the House’s attention to the fact that he then failed to table an amendment to that effect until it was too late. It fell to the hon. Member for Carmarthen East and Dinefwr (Jonathan Edwards), who I am delighted to see here this evening, to table such an amendment. However, at that point the official Opposition abstained and failed to support the very policy for which they had been campaigning the week before. I would like to think that they were persuaded by the arguments made from the Dispatch Box that it was the wrong policy. Perhaps there is some cachet in being tax personality of the year after all, although on that evening not all Government Back Benchers were so easily persuaded by arguments from the Treasury Bench.
Hon. Members will be aware that this is the first full Bill in which we have demonstrated our commitment to the principles of tax policy making that were set out in last year’s Budget. To paraphrase Bananarama, it ain’t just what you do, it’s the way that you do it. I am sure hon. Members are aware that the Treasury Committee published its report on our new approach to tax policy making on 15 March, and that they will have noted the principles of good taxation set out by my right hon. Friend the Chancellor in his Budget speech. Like the Committee, he gave his views on what the key elements of our tax system should be. It should support growth and encourage competition; be certain and predictable; be simple to understand and easy to comply with; and be fair, reward work, support aspiration and ask the most from those who can most afford it. Those principles are central to the policy making process that is reflected in the measures that we see in the Bill.
The Bill supports growth in our economy, and will help to provide businesses with the most competitive tax system in the G20. We set out our plans for achieving that in “The Corporate Tax Road Map”, which was published last November. We are providing business with a clear understanding of our overall direction of travel; setting out the timetable for major areas of reform; and enabling businesses to have the confidence they need to invest, create new jobs and drive the recovery. John Cridland, director-general of CBI said, quite simply:
“This Budget will help businesses grow and create jobs. The Chancellor has made clear the UK is open for business.”
The Bill delivers some of the major changes: a cut in corporation tax to 26% this year and 25% next year, towards a rate of 23% in 2014, which will be the lowest corporation tax rate in the G7; cuts in the small-profits rates of tax; interim reforms of the controlled foreign corporation rules, before a full reform next year; and simplification of the rules relating to corporate capital gains. Those will help to deliver on making Britain competitive internationally, although that is not the only driver of growth: we are supporting British businesses through changes to the enterprise investment R and D tax credit schemes, making them more generous; we have doubled the rate of entrepreneurs relief; and we are increasing the disposal time for short-life assets to eight years.
We set out most of the measures in the Bill last year, just as we set out most of the measures for next year in Budget 2011. We will consult on draft legislation in the autumn to allow time to hear from interested parties and, as I have said, we have set out future changes in a number of areas, including for corporate taxes. Certainty is what British businesses need most, and that is what this Government are giving them.
On simplification, we recognised the spaghetti bowl of complexity in the tax system, so last summer we set up the Office of Tax Simplification to advise us on how to untangle matters. It has made substantial progress and has already examined the reliefs within the tax system. Following its recommendations, we have identified more than 40 reliefs for abolition, of which seven are repealed by the Bill. We recently launched a consultation on the remainder to ensure that taxpayers have sufficient notice of the changes, with a view to legislating next year. Furthermore, the OTS has made recommendations on the operational integration of income tax and national insurance contributions, and we announced in the Budget that we will take forward work on that. A simpler tax system is an easier tax system, and it reduces costs for business and the Government, although it may leave me with less to read on my quiet evenings in.
The final principle outlined by the Chancellor and echoed by the Treasury Committee is that of fairness. We have increased the personal allowance by £1,000, and will increase it to £10,000. We are making real steps in every year in this Parliament. We have cut fuel duty by only 1p, as opposed to the 6p increase that the previous Government would have imposed. We are freezing vehicle excise duty for hauliers, and there will be an inflation-only increase in vehicle excise duty for all other motorists.
We are supporting pensioners through the triple guarantee on state pensions and by removing the requirement to annuitise, and we are helping charities through changes to the substantial donors rules. We are taking action on tax avoidance to address issues that have spiralled out of control. In particular, we have introduced legislation to tackle disguised remuneration—the practice whereby well paid individuals disguise their remuneration as loans that are never repaid, which results in a loss to the Exchequer. That measure will raise more than £700 million a year, and I am genuinely surprised and disappointed that it did not receive Opposition support in Committee. We have also introduced the bank levy to encourage banks to behave in a less risky manner, while ensuring that they pay their fair share. The tax system must be fair, and this Government are ensuring that that is so.
When I thought that I would be making this speech on 4 July, I found it easy to weave in references to American independence, in which taxation played such a large part. The date of 5 July is a little less well known for historical events, although of course it was the date in 1948 on which the NHS was launched. My research on this day uncovered a further event of note, although I shall refrain from calling it historical—were the right hon. Member for Delyn (Mr Hanson) here, I would wish him a very happy birthday. I thank him for his constructive engagement during the passage of the Bill in Committee and on Report, as I do the hon. Members for Bristol East (Kerry McCarthy) and for Nottingham East (Chris Leslie). I hope that the right hon. Gentleman has found the time to celebrate. I would like to thank him for his good humour during the Bill. I would also like to take this opportunity to pass on my congratulations to an official who has been supporting me throughout the Bill and who is celebrating her 30th birthday today and showing her dedication to the cause. It may be her 30th birthday but she is still with us in the Chamber today.
We have a plan for deficit reduction that has been internationally endorsed, and we are sticking to it. We have a plan for growth—growth that will be driven by investment and exports, growth that is sustainable and growth that supports entrepreneurs throughout the country. The Bill puts in place the right conditions to allow British business to flourish, and I commend it to the House.