Finance Bill

Debbie Abrahams Excerpts

Committee of the whole House
Wednesday 10th January 2024 Commons Chamber

On fraud, which was raised by the hon. Member for Ealing North, over the last three years HMRC has significantly increased the number of people working on R&D compliance to over 500. We have also announced policy measures to counter non-compliance in R&D schemes and will follow-up with a more detailed compliance action plan outlining of how HMRC will reduce error and fraud. That will be released in due course.

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

Following on from the comments of the hon. Member for Amber Valley (Nigel Mills) about the impact of the schemes and given the Federation of Small Businesses’ request for some publication about the impact of these tax reliefs on R&D levels, will the Minister also publish a report on their impact on different regions and subregions?

[Nigel Huddleston]

All taxes are kept under review, as are their impacts, so some of the calls for further analysis are not necessary because we do that as a matter of course. It is important to stress that many external studies have found that when full expensing has been introduced in other countries, it has been very effective in supporting investment. Of course, the OBR forecasts predict a boost of £3 billion each year. The analysis of the impact of the super-deduction is already taking place, but companies have 12 months from the end of their accounting period to amend their tax returns, so HMRC will not have complete data on the impact of the super-deduction until 2024. However, we will provide further analysis in due course.

My hon. Friend the Member for Erewash mentioned a whole range of real-world impacts from these measures and the previous measures, including the super-deduction, as well as, importantly, the annual investment allowance of £1 million, which affects the 99% of smaller businesses that can effectively benefit from full expensing. In the autumn statement, we announced full expensing for larger businesses: the top 1%, who conduct about 80% of full investment.

I am aware of time, but will cover a couple of other key points that were raised. My hon. Friend the Member for Erewash raised subcontracting. Again, we engaged extensively with stakeholders on this issue over the summer, and the Government have developed an approach that will allow the person taking the decision to do R&D to claim that relief. That was the preferred result of the consultation. However, an exception will apply in the important area that she mentioned of companies doing R&D—such as in a clinical trial—in the UK for another company that is ineligible for relief because, for example, it is an overseas customer. That is to make sure that the impact is there for everyone to benefit from. The hon. Member for Ealing North also mentioned partnerships; a corporate partner is eligible for full expensing, but an unincorporated partner is not. Again, the annual investment allowance of £1 million covers the investment needs of almost all unincorporated partnerships.

The hon. Member keeps harping on about taxes rising. I strongly advise him to look at his December payslip and compare it to the one he will get shortly. Maybe he will have the decency to come to me and tell me whether his tax is lower or higher. Each fiscal event needs to be taken separately. At the last one, the autumn statement, we cut taxes—national insurance is down 2p. [Interruption.] If the hon. Member does not believe me, I pose this challenge to him: if his payslip shows that his taxes are lower, perhaps he will do me the courtesy of coming to me and apologising, or give the difference to a charity, to put his money where his mouth is.

We do not believe that new clause 1 is necessary because the information has already been published in the tax impact and information notes alongside each change, which give a clear explanation of the policy objectives, along with details of the implementation costs for both HMRC and businesses. Therefore, the new clause is not necessary. I urge the House to reject it, and I commend clauses 1 and 2 and schedule 1 to the Committee.

Question put and agreed to.

Clause 1 accordingly ordered to stand part of the Bill.

Clause 2 ordered to stand part of the Bill.

Schedule 1 agreed to.

New Clause 1

Review of reliefs for research and development

“(1) The Chancellor of the Exchequer must, within three months of this Act being passed, publish a review of the implementation costs of the measures in section 2 incurred by—

(a) HMRC, and

(b) businesses.

(2) The review under subsection (1) must include details of the implementation costs of all measures related to credit or relief for research and development that have been introduced since December 2019.”—(James Murray)

Brought up and read the First time.

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