Finance Bill

Emma Little Pengelly Excerpts

Committee: 1st sitting: House of Commons
Wednesday 11th October 2017 Commons Chamber

[Sammy Wilson (East Antrim) (DUP)]

First, I welcome the proposal in the Finance Bill, which adds to the previous decision about devolving corporation tax to Northern Ireland and giving us autonomy to make decisions about what the appropriate level may be.

I am a bit bemused by new clause 2. The argument is that devolving corporation tax to Northern Ireland and our having a different rate will somehow or other open the door to abuse. That objection could of course have been made, and more appropriately made, when the decision was made to devolve the tax in the first place. If it is open to abuse, it will create the kind of problems described by the shadow Minister, but if that were the case, I cannot understand why these issues were not raised at the time we voted on the principle of devolution. I suspect this is more to do with the fact that the Labour party is opposed to any reduction in corporation tax.

Let me address a couple of the points that have been made about extending this to small and medium-sized enterprises. The Minister made it quite clear that the criteria are, first, that they have to have a physical presence in Northern Ireland; and, secondly, that they have to register profits commensurate with the activities they engage in in Northern Ireland. That of course will have to be shown—by accounts, by employment, by the physical infrastructure that such a business would have in Northern Ireland—so there are already safeguards anyway. It can be measured whether an SME is simply moving paper money to register profits in Northern Ireland, or whether it is creating genuine jobs.

The biggest safeguard will be the decisions made by the Executive in Northern Ireland—if, indeed, an Executive is ever up and running again in Northern Ireland. We hope there will be, but that is one of the problems at the moment. It is not in the interests of the Northern Ireland Government to allow the situation that has been described by the Labour spokesman, for the simple reason that the payment for the devolution of corporation tax comes from the block grant. If we allow companies simply to migrate their business to Northern Ireland, register their accounts in Northern Ireland and declare their profits in Northern Ireland, but they do not actually create any physical activity in Northern Ireland, we will have to pay the amount of tax lost from the block grant. There will be no better policeman or policewoman of this than the Northern Ireland Executive themselves.

The review asked for—if there is any point in a review after a year—is therefore superfluous. First, there is the evidence that the company has to produce, and then there will be the scrutiny of HMRC. When we negotiated the devolution of corporation tax, compliance costs were built in, because of the additional scrutiny. It will also be in the interests of the Northern Ireland Executive to ensure that the system is not abused. For all those reasons, I believe that the new clause is superfluous. It is not needed, and we will therefore vote against it.

[Emma Little Pengelly (Belfast South) (DUP)]

I want to raise one additional point. My hon. Friend the Member for East Antrim (Sammy Wilson) has set out very well a number of our concerns about the proposed new clause. We have looked at this issue in the Northern Ireland Assembly, and I had the privilege of being the Chairperson of the Finance Committee when we considered the detail of it. We listened to concerns from small business and to those outlined by the Opposition spokesperson, but the key objective is to attract new business and jobs to the UK. We do not necessarily want movement from the rest of the UK to Northern Ireland. This is about foreign direct investment, trying to create new jobs and contributing positively to the economy of Northern Ireland and of the UK.

In Northern Ireland, we have looked at this issue for many years. It has been scrutinised by committees. We have had a range of consultants and others look at the detail of the proposal because we want it to work. As my hon. Friend the Member for East Antrim said, we do not want it to be simply an exercise in brass-plating or anything like that. We want jobs, employment and further investment in Northern Ireland.

One of the big issues in terms of the movement and type of jobs we want is certainty. Certainty is essential if we are to get commitment from companies—hopefully, big companies—to move into the UK for the first time and to invest in plant and staff recruitment. The proposal in new clause 2 to have a review after 12 months will create uncertainty. What international business would look at the UK and invest in plant, employees and recruitment when one of the big incentives to moving—the lower corporation tax rate—could be removed following a review after just 12 months? It is essential that we remain positive about the measure and have certainty about it. I reiterate: we want new jobs for the UK, and we want them in Northern Ireland.

Question put and agreed to.

Clause 25 accordingly ordered to stand part of the Bill.

New Clause 2

Review of changes to chargeability of trading profits to corporation tax at Northern Ireland rate

‘(1) CTA 2010 is amended as follows.

(2) After section 357WH (Allocation of Northern Ireland profits etc of firm to company), insert—

“357WI  Review of changes to chargeability of trading profits to corporation tax at Northern Ireland rate

(1) As soon as practicable after the completion of the first financial year in respect of which the Northern Ireland rate is set by the Northern Ireland Assembly in accordance with the provisions of section 357IA, the Commissioners for Her Majesty’s Revenue and Customs shall complete a review of the effects of the changes to chargeability of trading profits to corporation tax at the Northern Ireland rate made in Schedule 7 to the Finance (No. 2) Act 2017.

(2) A review under this section shall consider in particular the effect of those changes on the extent to which companies are based in—

(a) Northern Ireland, and

(b) Great Britain.

(3) A review under this section shall also consider the effect of those changes on the extent to which the profits or losses of companies and firms are Northern Ireland profits or losses.

(4) A review under this section shall also consider the effect on employment in—

(a) Northern Ireland, and

(b) Great Britain.

(5) A report of the review under this section shall be laid before the House of Commons within one calendar month of its completion.”” —(Jonathan Reynolds.)

This new clause requires HMRC to carry out a review after the first year of operation of the Northern Ireland rate of the effect of the changes in Schedule 7 on the location of companies in Northern Ireland and in Great Britain, the extent to which trading profits and losses are treated as subject to the Northern Ireland rate and on employment in Northern Ireland and in Great Britain.

Brought up, and read the First time.

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