Finance (No. 2) Bill

Debate between James Murray and Victoria Atkins

Report stage
Tuesday 20th June 2023 Commons Chamber

[Victoria Atkins]

That gives me the opportunity to declare that I sat not only on the Joint Committee for that Bill but on the Select Committee. There was a great deal of concentration and discussion, as I recall—the House will have to forgive me as I am rolodexing back several years in my memory—about the meaning of communications data, because of the sensitivities in relation to some of the powers rightly given to our security services in order to safeguard national security and for other purposes.

There has been some debate about how the General Data Protection Regulation and the Data Protection Act apply in the years that have fallen since. The clarification has been made because the Home Office wanted to ensure that it defines that accurately, protects citizens’ rights and permits Government agencies, law enforcement agencies and other agencies to collect and review the data necessary to protect us all. We are tabling this amendment now at the first opportunity we have had, to ensure that that phrasing still permits HMRC to collect the vital data that we need to ensure that our taxes are collected properly. To sum up my point on new clause 5, the civil information powers allow HMRC to continue to collect vital revenue to fund our public services.

In conclusion, the Government’s proposed amendments will ensure that the legislation works as it should and that HMRC has the powers it needs to continue collecting tax revenue that is vital to fund our public services that so many in our country rely on. I will, of course, address all amendments tabled by other Members when I wind up later. I very much want to listen closely to the debate that will now follow. In the meantime, I commend amendments 9 to 19 and new clauses 4 and 5 to the House. I urge hon. Members to accept them in due course.

[James Murray (Ealing North) (Lab/Co-op)]

It is important, briefly, to first recognise the context in which we consider amendments and new clauses to the Bill. Yesterday we heard the news that the average rate for a two-year fixed-rate mortgage has now breached 6% for the first time since December. That news will leave the 400,000 people across the country whose existing fixed deals end between July and September feeling anxious and fearful. They face the prospect of having hundreds of pounds less in their pockets each month when their current deal expires and they have to re-mortgage. That is not to mention all those on variable rates, who have already seen their payments rise relentlessly as a result of interest rates going up again and again.

Across the country, mortgage payers are facing interest rate rises above 6% for the second time in 12 months. The first time came in the wake of the Conservatives’ disastrous mini-budget last autumn; now it is because inflation means that banks expect interest rates to stay higher for far longer than anyone feared. The truth is that mortgage payers are feeling pain because the Tories crashed the economy and have no plan to fix it. What is more, we know the current increases in mortgage payments come after 13 years of low growth and stagnant wages. They also come after 25 tax rises by the Government in this Parliament alone, increases that have pushed the tax burden in this country to its highest level in 70 years.

I will begin considering the detail of our amendments on Report by focusing on something very rare indeed: a tax cut from this Government. That tax cut is included in clause 18. Through that section of the Bill, the Government will be spending £1 billion of public money a year to benefit the 1% of people with the biggest pension pots. Ministers may claim that their decision was driven by a desire to get doctors back into work, but since the policy was first announced the Government have flatly rejected any call to consider a fairer and less costly fix targeted at doctors’ pensions.

It is not just Labour who have been questioning the Government’s approach; the Conservative Chair of the Treasury Committee, the hon. Member for West Worcestershire (Harriett Baldwin), said that even she was surprised that Ministers had opted for a blanket cut rather than a bespoke policy for doctors. That is why we will be voting today for our amendment 1, which deletes clause 18, thereby abandoning plans for this blanket change that fails to spend public money wisely. As our new clause 1 makes clear, the Chancellor should finally do what so many have been calling on him to do and produce an alternative approach to pensions that is targeted at NHS doctors and provides taxpayers with value for money.

Finance (No. 2) Bill (Fourth sitting)

Debate between James Murray and Victoria Atkins

Committee stage
Thursday 18th May 2023 Public Bill Committees

[The Financial Secretary to the Treasury (Victoria Atkins)]

Again, out of an abundance of caution, I refer hon. Members to my entry in the ministerial register of interests. I am recused from any consideration, in a ministerial capacity, of this levy.

[James Murray]

As we have heard, clause 326 increases both rates of the landfill tax in line with inflation, rounded to the nearest 5p. The increased rates apply to any disposal of relevant materials made, or treated as being made, at a landfill site in England or Northern Ireland on or after 1 April.

The landfill tax was introduced in 1996. It increased the cost of waste disposal at landfill to encourage waste producers and the waste management industry to switch to a more sustainable way of disposing of waste material. The tax was originally UK-wide, but it was devolved in Scotland from April 2015 and in Wales from April 2018. We will not oppose the clause, but I ask the Minister to fill us in on the wider context of the landfill tax, and specifically landfill tax fraud. In a Backbench Business Committee debate on landfill tax fraud in January, my hon. Friend the Member for Cambridge (Daniel Zeichner) said:

“Landfill tax fraud is a blight on communities across the country. It causes lasting damage to the environment and, of course, deprives the Exchequer of revenue.”—[Official Report, 12 January 2023; Vol. 725, c. 793.]

As Members discussed during that debate, according to His Majesty’s Revenue and Customs’ most recent annual estimate of the tax gap, the gap between landfill tax due and revenue collected in 2021 is £125 million. That is a gap of 17.1%—much higher than the overall tax gap for that year. According to HMRC’s report, the uncertainty rating for the landfill tax gap estimate is high. The then Exchequer Secretary, the hon. Member for South Suffolk (James Cartlidge), conceded in the debate that “non-compliance is high.” In responding to the debate, he set out some details of the operational resource dedicated to landfill tax non-compliance; however, I do not think that he directly answered a question that the shadow Minister, my hon. Friend the Member for Cambridge, put to him: how much of the £125 million tax gap identified in 2021 has been recovered by HMRC? I would be grateful if the current Exchequer Secretary could address that point.

Clause 327 amends the main rates of the climate change levy on gas and other taxable commodities, and the reduced rate percentages on those commodities paid by participants in the climate change agreement scheme from 1 April next year. The climate change levy is a tax on the non-domestic use of gas, electricity, liquefied petroleum gas and solid fuels. Energy-intensive businesses that participate in the climate change agreement scheme run by the Department for Energy Security and Net Zero pay reduced rates expressed as a percentage of the four main rates of the climate change levy on the taxable commodities supplied to them.

We understand that the changes introduced by the clause were announced in the 2022 autumn statement, which froze the electricity rate, and in which it was confirmed that the climate change levy rate for LPG will continue to be frozen until 31 March 2025. It was further announced that the reduced rates of the levy for 2024-25 on gas and other taxable commodities paid by qualifying businesses in the climate change agreement scheme would be amended, so that participants will not pay more under the levy than they would have if the rates had increased in line with the retail price index.

Clause 328 increases the plastic packaging tax in line with the CPI. The plastic packaging tax was introduced in April 2022 to provide an economic incentive for businesses to use recycled plastic in the manufacture of plastic packaging. That was expected to create greater demand for the material, which would in turn stimulate increased recycling and collection of plastic waste, diverting it from landfill or incineration. I understand that the new rate maintains the real-terms value of the incentive to include 30% or more recycled plastic and plastic packaging components in a product by increasing the rate of tax in line with the CPI. As that tax has now been in place for a year, what evaluation have the Government made of it? In particular, can the Minister tell us what impact the tax had in 2022-23, in terms of fulfilling its stated aim of stimulating increased recycling and collection of plastic waste?

Clause 329 makes changes to the aggregates levy exemptions for some types of aggregate from construction sites. We understand that it replaces four exemptions for by-product aggregate arising from certain types of construction with a broader and more general one. The explanatory notes state:

“Following a review of the levy in 2019, some concerns about the operation of the levy were raised by different stakeholder groups.”

I understand that the changes were consulted on in 2021. Draft legislation was published in July 2022 for technical consultation, which has now concluded. On that basis, we will not oppose the clause.

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[Victoria Atkins]

Clauses 330 and 331 will make changes to ensure that tax sites in investment zones can benefit from an optional single five-year offer of tax reliefs, identical to those available in freeports. That will mean that businesses within the tax sites can benefit from tax and national insurance reliefs to incentivise investment and reduce the cost of hiring employees.

The Government have set out an ambitious plan for growth and prosperity, rooted in boosting the UK’s potential as an innovation nation, growing strengths in key industries to support national priorities and levelling up communities across the country. At the spring Budget, the Chancellor confirmed that the investment zones programme will catalyse 12 high-potential, knowledge-intensive growth clusters around the UK, including four across Scotland, Wales and Northern Ireland. Each investment zone will bring together local partners to drive the growth of our key future sectors, bringing investment into areas that have traditionally underperformed economically. Each English investment zone will be able to benefit from access to interventions of £80 million over five years, which can be used flexibly between spending and a single, optional five-year tax offer. The changes made by clauses 330 and 331 will enable special tax sites in English investment zones to have access to that single, optional five-year tax offer.

Clause 330 will amend existing legislation to allow investment zone tax sites to be designated via secondary legislation in the same way as freeport tax sites. Clause 331 will allow the sunset date for the investment zones, tax reliefs and special tax sites to be set in that secondary legislation. Businesses investing or hiring new employees in investment zone tax sites will have access to the following tax reliefs: first, a full stamp duty land tax relief for land and buildings bought for commercial use or development for commercial purposes; secondly, a 100% relief from business rates on newly occupied business premises, and certain existing businesses where they expand in investment zone tax sites; and thirdly an enhanced capital allowance, a 100% first-year allowance for companies’ qualifying expenditure on plant and machinery assets for use in tax sites.

Furthermore, there is an enhanced structures and buildings allowance, which provides accelerated relief to allow businesses to reduce their taxable profits by 10% of the cost of qualifying non-residential investment per year, relieving 100% of their cost of investment over 10 years. [Interruption.] It is always delightful to hear from the Speaker.

Finally, there is employer national insurance contributions relief—zero-rate employer national insurance contributions on salaries of any new employee working in the tax site for at least 60% of their time, on earnings up to £25,000 per year, with employer NICs being charged at the usual rate above that level. The relief applies for 36 months per employee. The precise costs of tax sites will vary by site; however, the estimated value of 600 hectares of tax reliefs is £45 million, to be deducted from the overall £80 million funding envelope available to an investment zone.

These clauses will help to enable the investment zones tax offer to operate in special tax sites in England. That will drive private sector activity in investment zone tax sites, which will be key to catalysing the agglomeration of businesses in high-potential, knowledge-based sectors in investment zones across England.

[James Murray]

As we have heard, clause 330 and its associated schedule, schedule 23, will extend the power to designate special tax sites to allow designation of such sites in or connected with investment zones located in Great Britain, while clause 331 makes provision related to the sunset date for tax reliefs available in special tax sites.

We know that these provisions are being introduced effectively to extend the tax reliefs available in freeport tax sites to such sites in or connected with investment zones. We know that those tax reliefs include an enhanced capital allowance for qualifying expenditure and plant machinery; enhanced structures and buildings allowance for qualifying expenditure on non-residential buildings and structures; and a stamp duty land tax relief for certain acquisitions of land. Furthermore, a secondary class 1 national insurance contributions relief for eligible employers on the earnings of eligible employees up to £25,000 per annum, which is available in freeport tax sites, is also being extended to special tax sites in or connected with investment zones.

It is worth being clear that the investment zones with which the Government are currently proceeding are different from the investment zones that the right hon. Member for South West Norfolk (Elizabeth Truss) announced when she was Prime Minister. A significant number of councils put in bids for investment zones when they were announced under her premiership. According to the Association of Local Authority Chief Executives, councils had to spend an average of £20,000 to £30,000 on each bid, and may well have lost staff hours to work on preparing the submissions. Since then, investment zones have been relaunched, but it seems clear that the process for proceeding with the relaunched investment zones is entirely separate from the bidding process in operation for their former incarnation.

I would be grateful if the Minister confirmed how much money is estimated to have been wasted by councils, and indeed by central Government civil servants, on the now-abandoned bidding process for the original incarnation of investment zones. I assume that councils will be left out of pocket with respect to any money that they have spent on bids, and that the Government will not be considering refunding any of those costs, but I would be grateful if the Minister at the very least apologised to taxpayers for the money wasted as a result of this aborted policy.

I know that apologies can be hard to come by. Just last night, in fact, we heard the former Chancellor, the right hon. Member for Spelthorne (Kwasi Kwarteng), brazenly denying the harm that the mini-Budget last autumn caused to family finances. He refused to take responsibility for the impact of soaring rates on mortgage payers across the country and on renters, who are seeing higher costs passed on to them. However, I urge the Minister to do the right thing and take this opportunity to apologise more generally for the harm caused by the mini-Budget last autumn, and indeed by Conservative failures over the past decade.

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[Victoria Atkins]

I hope that clause 332 will be of real interest to hon. Members and their constituents. In recent years, there has been a growth in what are commonly called repayment agents. Hon. Members may have received a great deal of correspondence from their constituents about such agents. They are paid tax agents who specialise solely in making claims for income tax relief on behalf of their clients.

Repayment agents can provide a useful service to taxpayers by helping them to claim reliefs or allowances to which they are entitled from HMRC, but last year HMRC received around 2,800 complaints about repayment agents from taxpayers who were unclear about the terms or conditions to which they had signed up. Those taxpayers were unaware that they were claiming through a third party and that they would be charged a fee of up to 50% of the repayment, and they were unaware of the use of assignments. Clause 332 prohibits the assignment of income tax repayments and, where such rights have been assigned, renders the assignment void. It is a consumer protection measure that is aimed at ensuring that taxpayers have better control over their income tax repayments, and I hope that hon. Members will advertise the measure to their constituents.

I turn to clauses 333 to 335. New late payment penalty and interest legislation was approved by Parliament in 2021. The new system is built on fairness and proportionality. In implementing penalty reform and interest harmonisation for VAT, we have identified some minor defects in the legislation that the clauses seek to correct. Clause 333 ensures that, for customers who use the VAT annual accounting scheme, late payment interest will not be charged on interim instalments of VAT that are paid late. Clause 334 ensures that late payment penalties do not apply to instalments payable under the VAT annual accounting scheme, and clause 335 makes a minor technical change to repayment interest on VAT to ensure that the rules operate as intended.

Clause 336 gives HMRC a power to move insurance premium tax administration forms out of secondary legislation and into a public notice. Currently, whenever administration forms need to be updated, a statutory instrument needs to be passed. Moving administration forms out of that regime will enable them to be updated without the need to pass legislation each time an update is required. That will simplify the administration of tax and support HMRC in keeping pace with developments in tax policy and insurance industry practices.

Finally, clause 337 relates to the plastic packaging tax. Currently, late payments in respect of plastic packaging tax by liable businesses and businesses that are held secondarily liable or joint and severally liable incur the same penalties. In contrast, late payments of assessments made by HMRC where a business has failed to submit a return incur different penalties. Clause 337 addresses that anomaly and amends schedule 56 to the Finance Act 2009, so that all late payments of plastic packaging tax incur the same penalties.

[James Murray]

As we heard, clause 332 introduces a new provision that renders void assignments of income tax repayments. We understand that the clause removes the ability of a taxpayer to legally transfer their entitlement to an income tax repayment to a third party such as an agent. It enables HMRC to disregard assignments when issuing income tax repayments, although we understand that it does not remove a taxpayer’s ability to use a non-legally binding nomination where they wish their repayment to be made to a third party. The decision to prohibit assignments seems to have been driven largely by the practices of Tax Credits Ltd, which ultimately led to HMRC having to issue tax refunds directly to 60,000 affected taxpayers.

The changes in the clause have been broadly welcomed by groups including the Low Incomes Tax Reform Group, which pointed out that they mean that taxpayers will no longer be able to assign their rights to an income tax repayment to a third party repayment agent, and that includes taxpayers who have been tricked or misled into doing so by an unscrupulous agent. However, LITRG highlights that issues remain around the nomination process—the alternative way that I mentioned of enabling an agent to receive a payment. It is concerned that the provisions in the clause will not stop taxpayers being tricked or misled into nominating an unscrupulous agent to receive an income tax repayment. LITRG also raised its concern that responsible repayment agents, who were not misusing assignments, may exit the market, given the risk of non-payment for their work. LITRG therefore suggests that HMRC carefully monitors the impact of the provision on taxpayers and their ability to obtain refunds.

I am sure that the Minister will try to assure us that HMRC carefully monitors all its operations, but I would press her to give a more specific commitment in response to LITRG’s concerns. In particular, will she commit to publishing certain metrics proposed by LITRG, such as the total number of refund claims made and the total number made by third party companies?

Clauses 333 to 335 amend legislation governing a new penalty regime and rules on interest for VAT, which the Government announced at spring Budget 2021. As we heard, clause 333 makes two technical changes to the late payment interest rules. The first change ensures that late payment interest does not apply to instalments payable under the VAT annual accounting scheme. The second change means that when HMRC is recovering a VAT payment, the late payment interest start date is the date from which HMRC paid that amount. Clause 334 amends the Finance Act 2021 to ensure that late payment penalties do not apply to instalments payable under the VAT annual accounting scheme. Clause 335 amends the Finance Act 2009 to remove a restriction on the accrual of repayment interest on VAT paid by HMRC to the taxpayer. We will not oppose these clauses.

We understand that clause 336 will broaden existing powers, thereby enabling HMRC to move insurance premium tax forms from secondary legislation and into a public notice by way of a statutory instrument. As the Minister outlined, these technical changes are intended to reduce the administrative burden and make it easier to make administrative updates to the forms without the need for legislation. We also understand that this provides a necessary step for future legislation allowing HMRC to further digitise the insurance premium tax forms. We will not oppose the measure.

Finally, clause 337 amends schedule 56 to the Finance Act 2009, to align inconsistent late payment penalty provisions and ensure that all businesses liable for a late payment penalty in respect of the plastic packaging tax are charged the same penalty, however that liability arises. As we discussed earlier, the plastic packaging tax was introduced from 1 April last year to provide an economic incentive for businesses to use recycled plastic in the manufacture of plastic packaging, which was intended in turn to create greater demand for that material. The clause introduces a technical, administrative change and we will not oppose it.

[Victoria Atkins]

We are pleased that LITRG is one of the many groups that we work closely with. We listen to them very carefully. Indeed, I met the head of the group only last week, I think, to listen to their concerns or thoughts about the tax system.

Just to reassure hon. Members, some people want to nominate tax agents to reclaim their taxes, and we do not want to shut down that route if people want to use it and do so in a fully informed and consenting manner. That is why we are moving from the assignment process through to nominations, and taxpayers will be able to withdraw easily from nominations. The point is that nominations are not permanent; they can be changed if taxpayers should wish to do so.

That is a really critical consumer protection. It is why we have put it in the Bill. It took immediate effect, because we wanted to apply it as soon as possible to prevent taxpayers from being tied into agreements that they could not rescind. Repayment agents were made aware of the Government’s intentions to legislate in January and we would say that they will have had time to adjust to the new forms, if you like, by the time that this Bill receives Royal Assent.

In relation to the other matters, I understand that the Opposition are not challenging them, so I will stop there.

Question put and agreed to.

Clause 332 accordingly ordered to stand part of the Bill.

Clauses 333 to 337 ordered to stand part of the Bill.

Clause 338

Approval of aerodromes

Question proposed, That the clause stand part of the Bill.

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[The Chair]

With this it will be convenient to discuss clause 342 stand part.

[Victoria Atkins]

Clause 341 makes the renewal of certain licences to trade conditional on licence applicants completing tax checks in Scotland and Northern Ireland from 2 October 2023. Clause 342 makes amendments to licensing legislation in Scotland, which are consequential on clause 341

This is an extension of existing principles of conditionality that already apply to renewal applications in England and Wales for taxis and scrap metal dealer licences. The checks will confirm applicants are registered for tax and have notified HMRC of their income tax or corporation tax liability. This will make it harder for traders to operate in the hidden economy. It will also help licence holders get their tax affairs right and give honest businesses confidence that their competitors are playing by the same rules. New licence applicants will be supported and directed to HMRC’s guidance on tax obligations.

[James Murray]

We know that the Finance Act 2021 made provision for tax conditionality connected to the application for certain licences issued in England and Wales, namely licences to drive taxis, licences to drive and operate private-hire vehicles and licences to deal in scrap metal. We understand that clauses 341 and 342 extend the existing tax conditionality legislation to similar licences issued in Scotland and Northern Ireland. In Scotland, this applies to licences to drive taxis and private-hire cars, operate a booking office, and be a metal dealer, while in Northern Ireland it applies to licences to drive taxis.

We will not be opposing these clauses, but I would be grateful to the Minister if she can explain what, if any, additional resources will be made available to HMRC to effectively implement this extension of tax conditionality legislation.

[Victoria Atkins]

I wrote to the hon. Gentleman to set out the amounts and estimates that HMRC has given in its annual report and accounts about the collection protection in compliance yield, and this includes the compliance officers that would be put forward to help reduce the tax gap. They are changes to existing tax exemptions, reliefs and policies that HMRC is already resourced to administer, and it undertakes compliance interventions based on risk, with investigations normally covering multiple taxes and duties, as opposed to narrowly focusing on a single area of taxation. For example, we do not have a compliance team solely dedicated to investigating cases relating to the HGV levy, but if HMRC opened a tax inquiry into an HGV business, this would be one of many areas of taxation that it would look into to ensure that the business is compliant with its total tax obligations.

Question put and agreed to.

Clause 341 accordingly ordered to stand part of the Bill.

Clause 342 ordered to stand part of the Bill.

Clause 343

Definition of “charity” restricted to UK charities

Question proposed, That the clause stand part of the Bill.

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[James Murray]

It is a pleasure to follow my hon. Friend the Member for Wallasey, who spoke to new clause 1. I will address some of the points she raised, as well as amendment 2 and clause 346.

As several Members have said, the Office of Tax Simplification was set up in July 2010. It was an independent office in the Treasury before being placed on a statutory footing by the Finance Act 2016. As we have heard, on 23 September last year, the right hon. Member for Spelthorne (Kwasi Kwarteng) announced that it would be abolished. He said:

“Instead of having a separate arms-length body oversee simplification, the government will embed tax simplification into the institutions of government.”

I will return to that quote in a moment.

As hon. and right hon. Members have said, the policy was announced during the tenure of the previous Prime Minister and is being continued under the current leadership. That makes the abolition of the OTS one of the few elements of the so-called growth plan of that premiership to survive. In an earlier sitting of this Bill Committee, I commented:

“There is at the very least something ironic about a Government who use one clause of a Finance Bill to implement a recommendation of the Office of Tax Simplification and another clause of the same Bill to abolish that institution.”––[Official Report, Finance (No. 2) Public Bill Committee, 16 May 2023; c. 47.]

As was mentioned, the Chartered Institute of Taxation has pointed out that almost every Finance Act of the last decade has included measures that owe their genesis to the OTS.

To return to the reason originally cited for abolishing the OTS, the right hon. Member for Spelthorne said that the Government wanted to

“embed tax simplification into the institutions of government.”

We therefore have great sympathy with amendment 2, which was tabled by the hon. Member for Aberdeen North and has been spoken to. It would at least require the Chancellor to publish an analysis of the cost and benefit of the policy. That has been entirely lacking so far.

If the Government press ahead with abolishing the OTS, it is important that they make clear how they will deliver on their commitment to tax simplification. As was mentioned by my hon. Friend the Member for Wallasey, the Chartered Institute of Taxation sent a joint letter with the Low Incomes Tax Reform Group, the Association of Taxation Technicians, the Institute of Chartered Accountants in England and Wales, and the Institute of Chartered Accountants of Scotland to the Financial Secretary to the Treasury on 5 April. The letter covered identifying the characteristics of tax simplification; ensuring that someone is accountable for the delivery of tax simplification; including simplification declarations in tax information and impact notes; gaining external input on policy design and implementation; seeking feedback from a broad range of stakeholders; ensuring that HMRC and Treasury engagement groups have tax simplification as a standing objective; increasing awareness and improving guidance; allowing time for the development and integration of systems; and adopting a consistent approach across tax regimes.

I would be grateful if the Minister updated us on her response to the specific points set out by the Chartered Institute of Taxation. I also ask her again to set out clearly what costs and benefits, including the cost impact of any proposed new operational arrangements, she believes the abolition of the OTS will have, so that members of the Committee can consider this matter with all the relevant information to hand.

[Victoria Atkins]

For ease and convenience, I will speak to all the amendments and new clauses as well as clause 346. First, I thank the OTS—

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[Victoria Atkins]

Clause 347 makes changes to support the expansion of the dormant assets scheme to a wider range of assets, including insurance assets, pension assets, investment assets, client money assets and security assets such as shares. The Government estimate that up to a further £880 million will be made available for good causes across the UK thanks to the expansion of the scheme to the new sectors.

[James Murray]

As we know, under the UK’s dormant assets scheme, dormant asset funds are transferred to an authorised reclaim fund, Reclaim Fund Ltd. People can reclaim from that fund what they otherwise would have owned if their asset had never been transferred into the scheme. In some cases, it will be the monetary value of the dormant asset that will be transferred into the RFL rather than the original asset.

We understand that clause 347 ensures that the payments from an authorised reclaim fund are treated, for the purposes of income tax, as if they were from a pension asset that was initially transferred. We understand that it also seeks to ensure that, where an asset has been transferred from an authorised reclaim fund and its owner was alive at the time but subsequently dies before the asset has been reclaimed, the owner will be treated for inheritance tax purposes as still owning the original asset. We do not oppose the clause.

Question put and agreed to.

Clause 347 accordingly ordered to stand part of the Bill.

Clause 348

International arrangements for exchanging information

Question proposed, That the clause stand part of the Bill.

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[James Murray]

As we have heard, clause 348 consolidates existing automatic exchange of information powers that allow the Treasury to implement the domestic requirements of certain international instruments, relating to, among other things, the automatic exchange of information between tax authorities. We recognise that the purpose of the consolidation is to create a general power to allow the Treasury to give effect to existing and future international exchange of information instruments. We understand that once the Bill is enacted, the previous powers will be repealed. We do not oppose the clause.

We understand that clause 349 will allow the transfer of moneys that have remained unclaimed in the Courts Fund Office account for many years, despite attempts to trace the beneficiaries and the account titles being available to the public via the unclaimed balances database on gov.uk. We recognise that at present such moneys are being held in perpetuity unless claimed. I also noted that some moneys have apparently been held since 1726. Does the Minister know what rate of interest those moneys have been earning for the last 300 years, and how much money is expected to be earned from that interest at the point of transfer?

Clause 350 defines how HMRC’s payment functions across the taxes, duties and benefits it administers interact with financial sanctions regulations and seeks to ensure that relevant changes to UK financial sanctions regulations are automatically reflected in HMRC’s functions. I understand that subsection (1) prohibits the making of a payment, whether directly or indirectly,

“to or for the benefit of a person who is, at that time, a designated person for the purposes of financial sanctions regulations.”

We will not oppose the clause. However, the fact that subsection (1) is necessary could be seen to imply that payments have in fact been made to, or the benefit of, a person who was at the time

“a designated person for the purposes of financial sanctions regulations.”

Will the Minister confirm whether that was the case, and tell us how many payments have been made to such people, what the total value of such payments was in each of the last 10 years and under which financial sanctions regulations the people involved have been designated? Clauses 351 and 352 relate to the interpretation and short title, and we will not oppose them.

Very briefly, Mr Stringer, may I take this opportunity to thank people? I thank all Ministers and Committee members, particularly my hon. Friends the Members for Wallasey, for City of Chester, for West Lancashire, for Ilford South, for Erith and Thamesmead, and for Blaydon. I thank the Clerks, parliamentary authorities and third parties, including the Chartered Institute of Taxation. I also thank you, Mr Stringer, and of course Ms McVey, who chaired the sitting on Tuesday.

[Victoria Atkins]

The shadow Minister asked about the amount of money that is expected to be paid into the consolidated fund in 2024-25. It is some £50 million. I am afraid that I do not know the interest rate charged in 1726; I obviously have room to improve on that—apologies. I suppose that in an idle moment we may put our minds to it and see whether we can come up with something, but I do not commit to that. I regret that I did not hear the detail of his questions on financial sanctions.

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[James Murray]

I thank the Minister for giving way. The fact that clause 350(1) is necessary could be seen to imply that payments have in fact been made

“to or for the benefit of a person who is, at that time, a designated person for the purposes of financial sanctions regulations.”

My question was, if that is the case, will the Minister tell us how many payments have been made to such people, the total value of such payments in each of the last 10 years and which financial sanctions regulations the people involved were designated under?

[Victoria Atkins]

I am in the situation that I find myself in from time to time, which is that, although I am extremely conscious of the desire for transparency, there is still the principle of taxpayer confidentiality. Given the sensitivities of the subject matter, and given that, I suspect, a small group of individuals would be subject to the measure, I regret that I am unable to give those details. I have to give that answer from time to time, and I know that it is frustrating for hon. Members, because I can understand why they want answers. I regret that I cannot assist the hon. Member for Ealing North on this occasion.

Question put and agreed to.

Clause 348 accordingly ordered to stand part of the Bill.

Clause 349 to 352 ordered to stand part of the Bill.

New Clause 1

Reports to Treasury Committee on measures to simplify tax system

“(1) The Treasury must report to the Treasury Committee of the House of Commons on steps taken by the Treasury and HMRC to simplify the tax system in the absence of the Office of Tax Simplification.

(2) Reports under this section must include information on steps to—

(a) simplify existing taxes, tax reliefs and allowances,

(b) simplify new taxes, tax reliefs and allowances,

(c) engage with stakeholders to understand needs for tax simplification,

(d) develop metrics to measure performance on tax simplification, and performance against those metrics.

(3) A report under this section must be sent to the Committee before the end of each calendar year after the year in which section 346 (abolition of the Office of Tax Simplification) comes into force.”—(Dame Angela Eagle.)

This new clause would require the Treasury to report annually to the Treasury Committee on tax simplification if the Office of Tax Simplification is abolished.

Brought up, and read the First time.

Finance (No. 2) Bill (Third sitting)

Debate between James Murray and Victoria Atkins

Committee stage
Thursday 18th May 2023 Public Bill Committees

[The Financial Secretary to the Treasury (Victoria Atkins)]

It is a pleasure to serve under your chairmanship, Mr Stringer.

As a matter of housekeeping, I should say that the shadow Minister, the hon. Member for Ealing North, asked me questions on Tuesday regarding the implementation of changes to the company share option plan, and I committed to write to him with those details. That letter has gone to him this morning, with copies deposited in the Libraries of the Houses. Indeed, I have also arranged for it to be sent to the other Committee members, for their convenience.

The clause will amend existing stamp duty land tax rules to ensure that registered providers of social housing are exempt from the tax when purchasing property using funding allocated under section 31 of the Local Government Act 2003. In December last year, the Government announced an additional £650 million for the Homes for Ukraine support package, which included giving local authorities in England an additional £0.5 billion to reduce homelessness by obtaining housing to reduce pressure on social housing and to help accommodate Ukrainian and Afghan refugees. On 28 March this year, the Government announced a further £250 million of funding, the majority of which will be used to house Afghan families in bridging accommodation. The rest will be used to ease existing homelessness pressures.

The additional funding, as I said, is allocated under section 31 of the Local Government Act, and the existing stamp duty land tax system includes an exemption for social housing purchases. However, not all social housing providers in receipt of the additional funding would benefit from those exemptions, so we are looking to correct that and to enable registered providers of social housing to benefit from the exemption when they use the new funding. It is a sensible clarification and I hope that the Committee will support the clause standing part of the Bill.

[James Murray (Ealing North) (Lab/Co-op)]

It is a pleasure to serve in Committee with you as Chair, Mr Stringer.

The acquisition of certain properties by registered social landlords is exempt from stamp duty, provided that the purchase is funded with the assistance of public subsidy. As the Minister set out, in December last year the Department for Levelling Up, Housing and Communities announced an additional £500 million in funding for local authorities to secure additional housing stock for those fleeing conflict, including those from Ukraine and Afghanistan. We understand that that additional funding was allocated under section 31 of the Local Government Act, and the clause will add that section to the list of public subsidies that enable a purchase to qualify for the stamp duty exemption. For the purposes of the stamp duty exemption, we understand that local authorities that intend to register with the Regulator of Social Housing are treated as not-for-profit registered providers of social housing.

The explanatory notes state that £500 million was announced for the local authority housing fund in December 2022, and I welcome the Minister’s assurance that the additional £250 million announced since will also be covered by this clause. We will not oppose the clause, as any support it offers to local authorities that buy homes to provide social housing is welcome.

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[Victoria Atkins]

I hope I will be able answer some of the questions that the hon. Member for Wallasey asked about why the changes are being made. We announced our decision to reform the trade remedies framework in June 2021, and this is the end of a review process to look at how our framework is working. As I suspect Members across the House, not just this Committee, might expect, we have been talking and listening to industry, asking it for its views on how the trade remedy system could be improved. Consultations on including bilateral safeguard provisions have taken place as part of new free trade negotiations, and those will continue to occur for each negotiation. Importantly, we have asked not only the industry but the TRA, and we will work with it to ensure that the changes are implemented effectively.

The hon. Member for Ealing North asked about international comparators. I confirm that all the changes we are making are in line with our obligations under the WTO. Advance rulings are a key component of the UK’s accession to the comprehensive and progressive agreement for trans-Pacific partnership and other key free trade agreements, but they also help business. Those are some reasons for introducing them. On clause 317, no statutory right of appeal for traders has existed since we left the EU, but we continue to offer the trader the right to be heard scheme, which gives a trader a period of 30 days to present additional information before HMRC confirms the decision.

The hon. Member for Wallasey asked some important questions about the TRA and its independence, including why this has to be done through legislation. The TRA very much remains an independent body, and we genuinely value its expertise and advice. Its core objective will be to investigate allegations of unfair trading practices and unforeseen surges in imports, and to make recommendations to Ministers. It will continue to run fair, impartial and evidence-based investigations. The Secretary of State will then decide whether a measure should apply based on the evidence provided.

The Bill injects another element of transparency, because the Secretary of State for Business and Trade will have to make a statement to Parliament if Ministers decide to apply an alternative remedy to that recommended by the TRA—I imagine that the Treasury Committee would take a great interest in that—and the statement would set out the reasons for their decision. The TRA will continue to maintain a public file of the evidence and publish its conclusions as well. I hope colleagues will be reassured by the transparency that we seek to bring in.

On the TRA itself, it started to investigate cases in 2021. To date, its completed cases include one new investigation and 11 measures transitioned from the EU. It investigates, for example, allegations of dumping, subsidy and unforeseen surges in imports, and it provides objective, independent and evidence-based advice to Ministers, which we will very much continue to value.

As to why we have to make the changes through legislation, the TRA is a statutory body, it can therefore only act within its statutory powers. That is why we have to bring forward the legislation. Furthermore, it will give certainty to parliamentarians should it be needed in future—though I hope that will not be the case.

[James Murray]

I thank the Minister for her response, although she might have misunderstood my question on international comparators. Her response, I believe, was that what the UK Government are doing is in line with WTO requirements, but my question was whether there had been any international benchmarking of the TRA, its role, its powers and its relationship with politicians—its level of independence and so on—against similar authorities in other countries. Perhaps she will address that question.

[Victoria Atkins]

I do not have that information to hand, but I will endeavour to get it as quickly as possible and furnish the Committee with it.

Question put and agreed to.

Clause 315 accordingly ordered to stand part of the Bill.

Schedules 19 and 20 agreed to.

Clauses 316 and 317 ordered to stand part of the Bill.

Clause 318

Excepted machines etc

Question proposed, That the clause stand part of the Bill.

[Gareth Davies (Grantham and Stamford) (Con)]

I am afraid you’ve got me, Mr Stringer. It is a great pleasure to serve under your chairmanship.

Clause 318 makes technical amendments to the legislation that restricts the entitlement to use rebated fuels to a number of qualifying uses from 1 April 2022 to adjust the restrictions and ensure the legislation operates as intended. It makes minor amendments to changes that were introduced in April 2022 to restrict the entitlement to use rebated fuels.

At Budget 2020, the Government announced that we would remove the entitlement to use rebated diesel and biofuels, including marked oils, from most sectors to help meet our climate change and air quality targets. The changes were legislated for in the Finance Act 2021 and amended by the Finance Act 2022. The changes ensure that most users of rebated fuels prior to April 2022 are now required to use fully duty-paid fuel, like motorists. That more fairly reflects the harmful impact of the emissions that they produce.

Following the implementation of the changes, the Government were made aware of a small number of unintended impacts on fuel users. This measure will make minor amendments in relation to them and will correct a technical issue in section 14B of the Hydrocarbon Oil Duties Act 1979.

The changes in the clause will adjust restrictions on the entitlement to use rebated fuels to a number of qualifying uses, will qualify how the changes to the new rules work, and will allow the legislation to operate as intended. They will allow machines or appliances used to generate electricity or provide heating primarily for non-commercial premises to use rebated fuels even if they also provide some of the electricity or heat to commercial premises. They will also add arboriculture to the list of activities for which machines and appliances, other than vehicles, can use rebated fuels. That clarification will allow those working in the sector to use rebated fuels in the same machines and appliances as they did before April 2022.

The changes allow the use of rebated fuels in tractors and gear owned by lifeboat charities used to launch and recover their lifeboats. Finally, they make minor technical corrections to remove an anomaly of section 14B of the Hydrocarbon Oil Duties Act 1979.

These changes reflect feedback received from stakeholders since the Finance Act 2022 received Royal Assent. The technical changes in the clause will ensure that the Government’s reforms to the tax treatment of rebated fuels made in April 2022 work as intended. I commend the clause to the Committee.

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[James Murray]

I will speak briefly to clause 320 and schedule 21, which relate to the scope of the soft drinks industry levy. As the Exchequer Secretary set out, the result of these measures is that the levy will now apply to liquid flavour concentrates that are manufactured in, or imported into, the UK. The concentrates are products that are mixed with added sugar in a dispensing machine to dispense a soft drink for the final consumer.

The soft drinks industry levy was announced at Budget 2016 and came into force in April 2018. It has been targeted at producers, manufacturers and importers of soft drinks containing added sugar by encouraging the reformulation of drinks to reduce levels of added sugar and portion sizes, and the marketing of low-sugar alternatives and so on. We recognise that this technical change will bring liquid flavour concentrates within scope of the levy, and we will not oppose the clause.

[Victoria Atkins]

Out of an abundance of caution, I refer Members to my entry in the Register of Members’ Financial Interests and my ministerial interests. I am recused from this subject matter in a ministerial capacity.

Finance (No. 2) Bill (Second sitting)

Debate between James Murray and Victoria Atkins

Committee stage
Tuesday 16th May 2023 Public Bill Committees

[The Financial Secretary to the Treasury (Victoria Atkins)]

Clause 36 makes changes to ensure that tax is paid on value built up in UK shares or securities even if the shares or securities are exchanged for an equivalent holding in a non-UK company. The measure is already legally in application since the point of its announcement in the autumn statement on 17 November last year. It will ensure that tax cannot be avoided where a UK resident non-domiciled individual with a degree of control in a UK company exchanges shares or securities in a UK close company for shares or securities in a non-UK holding company.

Before the measure was introduced, individuals could claim the remittance basis on disposal of the non-UK company shares and any income received in respect of the non-UK company shares. That means that tax will be paid only on the chargeable gain or the income if it is brought into the UK. The measure prevents the remittance basis from applying to the chargeable gain on disposal where the individual holds more than 5% of shares or securities in a UK close company and exchanges the shares for an equivalent holding in a non-UK company. Instead, the individual will pay tax as if the share exchange had not taken place. The clause will prevent tax avoidance by a small number of individuals, and protects £830 million of revenue across the scorecard period, ensuring that tax is paid on value built up in the UK on UK company securities even when securities are exchanged for securities in a non-UK company.

Clause 37 and schedule 5 make changes to require large multinational businesses operating in the UK to prepare transfer pricing documentation in accordance with the OECD’s transfer pricing guidelines. Transfer pricing is a means of ensuring that the pricing of transactions between connected parties is at arm’s length for tax purposes. From the financial year 2016-17 to 2021-22, HMRC brought in £10 billion in additional tax from transfer pricing compliance activities. HMRC does not currently prescribe specific transfer pricing records that UK businesses must prepare to demonstrate that their tax returns are complete and accurate, or the format of those records.

The proposed changes would require UK businesses to prepare OECD standardised documentation, which is described as a master file providing high-level information of the global business operations and a local file providing more detailed information about material cross-border transactions of UK group members with other members of the multinational group. The changes made by clause 37 and schedule 5 provide greater certainty for UK businesses, provide HMRC with better quality data to enable more efficient and targeted compliance interventions, and align the UK’s practice more closely with the transfer pricing documentation requirements of comparable tax administrations.

Clause 38 makes changes to ensure that access to double taxation relief is limited in respect of dividends received by UK companies in periods prior to the introduction of a broad distribution exemption regime in 2009. Specifically, it will prevent new claims for double tax relief credit calculated at the foreign nominal rate of tax on such dividends being made on or after 20 July 2022, the date on which the Government announced in a written ministerial statement that legislation would be introduced for that purpose. Unlike normal double tax relief, which is given on tax actually paid, foreign nominal rate credit is a notional amount calculated by reference to the rate of tax applicable to the profits out of which the overseas dividends were paid.

A first-tier tribunal decision in 2021 concerning the nature of this credit raised the prospect that certain claims could still be made by companies in receipt of foreign dividends prior to the introduction of distribution exemption in 2009, possibly as far back as 1973, so we needed to act. The measure will protect Exchequer revenue by preventing new claims from being made for long-settled years where no actual additional tax has been paid by the claimant. It does not seek to prevent such claims in relation to periods that are open or remain subject to ongoing litigation. The measure is intended to preserve the balance between taxpayers’ rights to make double-taxation relief claims and the need to impose reasonable time limits in respect of such claims. I recommend that all of these clauses stand part of the Bill.

[James Murray (Ealing North) (Lab/Co-op)]

I begin by addressing clause 36, which inserts new sections into the Taxation of Chargeable Gains Act 1992. As we heard from the Minister, the new sections will help to make sure that UK tax cannot be avoided on chargeable gains made on the disposal of a UK business, or on income received in respect of shares or securities held in a UK business, by exchanging securities in a UK company for securities in a non-UK holding company. Under the current legislation, where such an exchange takes place and the individual is a UK-resident non-domicile, they will be able to claim the remittance basis on any chargeable gain made on the disposal of the non-UK company’s securities or on any income received in respect of the offshore company’s securities.

I would be grateful if the Minister could set out the Government’s response to some of the queries about the detail of the Bill that have been raised by the Chartered Institute of Taxation, which has expressed concern that by applying only to individuals in their other guises—for example, when they are acting as trustees—the measure leaves gaps that could be exploited. The Chartered Institute of Taxation believes that there is potentially a straightforward avoidance opportunity here, whereby having shares held by trustees just before the share-for-share exchange could be resolved by extending the measure to cover trustees, rather than just individuals on their own. To tackle this issue, the Chartered Institute of Taxation suggests that individuals acting as trustees, or as partners or members of partnerships or LLPs, be included within the definition of those affected by the change, to ensure that artificial intermediaries are not put in place prior to any exchange.

The second point raised by the Chartered Institute of Taxation, which I would like the Minister to address, relates to the wording of the Bill with respect to the ownership of shares, which it believes may also create an avoidance opportunity. New section 138ZA(1)(d) of the Taxation of Chargeable Gains Act 1992, which clause 36 introduces, refers to the person to whom the shares are issued—the legal owner, as opposed to the beneficial owner. It is well recognised in tax law that the beneficial owner is the real owner for tax purposes, so the Bill should logically refer to beneficial ownership. The Chartered Institute of Taxation is therefore concerned that failure to clarify the beneficial, rather than legal, ownership could leave a possible avoidance opportunity open, and I would be grateful if the Minister could address that point.

More widely, looking beyond the specific detail of the Bill, we believe it is important to consider the context in which the clause operates. It seems clear that the situation that the measure in the clause seeks to address arises only because of the existence of the non-dom tax status and the associated remittance basis. Indeed, the Government’s own policy paper on this matter makes it clear that the measure is expected to affect a very small number of wealthy, UK-resident non-domiciled individuals a year. In practice, the measures we are considering need to be addressed only because the Government refuse to get rid of the £3.2 billion-a-year tax loophole that the Prime Minister has referred to as “that non-dom thing”.

The Minister may recall how she told the House in January that the measures we are debating today would mean that the Chancellor would close the loophole in non-dom legislation, but when we inspect the detail that is before us today, it is clear that this is just a smaller loophole within the much larger and more profound loophole: the continued existence of the non-dom tax status. The policy paper underscores this point and confirms that the measure will raise, on average over the next five years, just one 20th of the £3.2 billion lost through the non-dom tax status every year. I urge the Minister to go beyond the small step today and commit to abolishing the non-dom tax loophole altogether.

Moving on to clause 37 and schedule 5, we understand that this measure is intended to make sure that businesses maintain and provide upon request transfer pricing documentation prepared in accordance with the OECD transfer pricing guidelines. We recognise that accessing high-quality data in a standardised format would enable HMRC to carry out more informed risk assessments, target resources more efficiently and reduce the time taken to establish the facts in compliance interventions. Moreover, having to clearly report transfer pricing information in specific documentation will result in businesses having clearer and more robust transfer pricing positions to inform the filing of their return. This may encourage and incentivise businesses that adopt higher risk transfer pricing positions to change their behaviour.

In recent years there have been significant developments in the field of international taxation. More than six years ago, the OECD presented a package of measures in response to the G20-OECD base erosion and profit shifting action plan, including a requirement to develop rules regarding transfer pricing documentation. The action 13 final report recognised the importance of having the right information at the right time to identify and resolve transfer pricing risks. This led to the introduction of guidance on a standardised approach to transfer pricing documentation.

The standardised approach consists of three things: a master file containing standardised information relevant for all multinational enterprise group members; a local file referring specifically to material transactions of the local taxpayer; and a country-by-country report for the largest multinational enterprise groups containing aggregate data on the global allocation of income, profit, taxes paid, economic activity and so on among the tax jurisdictions in which it operates.

We understand from the policy paper on this measure that the UK did not originally introduce specific requirements regarding the master file and local file because the Government felt that the UK already had broad record-keeping requirements. They seem to have changed their mind on this, which has led to this Bill. It seems that the status quo had created uncertainty for UK businesses regarding the appropriate transfer pricing documentation that they needed to keep. That led to an inconsistency of approach. Although this measure relates to the standardised approach for transfer pricing documentation, I would like to ask the Minister to update the Committee on the status of country-by-country reporting.

The policy paper refers to the fact that the UK implemented the country-by-country minimum standard. However, as we know, the Government have long been hesitant to go beyond that minimum and provide public country-by-country reporting. Indeed, nearly three years ago my hon. Friend the Member for Houghton and Sunderland South (Bridget Phillipson) made it clear to one of the Minister’s predecessors that for years the Opposition has been urging the Government to commit to country-by-country reporting on a public basis. Will the Minister give us her view on public country-by-country reporting and explain what is preventing the Government from implementing it?

Finally, clause 38 introduces a measure to limit access to double taxation relief in certain circumstances. Specifically, we understand that it will prevent new claims for double taxation relief credit, calculated by the foreign nominal rate of tax, which could arise in relation to overseas dividends received by UK companies in periods prior to the introduction of the distribution exemption in 2009. We recognise that this measure is intended to preserve the balance between double taxation relief claims and the need to impose reasonable time limits in respect of such claims, so we will not be opposing this clause.

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[Victoria Atkins]

The hon. Gentleman is trying to tempt me away from the scope of the Bill, and I will resist that temptation. I gently ask him to help me—perhaps afterwards—to understand the evidence he has to support his claim that the overwhelming number of non-dom claimants are British residents. We just need to be a little bit careful about definitions.

Let me move on to the questions from the hon. Member for Ealing North. The share exchange legislation provides a relatively simple way for shareholders to avoid tax. It applies only to individuals. If individuals use artificial arrangements to prevent the legislation from applying, they will need to consider whether other anti-avoidance provisions apply.

The hon. Member asked about the difference between the legal owner and the beneficial owner. Again, the legislation applies to shares held on behalf of the individual in a nominee, or bare trust arrangement. Section 60 of the TCGA treats shares as being issued to the beneficial owner where there is a bare trust or nominee arrangement in place.

On public country-by-country reporting, we remain firmly committed to a multilateral approach, but it is important that such a requirement applies consistently across domestic and foreign headquartered multinationals to avoid distorting decisions on where companies decide to locate.

[James Murray]

The Minister quoted some figures that we have heard before, and I think it is worth the Committee having the context for them. The Minister tried to defend non-dom tax status by claiming that non-doms paid £7.9 billion in UK taxes last year. As always, that argument entirely misses the point, because we are talking about the £3.2 billion of tax that non-doms avoid paying in this country every year.

The Minister also repeated her line about non-doms having invested £6 billion in investment schemes since 2012, but I am sure the Committee would want to know that that ignores the fact that only 1% of non-doms invest their overseas income in the UK in any given year. In fact, non-dom status discourages people from bringing money into the UK to invest. We have set out the Labour party’s position very clearly, explaining how we would have a modern, short-term scheme for temporary residents.

Finally, the Minister referred to the potential behavioural impact if non-dom status were abolished. She was quick to dismiss some of the independent findings of the LSE and Warwick, made on the basis of HMRC data. If she is so confident that the behavioural difference will be that different, will she publish the Treasury research, so we have it in the public domain?

[Victoria Atkins]

We have to make judgments on how we ensure that the UK economy is not only internationally competitive but attractive to other countries. We are happy to make the point that non-domiciled taxpayers can make a valuable contribution to the United Kingdom, but of course we want them to pay—we require them to pay—UK income tax, and so on, on their UK income and remittances. We want to ensure that that system is in place.

On the behavioural aspects, we looked very carefully at the University of Warwick report, but what worries us is that there does not seem to be a recognition of the mobility of such people. They are able to live and work anywhere in the world. We do not want to put their living here at risk. Let us not forget that the hon. Gentleman is prepared to put at risk £7.9 billion. That is a risk we are not prepared to take.

[James Murray]

I will focus on the question in my previous intervention. The Minister was keen to rubbish the LSE and Warwick analysis based on HMRC data. Will she—

[Victoria Atkins]

On a point of order, Ms McVey.

[The Chair]

James Murray will finish and then the Minister will come in.

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[Victoria Atkins]

Clause 39 makes changes to clarify that payments from the lump sum exit scheme are treated as capital receipts. It aims to set clear and fair rules regarding the taxation of the scheme. Clause 40 creates a fairer system for assessing capital gains when an asset is disposed of under an unconditional contract. Clause 41 makes the capital gains tax rules fairer for spouses and civil partners in the process of separating or divorcing. Clause 42 makes changes to ensure that individuals who pay tax on carried interest are able to better align the time a tax liability arises in the UK with that of other relevant jurisdictions, and therefore claim double taxation relief where it is due. Clause 43 makes changes to ensure that roll-over relief and private residence relief work as originally intended for members of limited liability partnerships and partners of Scottish partnerships.

I will go through the changes in detail. Clause 39 clarifies the tax treatment for around 2,700 sole trader farmers, farming partnerships and farming companies who have received, or will receive, payments from the lump sum exit scheme. That will give certainty to those receiving such payments and remove the need to consider individual cases.

Clause 40 modifies HMRC’s four-year assessment powers so that, in certain circumstances, they will operate by reference to the tax year or accounting period in which the asset is conveyed or transferred. For capital gains tax, those circumstances are where the conveyance or transfer takes place six months after the end of the tax year in which the contract is entered into. For corporation tax, the date is one year after the end of the accounting period for the contract.

Capital gains tax rules provide that the transfer of assets between spouses and civil partners is made on a “no gain/no loss” basis. When spouses or civil partners separate, no gain/no loss transfers can be made only in the remainder of the tax year in which the separation occurs. Clause 41 extends no gain/no loss treatment until the end of the third tax year after the year the parties ceased to live together, the date on which the parties’ marriage or civil partnership ended, or the date when the parties entered into a divorce or separation agreement. No time limit applies to transfers of assets that form part of a formal divorce or separation agreement. The clause also makes changes to the rules that apply to the sale of the former family home. The other change applies to individuals who have transferred their share in the former family home to their ex-spouse or civil partner and who are entitled to receive a percentage of the proceeds when it is eventually sold.

Amendment 6 corrects an issue with time limits. Where a divorce agreement has not been entered into, spouses and civil partners should have up to three full tax years in which to transfer assets between themselves on a no gain/no loss basis. As it is worded currently, clause 41 provides a day short of that, so we want to correct that. Amendment 7 clarifies that the new rules also apply to divorce agreements entered into after spouses and civil partners have ceased to be married or have ended their civil partnership.

The changes made by clause 42 will introduce a new elective basis of taxation for carried interest, a type of reward for asset managers. For those who opt to use the elective basis, it will tax carried interest in the UK at an earlier time than under the current rules. That will mean that individuals receiving carried interest may be able to claim double tax relief in other jurisdictions more easily, avoiding disproportionate tax outcomes. That will help to remove barriers to international trade and support the health of the asset management sector while accelerating, but not reducing, UK tax.

Amendment 8 seeks to refine the calculation of carried interest for the purposes of clause 42. It modifies the calculation methodology so that it works in circumstances where managers are entitled to more carried interest if investors receive fund profits earlier. That means that the measure will better deliver in practice the opportunity to claim relief from double taxation on carried interest, as intended.

Clause 43 will ensure that roll-over relief and private residence relief work as originally intended for members of limited liability partnerships and partners of Scottish partnerships, by clarifying that the reliefs are available to them when an exchange of interest in land or private residences takes place, in the same way as they are when the land is held by the individual members or partners.

This group of clauses will provide greater certainty, consistency and fairness in the taxation of chargeable gains. I therefore commend them to the Committee.

[James Murray]

Clause 39 clarifies the tax treatment of payments received under the lump sum exit scheme, saying they will be treated as capital receipts rather than income, provided that the eligibility criteria are met. As we know, the lump sum exit scheme was designed to make it easier for farmers who wish to retire or to leave the industry. The basis for the scheme was considered in 2021 by a consultation that we understand received 654 responses.

We will not oppose the clause, which is specifically designed to provide clarity on the tax treatment of payments made under the scheme, but I wish to use this opportunity to ask the Minister for more context around the clause and, in particular, for details on the operation of the scheme and what comes next.

I understand that a total of 2,706 farmers made an initial application to the lump sum exit scheme by the deadline of 30 September 2022. Of those claims, 511 were withdrawn or rejected. Will the Minister tell us what analysis there has been of why those 511 claims were withdrawn or rejected?

I am conscious that when the draft Agriculture (Lump Sum Payment) (England) Regulations 2022, which relate to this matter, were debated in March last year, concerns were raised, on behalf of organisations including Sustain, that the scheme could be open to instances of fraud. Will the Minister confirm whether any of the 511 claims that were withdrawn or rejected were in fact rejected on the basis of fraud? If she does not have that information, perhaps she can at least provide us with the detail about what anti-fraud efforts have been made in relation to the scheme and how successful they have been.

I understand that the Department for Environment, Food and Rural Affairs is conducting five pilots aimed at supporting new entrants into farming, and I would be grateful if the Minister updated us on how those pilots are going and any early lessons that she may be able to share with us.

Clause 40 modifies the operation of the period in which a person must notify HMRC that they are chargeable to capital gains tax or corporation tax, and the time limits for assessing chargeable gains and claiming allowable losses, when an asset is disposed of under an unconditional contract.

When an asset is disposed of in that way, its date of disposal for capital gains purposes is treated as being the date on which the contract is made and not the date on which the asset is conveyed or transferred, if this is different. HMRC subsequently has four years from the end of the tax year or accounting period in which the disposal is treated as taking place in which to assess any tax that is due. Similarly, there is a four-year time limit for making loss claims. If there is a long gap between the disposal contract being entered into and it being performed, that can result in HMRC and taxpayers having little or no time in which to make a tax assessment or a claim.

We recognise that the measure removes potential avoidance opportunities by ensuring that HMRC can assess tax due in circumstances in which more than four years pass between an unconditional contract being entered into and an asset being conveyed or transferred. It also provides the taxpayer with a safeguard by allowing a corresponding period to claim allowable losses. We will therefore not oppose the clause.

As we heard, clause 41 makes changes to the rules that apply to transfers of assets between spouses and civil partners who are in the process of separating. It provides that they be given up to three years in which to make a no gain, no loss transfer of assets between themselves when they cease to live together, and unlimited time if the assets are the subject of a formal divorce agreement. It also introduces special rules that apply to individuals who have maintained a financial interest in their former family home following separation and that apply when that home is eventually sold.

Essentially, the clause seeks to make fairer the capital gains tax rules that apply to spouses and civil partners who are in the process of separating. It gives them more time to transfer assets between themselves without incurring a potential charge to capital gains tax. No gain, no loss treatment is currently available only in relation to disposals made in the remainder of the tax year in which the spouses or civil partners cease to live together. After that, transfers are treated as normal disposals for capital gains tax purposes. The measure extends the time available to give separating couples at least three years to make no gain, no loss transfers between themselves for capital gains tax purposes.

It is worth noting that the “Background to the measure” section of the Government’s policy paper on this matter refers to the Office of Tax Simplification and its consideration of how the capital gains tax rules apply to individuals who separate and divorce. The Government responded to the Office of Tax Simplification recommendations by agreeing that the no gain, no loss window on separation and divorce should be extended, and that is what the clause implements.

There is at the very least something ironic about a Government who use one clause of a Finance Bill to implement a recommendation of the Office of Tax Simplification and another clause of the same Bill to abolish that institution. As the Chartered Institute of Taxation has pointed out, the changes to be made by the clause are a result of an Office of Tax Simplification report. In fact, they are the third recommendation from that report to be implemented: it also recommended an increase in the notification period for the disposal of residential properties from 30 days to 60, and the incorporation of capital gains tax into a single customer account.

Will the Minister offer her views on that when she responds, and set out how the Government reconcile the apparent worth they seem to attribute to the Office of Tax Simplification, as evidenced by their decision to implement its recommendation in clause 41, with their decision to scrap it later in the Bill?

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[Victoria Atkins]

On amendment 8, I had read out that it seeks to refine the calculations of carried interest for the purposes of clause 42. It modifies the calculation methodology so that it also works in circumstances where managers are entitled to more carried interest if investors receive fund profits earlier. That will mean that the measure will better deliver in practice the opportunity to claim relief from double taxation on carried interest, as intended.

[James Murray]

I apologise to the Minister for missing her comments about Government amendment 8 and remind her that I would like to know whether the amendment, if it is passed, will have any effect on the overall Exchequer impact of the measure.

[Victoria Atkins]

I will come to that later.

The hon. Gentleman should send his questions about the farmer scheme to DEFRA, which is responsible for the Rural Payments Agency, which operates the scheme. He will know that we are confining ourselves to the tax implications of the scheme, so he ought to direct his questions there.

The hon. Gentleman asked about the Office of Tax Simplification, and that debate awaits us in our next day of consideration in Committee. I will not trespass on those deliberations, but we are in fact going further than the OTS’s recommendation, as we consider that that will give a fairer outcome to the parties involved in complex separation and divorce proceedings. We received representations that the OTS’s recommendations did not go far enough and we wanted to address the issues about the former family home that, for many divorcing and separating couples, is their main asset. We want to try to relieve the pressure during what can be a very upsetting and emotional time for the people involved and to try to ensure that they have time to resolve important family disputes.

In relation to carried interest being taxed as income, depending on the circumstances carried interest can be subject either to income tax rates or to the higher capital gains tax rate of 28% for higher and additional rate taxpayers. This is a balanced approach and one that is followed by comparable jurisdictions. We are supportive of the wider role and importance of the asset management sector. Amendment 8 has no impact on clause 42; it is designed to make the measure work as intended.

Question put and agreed to.

Clause 39 accordingly ordered to stand part of the Bill.

Clause 40 ordered to stand part of the Bill.

Clause 41

Separated spouses and civil partners

Amendments made: 6, in clause 41, page 32, line 36, at beginning insert “on or ”.

This amendment ensures that the inserted subsection (1C) applies to disposals made on the days mentioned in paragraphs (a) and (b) of that subsection as well as before those days.

Amendment 7, in clause 41, page 33, line 8, after “etc)” insert—

“, but as if, in subsection (2)(a), after ‘partner’ there were inserted ‘, or former spouse or civil partner,’”. —(Victoria Atkins.)

This amendment clarifies that the inserted subsection (1D) applies in relation to disposals made after A and B have ceased to be married or civil partners.

Clause 41, as amended, ordered to stand part of the Bill.

Clause 42

Carried interest: election to pay tax as scheme profits arise

Amendment made: 8, in clause 42, page 34, line 40, at end insert—

“(5A) Where—

(a) distributions were made by the scheme to external investors before the relevant tax year, and

(b) the timing of those distributions affects the amount of carried interest that actually arises to A,

the amount of carried interest to be presumed to arise in the circumstances mentioned in subsection (5) is to reflect the fact those distributions were made before the relevant tax year.

(5B) But if reflecting that fact would lead to a presumption that an amount of carried interest had arisen before the relevant tax year, any such amount is to be presumed to arise in the relevant tax year.” —(Victoria Atkins.)

This amendment secures that the amount of carried interest that is presumed to arise in the hypothetical situation that determines the amount of the charge properly reflects prior distributions to investors.

Clause 42, as amended, ordered to stand part of the Bill.

Clause 43 ordered to stand part of the Bill.

Clause 44

Meaning of “alcoholic product”

Question proposed, That the clause stand part of the Bill.

Finance (No. 2) Bill (First sitting)

Debate between James Murray and Victoria Atkins

Committee stage
Tuesday 16th May 2023 Public Bill Committees

[Victoria Atkins]

Clause 1 legislates the charge for income tax for 2023-24. Clauses 2 and 3 set the main, default and savings rates of income tax for 2023-24 and clause 4 maintains the starting rate for savings nil rate band for tax year 2023-24.

Before I get into the meat of these clauses, it might help to remind hon. Members that, as I have already said, because some measures in the Bill have already been debated on the Floor of the House, many measures will not be debated here in this Public Bill Committee. There is no mystery as to why some clauses are not appearing.

Income tax is one of the most important revenue streams for the Government, expected to raise approximately £268 billion in 2023-24. These clauses are legislated annually in the Finance Bill. Clause 1 is essential; it allows for income tax to be collected in order to fund the vital public services on which we all rely. Clause 2 ensures that the main rates of income tax for England and Northern Ireland continue at 20% for the basic rate, 40% for the higher rate and 45% for the additional rate.

Clause 3 sets the default and savings rates of income tax for the whole of the UK. The starting rate in clause 4 applies to the taxable savings income of individuals with low earned incomes of less than £17,570, allowing them to benefit from up to £5,000 of savings income free of tax. Clause 4 will maintain the starting rate limit at its current level of £5,000 for 2023-24, in order to ensure simplicity and fairness within the tax system while maintaining a generous tax relief. Clauses 3 and 4 are important pillars of the Government’s savings strategy, because we wish to help those with low earned income to save.

In addition to the starting rate whereby eligible individuals can earn up to £5,000 in savings income free of tax, savers are supported by the personal savings allowance, which provides up to £1,000 of tax-free savings income for basic rate taxpayers. Savers can also continue to benefit from the annual ISA allowance of £20,000. Taken together, those generous measures result in around 95% of savers paying no tax on their savings income.

Finally, the Government’s efforts to encourage those on the lowest incomes to save include the Help to Save scheme, which provides savers with a 50% bonus on their savings. The Government have recently extended the scheme while we consult on longer-term options to continue to support low-income savers, which is a good example of our commitment to levelling up opportunity across the whole country. I hope that Committee members feel able to promote the scheme to their constituents, and I encourage them to do so. We are committed to helping people of all incomes, at all stages of life, to save. Recent reforms, coupled with the significant increase to the starting rate limit in 2015, mean that the taxation arrangements for savings income are very generous.

[James Murray (Ealing North) (Lab/Co-op)]

It is a pleasure to serve on this Committee with you as Chair, Ms McVey. As we heard from the Minister, clause 1 imposes a charge to income tax for 2023-24. It is a formality in every Finance Bill, which provides the legal basis for Parliament to impose an annual income tax. Of course, we will not oppose that clause. Clause 2 provides the main rates of income tax for 2023-24, which will apply to the non-savings, non-dividend income of taxpayers in England and Northern Ireland. As the Minister said, the rates include the 20% basic rate, the 40% higher rate and the 45% additional rate.

With respect to the other nations of the UK, the explanatory notes make it clear that income tax rates on non-savings, non-dividend income for Welsh taxpayers are set by the Welsh Parliament. The UK main rates of income tax are reduced for Welsh taxpayers by 10p in the pound on that income. The Welsh Parliament sets the Welsh rates of income tax, which are then added to the reduced UK rates. Income tax rates and thresholds on non-savings, non-dividend income for Scottish taxpayers are set by the Scottish Parliament. We do not oppose clause 2. However, the income tax rates within it will interact with the level of personal allowance and relevant thresholds to determine how much income tax people pay. I will briefly ask the Minister about them.

Committee members will remember that in the March 2021 Budget, and in the Finance Act that followed, the then Chancellor—now Prime Minister—froze the basic rate limit and personal allowance for income tax for four years. In the recent autumn statement 2022, and in the following Finance Act, the current Chancellor extended those freezes by a further two years. That means that the current 2023-24 tax year is the second of a six-year freeze. The Office for Budget Responsibility has made clear, in its March 2023 economic and fiscal outlook, that the Government’s six-year freeze in the personal allowance will take its real value in 2027-28 back down to the level in 2013-14. When the Minister responds, I would be grateful if she could confirm whether she accepts that conclusion from the Office for Budget Responsibility.

As we have heard, clause 3 sets the default rates and saving rates of income tax for the year 2023-24. Clause 3 specifically sets the default rates that will apply to the non-savings, non-dividend income of taxpayers who are not subject to the main rates of income tax, Welsh rates of income tax or Scottish income tax. It also sets the savings rates that will apply to savings income of all UK taxpayers. We will not be opposing the measure.

Finally, clause 4 sets the starting rate limit for savings for 2023-24, which remains at £5,000, as we heard. As we know, the starting rate for savings can apply to an individual’s taxable savings income, which includes—but is not limited to—interest on deposits with banks or building societies. The extent to which an individual’s savings income is liable to tax at the starting rate for savings, rather than the basic rate of income tax, depends on their total non-savings income, which can include income from employment, profits from self-employment, pensions income, and so on.

If an individual’s non-savings income is more than their personal allowance plus the starting rate limit for savings, the starting rate is not available for that tax year. Where an individual’s non-savings income in a tax year is less than the personal allowance plus the starting rate limit, their savings income is taxable at the starting rate up to the starting rate limit. We will also not be opposing clause 4.

As I have set out, we will not be opposing any of the four clauses in this first grouping of the debate, but I look forward to the Minister’s response on my specific point about the Office for Budget Responsibility.

--- Later in debate ---

[Victoria Atkins]

Clauses 16 and 17 make changes to improve two of the tax-advantaged employee share schemes. Clause 16 increases the generosity and availability of the company share option plan, or CSOP. The changes will help larger companies that have grown beyond the scope of the enterprise management incentive—EMI—scheme, to offer more attractive share-based remuneration, helping them to recruit and retain the key talent that they need to succeed and grow. Clause 17 makes changes to the provisions of the enterprise management incentives. Those changes will simplify the process to grant options under an EMI scheme, and remove some of the administrative burdens on participating companies.

CSOP is available to all UK companies wishing to offer their employees share options, but the EMI scheme is specifically targeted at small and medium enterprises. It helps them to compete with larger firms to attract and retain key talent by bolstering the attractiveness of the share-based remuneration they can offer to their employees. At Budget 2021, the Government published a call for evidence to seek views on whether the EMI scheme should be expanded. At spring statement 2022, they announced that it remains effectively and appropriately targeted. However, they also expanded the review to consider whether CSOP could support companies as they grow beyond the scope of EMI. Following the review, we decided that CSOP should be expanded to make it more generous and accessible to a broader base of companies, including scale-ups that are no longer eligible for EMI.

The Government also listened to those who said that the administrative requirements of the EMI scheme could be improved, particularly in relation to the process of granting options. That is an example for the hon. Member for Aberdeen North of the public-facing nature of our efforts in drafting this Bill. We are making these changes to address those concerns.

The changes made by clause 16 will increase the CSOP employee share options limit from £30,000 to £60,000 and allow future changes to the share option limit to be made by regulations. The “worth having” condition will be removed, allowing more share types, and therefore companies, to be included in the scheme. Clause 17 will remove two administrative requirements within EMI. The first is the requirement to include within the option agreement details of any restrictions on the shares to be acquired under the option, as those restrictions are typically set out in other documents. The second is the requirement for an employee who receives an EMI option to sign a declaration that they meet the EMI working time requirement. The clause will not remove the working time requirement itself, which is a key part of the scheme. These sensible changes will reduce the burdens on companies granting EMI options, saving them time and money and reducing the risk that tax relief is lost due to administrative oversights.

The changes to EMI will support an estimated 4,700 small and medium-sized companies, and an estimated 45,000 employees who are granted EMI options annually. The changes will apply to both schemes granted on or after 6 April 2023, and options granted before 6 April 2023 that have not yet been exercised.

Clause 16 will improve the company share option plan, making it more accessible and generous, which will support businesses to recruit and retain key staff. Clause 17 will improve the enterprise management incentives scheme by simplifying the process to grant options, and will support small and medium-sized businesses to recruit and retain the talent they need to succeed. I commend the clauses to the Committee.

[James Murray]

As the Minister said, clause 16 makes changes to the company share option plan, a tax-advantaged employee share scheme available to all UK companies and their employees. It will double the employee share options limit from £30,000 to £60,000; remove the “worth having” condition, which limits which types of shares are eligible for inclusion within a CSOP scheme; and make changes to the share options limit, which will now be achievable through secondary rather than primary legislation.

We understand from the Government’s policy paper that this measure seeks to support companies to attract talent and to grow by expanding the availability and generosity of CSOP. They hope to allow companies to offer their employees a greater stake in the company so employees can share in their employer’s success. The changes will help companies that have grown beyond the scope of the enterprise management incentives scheme to offer more attractive share-based remuneration, supporting them to recruit and retain talent. These changes to CSOP were announced not by the Chancellor at the spring Budget 2023, but by the previous Chancellor in September 2022, so it seems we have found one of the very few remaining measures from last autumn’s so-called growth plan.

Although the Minister has set out the details of what this measure involves, I would like to ask her to explain some of the detail behind its operational impact, set out in HMRC’s policy paper. In the section on operational impact, it says that a small IT change will be required to support delivery of the measure, which will be expected to cost less than £5,000. It also says that, due to the relaxation and increased generosity of the CSOP rules, HMRC will undertake increased compliance activity to ensure CSOP is being used appropriately. It says that additional resource will be dedicated to compliance work to support the effective delivery and implementation of this measure, and that this resource is expected to cost a total of £570,000.

Will the Minister confirm whether the additional resource dedicated to that compliance work will be additional net resource at HMRC, or will it involve any redeployment of resources? If the latter is true, will she explain the expected impact on other work carried out by HMRC? We know from a recent Public Accounts Committee report that £9 billion in tax revenue was lost during the pandemic because 4,000 HMRC staff fighting tax avoidance were redeployed. We therefore believe it is important to ask questions about any such potential redeployment. I look forward to a clear answer from the Minister on that point.

--- Later in debate ---

[Victoria Atkins]

Yes, Ms McVey; the trip to John Lewis will have to come later. I am helpfully informed that, as set out in the TIIN, the additional resource will be dedicated to compliance work to support effective delivery and implementation of the measure. That is expected, as the hon. Member for Ealing North said, to cost a total of £570,000, but we will write to him with further details in due course.

[James Murray]

I appreciate the Minister reading out the information from the policy note, which I also read and quoted during my speech. The question I was specifically asking, just to make sure there is no confusion at all, was whether the additional resource that she referred to—the £570,000 resource that is dedicated to compliance work—will be additional net resource at His Majesty’s Revenue and Customs, or will it involve any existing resource at HMRC being redeployed? If the latter, will the Minister set out—in writing, I presume—what impact the redeployment will have on other work carried out by HMRC?

[Victoria Atkins]

I am mindful that when the hon. Member asked me quite a technical question in a Statutory Instrument Committee recently, he misunderstood my response and raised a point of order that turned out to be wrong. I had to correct him on the record and with a letter to the Library, so I am pleased to be able to write to him on this matter to ensure that I have answered his question and that he understands the answer.

[James Murray]

Maybe you’ll get it right this time.

[Victoria Atkins]

I got it right. That was the point. He raised a point of order that was wrong.

Question put and agreed to.

Clause 16 accordingly ordered to stand part of the Bill.

Clause 17 ordered to stand part of the Bill.

Clause 26

Payments under Jobs Growth Wales Plus

Question proposed, That the clause stand part of the Bill.

[Victoria Atkins]

The clause clarifies that payments made under the Welsh Government’s Jobs Growth Wales Plus scheme are exempt from income tax, with retrospective effect from 1 April 2022. The scheme was introduced by the Welsh Government on 1 April last year to replace traineeships and Jobs Growth Wales. The changes made by the clause will exempt from income tax payments made by way of training allowances under the scheme. Without the clause, the payments would be taxable, which would not be in line with the treatment of payments made for other training allowances.

[James Murray]

As we have heard, the clause introduces an income tax exemption for payments made by way of training allowances under the Jobs Growth Wales Plus scheme, which the Welsh Government introduced on 1 April 2022 to replace the traineeships and Jobs Growth Wales programmes in Wales. This is a training and employment programme aimed at 16 to 18-year-olds who are not in education, employment or training, and is designed to help them overcome any barriers that they may face in further training or employment.

As I understand it, the scheme has three strands: engagement, advancement and employment. Under the engagement strand, participants receive a training allowance of up to £30 a week; under the advancement strand, they receive £55 a week, and under the employment strand, individuals will be paid at national minimum wage for the age group. We understand that the training allowances paid under the scheme will be exempt from income tax. That was announced by the Financial Secretary to the Treasury in a written ministerial statement on 11 October last year. The objective of the measure is to clarify the tax treatment payments made by way of training allowances under the Jobs Growth Wales Plus scheme, and it will have retrospective effect from 1 April last year. We will not oppose the measure.

--- Later in debate ---

[Victoria Atkins]

The clause makes changes to support foster carers by increasing the amount of income tax relief available to them and ensuring that that relief stays at an appropriate level over time in line with inflation. We are nearly doubling the qualifying care relief threshold, which will give a tax cut to a qualifying carer worth an average of £450 a year. I know that hon. Members are particularly interested in supporting foster carers, who are real public servants, in looking after looked-after children.

Qualifying care relief has been unchanged since 2003. Many carers are now paying income tax on payments intended to represent the additional costs of fostering that qualifying care relief was intended to exempt. Minimum fostering allowances are set to rise by 12.4% in this financial year, and with current tax threshold freezes, current qualifying care relief levels are expected to push approximately 1,500 carers into tax, which could disincentivise care. We are seeking to reflect the higher allowances that are paid to carers and the higher costs of caring compared with when the relief was set originally. By linking the value of the relief to inflation, the measure will also help to ensure that the level of qualifying care relief remains appropriate over time, supporting carers now and in the future. This will help to provide a greater financial incentive for carers to join or stay in the care industry, improving the recruitment and retention of carers in the future.

The measure increases the amount of income tax relief available for foster carers across the UK and shared lives carers using qualifying care relief from £10,000 to £18,140 per year, plus £375 to £450 per week for each person cared for. Those thresholds will be index linked to the consumer prices index. That will benefit more than 33,000 individuals who receive care income in respect of foster caring and other types of care and who currently submit self-assessment returns; such people look after an estimated 58,000 foster children.

We expect to take most care income out of tax by providing a higher level of relief. It will have simplification benefits, because it will allow more carers to use the simpler method of completing their self-employment pages on their self-assessment return. I hope that that will be a welcome improvement to the tax position of foster carers and shared lives carers. I therefore commend the clause to the Committee.

[James Murray]

As the Minister says, the clause increases the annual amount of care income that a recipient of qualifying care relief will receive that is not subject to income tax. Furthermore, the clause provides for the annual amount to increase in subsequent tax years in line with CPI. We know that qualifying care relief allows carers who look after children or adults, including foster carers, shared lives carers and kinship carers, to receive certain payments tax free, up to an annual limit. We know that the annual limit comprises a fixed amount for each household, plus a weekly amount for each child or adult being cared for.

Qualifying care relief is a tax simplification providing specific tax relief for care income as a replacement for apportioning and calculating full deductions for expenses. The relief allows carers to keep simpler records for their care activities and to use a simpler method of filling in the self-employed pages of their tax returns, as the Minister mentioned. We recognise that the clause increases the fixed and weekly amounts making up the annual limit to bring more carers out of income tax and simplify their tax reporting responsibilities. It also introduces CPI indexation.

We welcome the fact that the clause could provide a greater financial incentive for carers to join or stay in the care industry, potentially improving the recruitment and retention of carers in the future, so we will not oppose it.

--- Later in debate ---

[Kirsty Blackman]

I have a quick question on Government amendment 4. Will it change the application of schedule 2 and proposed new schedule 1C to the Taxation of Chargeable Gains Act 1992, or does it simply clarify what is intended anyway under those schedules? The amendment specifically mentions the property not being held for pensions purposes. I am trying to understand whether that was the original intention, or whether the amendment changes the intent of schedule 2 and of schedule 1 to the TCGA.

[Victoria Atkins]

On the simplification point, the replacement of the lower-rate band with the new tax-free amount supports our long-standing goal of a modern and simpler tax system. This is a simplification for low-income discretionary trusts, as income within the tax-free amount will no longer be taxed as it arises. The change also simplifies calculations when income distributions are made. The consultation last year outlined that where discretionary trusts make income distributions, the existing 45% credit given to beneficiaries with that income would remain, as would the continued need for trustees to top up their payments to HMRC to match that credit when the distribution is made. I am told that the Chartered Institute of Taxation agreed with that proposition, and the Association of Taxation Technicians saw that as largely a question of timing and did not see a particular issue with the principle.

The hon. Member for Ealing North asked about vulnerable beneficiary trusts. The measures are a simplification for those trusts, as for any other low-income trust, as there will no longer be the need to elect to have income taxed as if for vulnerable beneficiaries. Instead, the income will simply not be taxed as it arises. Most vulnerable beneficiary trusts are, indeed, discretionary trusts, and as I said earlier, both the Chartered Institute of Taxation and the Association of Taxation Technicians have opined on this. The measure does not affect the need for trust beneficiaries to consider their tax reliability on their trust income. On the hon. Member for Aberdeen North’s question, the amendment clarifies our intentions.

[James Murray]

I thank the Minister for her response to my point. For clarity, my understanding of the Chartered Institute of Taxation’s point was that where trustees have no liability to report or pay, the beneficiaries, if they are basic-rate taxpayers, may still have basic rate income tax due on their income from the trust. I may have misunderstood, but did she say that beneficiaries will not be liable to income tax? Can she clarify that point?

[Victoria Atkins]

I will repeat exactly what I said for the hon. Gentleman, slowly: the measure does not affect the need for trust beneficiaries to consider their tax reliability on trust income that they receive.

Question put and agreed to.

Clause 29 accordingly ordered to stand part of the Bill.

Schedule 2

Estates in administration and trusts

Amendment made: 4, in schedule 2, page 291, line 38, at end insert—

“(za) the property comprised in the settlement is not held for a pensions purpose within the meaning of paragraph 7(3) of Schedule 1C to TCGA 1992 (property comprised in settlements held for a pensions purpose);”—(Victoria Atkins.)

This amendment would mean that a pensions settlement could not be a “qualifying settlement” for the purposes of section 24B of the Income Tax Act 2007 (being inserted by the Bill) or a “relevant settlement” in respect of which the conditions in subsection (9) of that section could be met.

Clause 30

Transfer of basic life assurance and general annuity business

Question proposed, That the clause stand part of the Bill.

[Victoria Atkins]

Clauses 30 and 31 address two issues concerning the tax rules that deal with reinsurance of a specific type of long-term insurance business known as basic life assurance and general annuity business, or more commonly, BLAGAB. Clauses 32 and 33 address the corporation tax and pension tax consequences that will arise from proposed new schedule 12 of the Financial Services and Markets Act 2000, which amends the procedure for a court-ordered write-down of an insurer’s liabilities when an insurer is in financial distress.

Clauses 30 and 31 were originally announced by the Economic Secretary to the Treasury in a written ministerial statement on 15 December 2022 and applied with effect from that date. They address the risk of both tax loss and unfair outcomes for insurers that could otherwise arise from commercial transfers of BLAGAB from one insurer to another.

Insurers writing BLAGAB are charged corporation tax under the “income minus expenses” basis of taxation, which seeks to tax the shareholder profits and the policyholder investment return together as a single taxable amount. When a BLAGAB book is reinsured prior to the transfer of a business, the shareholder profit and policyholder investment return become separated and are taxed differently, which could result in a tax mismatch. Clauses 32 and 33 prevent unintended tax consequences arising for both the insurer and individuals in the event of a court-directed write-down, which will help to ensure that such write-downs are a viable option to insurers in financial difficulty.

Clause 30 addresses a possible tax mismatch arising from the rules applying to the reinsurance of BLAGAB, which can result in a loss of corporation tax when a court-approved transfer of BLAGAB is preceded by reinsurance. In that situation, the clause classifies and taxes the reinsured business as BLAGAB in the hands of the reinsurer, ensuring that profits are taxed on a consistent basis. By protecting the Exchequer in such a way, this measure will increase receipts by £50 million to £60 million per annum.

Clause 31 addresses an industry concern that the current scope of the legislation, which treats certain sums received under a reinsurance contract as taxable income, may be unnecessarily wide and is blocking commercial transactions. It amends section 92 of the Finance Act 2012 so that it does not apply where substantially all the insurance risks of a book of BLAGAB are reassumed by a reinsurer.

Clause 32 addresses the corporation tax consequences that could otherwise arise when an insurer’s liabilities are written down under proposed new section 377A of the Finance Services and Markets Act 2000, and when there is any subsequent write-up under proposed new section 377I of FSMA. Without the clause, any release of liabilities could lead to an undesirable additional tax charge, which would reduce the balance sheet benefits of the write-down. The changes therefore help to ensure that the ailing insurer avoids insolvency. The clause also prevents the insurer from claiming a tax deduction where a write-down order is subsequently varied or terminated, which ensures that when an insurer recovers, the overall impact of the clause is tax neutral.

Clause 33 will extend the circumstances in which a pre-6 April 2015 lifetime annuity or a dependants annuity under a registered pension scheme can be reduced under a section 377A write-down without incurring unauthorised payments charges. This will ensure that those who receive financial services compensation scheme top-up payments, following a write-down under proposed new section 217ZA of the Financial Services and Markets Act 2000, will not face a tax disadvantage.

These clauses address a possible mismatch within the life insurance tax rules and clarify the scope of existing legislation, facilitating commercial transactions and protecting vital Exchequer revenue. They also ensure that write-down orders are a viable option for insurers in financial distress, and do not cause any additional tax liability for either the insurer or the individuals who hold policies with those insurers. I therefore recommend that the clauses stand part of the Bill.

[James Murray]

As we have heard, clause 30 applies to reinsurers of specific types of long-term insurance businesses known as basic life assurance and general annuity businesses, or BLAGAB. This is a technical change that addresses a tax mismatch in the life insurance rules where reinsurance precedes a transfer of BLAGAB. In that situation, the clause classifies the reinsured business as BLAGAB in the hands of the reinsurer.

We recognise that when books of life insurance policies are transferred between insurers, the economic transfer is typically effected by a reinsurance contract, pending court approval of the transfer. That gives the purchaser the economic benefits of the acquisition immediately. As we know, a tax mismatch can arise, as the profits from the business are initially taxed in the hands of the cedant as BLAGAB, then in the hands of the reinsurer as non-BLAGAB and, finally, after the business transfer scheme occurs, in the hands of the reinsurer as BLAGAB once again. A loss of tax can occur if a non-BLAGAB trade loss arises for the reinsurer and is offset against total profits or surrendered as group relief. The clause resolves that anomaly by ensuring that any profits or losses from the reinsured business that arise to the reinsurer are within BLAGAB. The ensuing result is that any trade profit or loss in the reinsurer will be subject to the BLAGAB rules, which accordingly brings the tax treatment of the reinsurer in line with the seller of the business.

We will not oppose this measure. For completeness, however, I would be grateful if the Minister could confirm the Exchequer impact of the measure, as it was not included in the original policy paper published on 15 December last year. We recognise that, as the policy paper points out, a consultation was not conducted due to the risk of forestalling. We also recognise that the amendments to eliminate the possibility of a mismatch will apply from 15 December last year, regardless of when the reinsurance contract was entered into.

--- Later in debate ---

[Victoria Atkins]

Clause 34 and schedule 3 make changes to the corporate interest restriction and connected rules in order to protect Exchequer revenue, remove unfair outcomes and reduce administrative burdens for businesses. Clause 35 and schedule 4 amend tax rules for real estate investment trusts, qualifying asset-holding companies, and overseas collective investment vehicles that invest in UK property.

On clause 34, the UK’s corporate interest restriction rules prevent groups from using financing expenses to erode their UK tax base, where those expenses are not aligned with a group’s UK taxable activities. The Government estimate that the rules have increased corporation tax receipts by over £1 billion per annum since they were introduced in April 2017. The rules can be complex because they operate at both worldwide group and individual entity level. Therefore, on their introduction, the Government committed to keeping the rules under review, and in July last year HMRC set up an external working group to consult on proposed amendments to address issues raised by businesses and their advisers.

Following that consultation, we are introducing clause 34 and schedule 3 to make a total of 21 amendments to the corporate interest restriction and related rules limiting deductions for finance costs. There are five changes that protect the Exchequer’s position. I will not go through all five, but they include ensuring that groups cannot reallocate amounts of disallowed financing costs to reduce or eliminate a corporation tax inaccuracy penalty for careless or deliberate errors, and confirming that groups containing charities cannot benefit from tax relief for financing costs incurred in respect of tax-exempt activities. In most cases, the changes implemented by the Bill will take effect for periods of account starting on or after 1 April 2023.

The Government have also tabled amendment 5, which concerns the definition of an insurance company for the purpose of the corporate interest restriction rules. The amendment ensures that the legislation has the desired effect, and I am told that it is supported by the Association of British Insurers.

At Budget 2020, we launched a review of UK investment funds’ taxation and regulatory rules. That led to the introduction of a new tax regime for qualifying asset-holding companies in April last year. Clause 35 and schedule 4 make targeted changes to that regime, to address issues raised by industry. They also make reforms to other tax regimes for investment vehicles that invest in UK property.

There are many changes, including, first, to amend the “genuine diversity of ownership” condition in the tax regimes for qualifying asset-holding companies and real estate investment trusts, as well as the non-resident capital gains tax rules that apply to overseas collective investment vehicles. The second group of changes make targeted amendments to the REIT rules, to address issues raised by industry following a call for input in April 2021. They remove unnecessary constraints and administrative burdens. The third group of changes make amendments to the qualifying asset-holding companies regime, making it more widely available to investment fund structures that fall within its intended scope.

It is right that, after six years, the Government review the corporate interest restriction rules and address issues brought to our attention. That is what these clauses and schedules serve to deliver.

[James Murray]

As we have heard, clause 34 and schedule 3 make amendments in connection with the corporate interest restriction and predecessor legislation, to ensure that the rules work as intended. As we know, the corporate interest restriction rules superseded part 7 of the Taxation (International and Other Provisions) Act 2010, commonly referred to as the debt cap. The aim of the rules has been to restrict the ability of large businesses to reduce their taxable profits through excessive UK finance costs. Amendments were made to the corporate interest restriction rules in the Finance Acts of 2018, 2019 and 2021, to address various technical issues in order to ensure that the rules operated as intended. In July 2022, a working group was formed to consider proposed amendments to the rules, following further representations from customers, tax advisers and representative bodies regarding unfair outcomes. It was announced at the Budget that the Government would make a number of modifications to the rules, and clause 34 implements those modifications.

We will not oppose clause 34, but I would be grateful if the Minister could give some sense of the scale of the benefit that the changes are likely to bring to businesses or the Exchequer. The policy paper for the measure begins:

“This measure addresses a number of issues to protect the Exchequer and reduce unfair outcomes or high administrative burdens.”

However, in the detail, it states:

“This measure is expected to have a negligible impact on the Exchequer…This measure will have a negligible impact on an estimated 6,800 groups,”

and

“This measure is expected overall to have no impact on business’ experience of dealing with HMRC as the proposals do not significantly change any processes or administrative obligations.”

The policy paper therefore sets out at several points the view that the measure has no impact or, at most, a negligible impact. I would be grateful if the Minister could help us to square those statements with the aim of the measure. For instance, can she explain how the policy paper can claim at one point that the measure will “reduce...high administrative burdens,” yet also conclude that

“the proposals do not significantly change any processes or administrative obligations”?

Clause 35 and schedule 4 update the rules governing the tax treatment of certain investment vehicles. The qualifying asset-holding companies regime was included in the Finance Act 2022 and came into effect from April last year. Amendments to the regime were initially announced in July 2022, with further amendments announced in March 2023. The amendments seek to make the regime more widely available to investment fund structures that fall within its intended scope.

As we have heard, clause 35 and schedule 4 also affect the rules for real estate investment trusts—companies through which investors can invest in real estate indirectly. In a written statement on 9 December 2022, the Chancellor announced changes to the property rental business condition and three-year development rule within the real estate investment trust rules. Schedule 4 gives effect to those changes, and we will not oppose clause 35.

[Victoria Atkins]

We are making these changes because, as I have said, we are mindful that this is an incredibly complex area of law and of corporate accountability and we are genuinely happy to listen to businesses when they tell us that there are problems and they think that they have solutions for those problems. That is why we have gone through this process and set up an external working group. HMRC, businesses and their advisers have identified issues with the current rules. We are making these changes to protect the Exchequer and reduce unfair outcomes and administrative burdens on affected businesses.

The hon. Member for Ealing North referred to the worldwide debt cap. The corporate interest restriction rules superseded the tax treatment of financing cost and income rules, commonly referred to as the worldwide debt cap, but there are still open inquiries and cases in litigation where the debt cap legislation is in point. The changes clarify that a revised statement of disallowances is ineffective unless a revised statement of allocated exemptions is also submitted, so exemptions must always be reduced in line with disallowances.

Question put and agreed to.

Clause 34 accordingly ordered to stand part of the Bill.

Schedule 3

Corporate interest restriction etc.

Amendment made: 5, in schedule 3, page 309, line 4, leave out paragraph 28 and insert—

‘28 (1) In section 494 of TIOPA 2010 (other interpretation), at the end insert—

“(3) The definition of “insurance company” in section 65 of FA 2012 (which is applicable to this Part as a result of section 141(2) of that Act) has effect for the purposes of this Part as if, in subsection (2)(a), the reference to Part 4A of the Financial Services and Markets Act 2000 included a reference to the law of a territory outside the United Kingdom which is similar to or corresponds to that Part.”

(2) In Part 7 of Schedule 11 to that Act (index of defined expressions), in the entry relating to an insurance company, in the second column, for “section 141 of FA 2012” substitute “section 494(3)”.’—(Victoria Atkins.)

This amendment secures that companies count as insurance companies for the purposes of the corporate interest restriction rules if they effect or carry out contracts of insurance and have regulatory permission to do so under a foreign law which is similar to or corresponds to the relevant United Kingdom law.

Schedule 3, as amended, agreed to.

Clause 35 ordered to stand part of the Bill.

Schedule 4 agreed to.

Ordered, That further consideration be now adjourned. —(Andrew Stephenson.)

Oral Answers to Questions

Debate between James Murray and Victoria Atkins

Tuesday 9th May 2023 Commons Chamber

[James Murray (Ealing North) (Lab/Co-op)]

Tens of thousands of people have been affected by the loan charge, with some having faced well-documented distress and harm as a result of HMRC’s approach. At the same time, HMRC has been issuing fewer than two fines a year against the architects and enablers of failed tax avoidance schemes. It is absolutely right that disguised remuneration schemes are tackled fairly and effectively, so how on earth can the Conservative Government justify such a light-touch approach for the promoters of such schemes, while many of those caught up in them face such a nightmare?

[Victoria Atkins]

I draw the hon. Gentleman’s attention to the strengthening of HMRC’s powers to tackle promoters of tax avoidance in the Finance Acts of 2021 and 2022, with a further tough new package of measures to ensure that promoters face stronger sanctions much more quickly. These measures will raise £130 million over the next five years and are already being used. We have already published the details of promoters and tax avoidance schemes in order to help consumers, and we have also published HMRC stop notices, because we want to help taxpayers who want to do the right thing to understand which promoters should be avoided.

Draft Major Sporting Events (Income Tax Exemption) (Women’s Finalissima Football Match) Regulations 2023

Debate between James Murray and Victoria Atkins

Wednesday 22nd March 2023 General Committees

[James Murray (Ealing North) (Lab/Co-op)]

It is a pleasure to serve with you in the Chair, Mrs Murray. As we have heard from the Minister, the regulations seek to remove the income tax liability for accredited persons who are non-resident in the UK for performance of their duties or services in the UK in connection with the women’s—I cannot say this very well—

[Victoria Atkins]

Finalissima!

[James Murray]

Yes—hopefully Hansard will correct that for me. The Finalissima 2023 will be held here on 6 April. As the statutory instrument sets out, the tax exemption will be available from the period of 2 to 7 April. As well as being non-resident, beneficiaries of the tax relief must work for or be contracted by one of the sporting bodies, teams or clubs competing in the competition. The Opposition will not oppose the statutory instrument, as it is standard practice with world-class sporting events for the host nation to provide certain tax exemptions, not least to avoid the risk of double taxation in the UK and the home nation of the accredited person. We believe it is important that the UK is seen as an attractive place to host major cultural and sporting occasions, as it has done successfully so many times in the past.

If you will allow me, Mrs Murray, I would like to place on record how pleased I am that the competition will be hosted only a stone’s throw from my constituency. As it is only a short journey from Ealing North to Wembley stadium, I am sure that many of my constituents will be eager to attend the match. I would be grateful if the Minister could outline what measures will be taken to ensure that communities local to the competition will have a fair opportunity to purchase tickets. My constituency has another close connection with our women’s national football team: one of its players, the brilliant Chloe Kelly, was raised in Hanwell. I am so glad to be able to quote the excellent deputy leader of Ealing Council, Councillor Deirdre Costigan, who announced that Ealing Council would like to offer Chloe

“Freedom of the Borough for her amazing achievements…we want to see many more young people achieve sporting greatness like Chloe.”

I wholeheartedly echo her comments.

The Opposition will not oppose the statutory instrument, and I am sure that the Minister will join me in wishing the Lionesses every success in the upcoming match.

Oral Answers to Questions

Debate between James Murray and Victoria Atkins

Tuesday 7th February 2023 Commons Chamber

[James Murray]

In October 2021, the right hon. Member for Richmond (Yorks) (Rishi Sunak), as Chancellor, welcomed the OECD global agreement on a global minimum corporation tax rate. The then Chancellor’s press release made it clear that

“The aim is for these historic rules to be implemented and effective from 2023.”

Yet now we hear rumours that some senior Conservatives are agitating against the deal being implemented, and we have all seen the Prime Minister’s weakness when facing resistance from his own party. Can the Minister confirm that pillar two of the OECD deal will be in place, as promised, by the end of this year?

[Victoria Atkins]

Yes.

Non-domicile Tax Status

Debate between James Murray and Victoria Atkins

Tuesday 31st January 2023 Commons Chamber

[James Murray]

Thank you, Mr Deputy Speaker, for the opportunity to set out the details of the kind of long-term workforce plan that we believe the NHS needs.

The NHS is one of the great challenges we face, but we know another challenge that parents and children across the country face: the desperate need for a modern childcare system. We need a system that supports families from the end of parental leave to the end of primary school, as the shadow Education Secretary, my hon. Friend the Member for Houghton and Sunderland South (Bridget Phillipson), has set out. As the first step in this landmark shift, we would use revenue from abolishing non-dom tax status to guarantee breakfast clubs for every primary age child in England. Too many families cannot afford the clubs before school that boost children’s learning and development and help parents to go to work. Labour’s plan would save families money as well as help parents to work the jobs and hours they choose.

Our plan to abolish non-dom status, replace it with a modern system and use the money raised to strengthen the NHS, childcare and the economy should be a no-brainer. Yet the Conservatives refuse to do it. We want to know why. This is not the first time I have asked Ministers to explain their position. In the last few months of last year, I asked Treasury Ministers five times to explain why the Government have been so reluctant to abolish this outdated tax loophole. I asked Ministers five times whether the Chancellor considered abolishing non-dom tax status, whether the Prime Minister was consulted about doing so and whether, when the current Prime Minister was Chancellor, he recused himself from discussions on the matter.

Five times I asked those questions; five times the Ministers refused to answer or even acknowledge them. Instead, Ministers have been determined to defend non-dom status. I suspect we will hear some of those same defences today. If previous debates are any guide, the Minister may well repeat her line that we should be grateful to non-doms for paying £7.9 billion in UK taxes last year.

[The Financial Secretary to the Treasury (Victoria Atkins)]

On a point of order, Mr Deputy Speaker. If I am going to be quoted, I expect to be quoted correctly. The hon. Gentleman seems to use words I am not sure he quite understands—I do not know. In my speech, I am going to help him to understand some of the words he has used. But I have only ever sought to set out the facts, which we have to take into account on the issue under discussion, which is that they do pay £7.9 billion in tax. That is the context in which I have cited that figure, not in the way that he has alleged.

[Mr Deputy Speaker]

Shadow Minister, do you want to respond to that? They were your words, not mine.

Local Government Finance Act 1988 (Non-Domestic Rating Multipliers) (England) Order 2022

Debate between James Murray and Victoria Atkins

Tuesday 17th January 2023 General Committees

[Victoria Atkins]

I thank the hon. Member for Ealing North for his efforts in describing the origins of the SI. It is always very interesting, because when I take a SI, I take the view that of course hon. Members will have read and considered carefully the document. I like to try to bring those SIs to life, but the hon. Gentleman can always be relied upon to go through the minutiae of a SI. We are extremely grateful to him for that.

I must pick the hon. Gentleman up on a point that he also mentioned in a Westminster Hall debate, namely that we have somehow reneged on a promise about a review. We have reviewed, and we have been able to make the package under consideration today precisely because we worked with businesses and the Valuation Office Agency—an independent, arm’s length body though it is—to make sure that when we drew up that package, we were responding to the needs of the retail, hospitality and leisure sector. We were drawn to help the needs of that sector in particular, even though he knows that at the autumn statement we had very, very difficult circumstances with which we had to deal. I for one am very, very pleased that in what was a very difficult period for the economy—and it remains so—we were able to find the headroom to bring about the £9.3 billion tax cut for local businesses up and down our high streets.

I know from my own constituency the help that businesses rely on, particularly those on the high streets in some of my more rural market towns. Very often the properties there get small business rate relief and that can mean the difference between their being able to stay in business and sadly being unable to do so.

In relation to the hon. Gentleman’s specific question, I am assured that no increase is involved and that it is an aggregate RV change and there is an adjustment in the appeals package.

[James Murray]

The Minister may have misunderstood my question. I was asking her to clarify how the formula works. I think I understand it, having read the minutiae on which she commented that I pay great attention to, but I just wanted to check that my understanding is correct, because variable B obviously increases in comparison to last year, although business rates are frozen. Could she just explain how that formula works, just so I have clarity that I have understood it correctly?

[Victoria Atkins]

As I said, we are freezing the multiplier. The Valuation Office Agency conducts the valuations of properties independently, as he will know. We have gone to great trouble since the pandemic to support the VOA in its assessment of properties. In relation to the formula, it is precisely because we are freezing the multiplier that we have the SI.

It is very good of the Opposition to support the SI, and I am confident—

[James Murray]

I understand the Minister’s point about the freezing of business rates, which is the commitment made by the Chancellor in the autumn statement. My question is about variable B increasing as a result of the order. How does the formula work to maintain a freeze in business rates in that context?

[Victoria Atkins]

Again, I am very happy to help the hon. Gentleman. The formula reduces the multiplier to affect the increase in rateable value at the revaluation, and then adjusts by about 4% to account for appeals before protecting from inflation. I hope that that level of detail is reassuring to the hon. Gentleman, and that he understands that the full might of the Treasury has worked this out, with the help of the Valuation Office Agency.

Question put and agreed to.

Oral Answers to Questions

Debate between James Murray and Victoria Atkins

Tuesday 20th December 2022 Commons Chamber

[James Murray (Ealing North) (Lab/Co-op)]

I echo the consensus about the importance of a merry Christmas. In the last month, I have asked Treasury Ministers three simple questions: whether the Chancellor has considered abolishing non-dom status; whether the Prime Minister was consulted about doing so; and whether, when the current Prime Minister was Chancellor, he recused himself from discussions on the matter. I have asked those questions four separate times, but four times Treasury Ministers have refused to answer or even acknowledge them. Once might be an oversight and twice might be careless, but three times seems deliberate and four times feels like stonewalling. Will the Minister finally show that they have nothing to hide by answering my questions today?

[Victoria Atkins]

I am pleased that the hon. Gentleman is entering into the spirit of pantomime season with his questions. We have been clear that non-doms paid £7.9 billion in UK taxes last year—a number that he does not seem able to accept—which is a significant sum of money. Although we keep the scheme under review, as I have said many times—perhaps he is choosing not to hear it—we must recognise their contribution in UK taxes, because that £7.9 billion helps to pay for the services that we all care so much about.

[James Murray]

Well, that was the fifth time; I wonder what people will make of that.

We believe that to be trusted and effective, the tax system must be fair, yet while millions of working people and businesses across Britain are paying the highest tax burden in decades, those who use tax havens are playing by different rules. Those who benefit from tax havens are undercutting responsible businesses, undermining our public services and breaking the basic principle that we must all play by the same rules. Will the Minister agree that creating a fair tax system must involve challenging tax havens and those who avoid paying their fair share?

[Victoria Atkins]

I ought to declare an interest at this point: I used to prosecute tax fraudsters for HMRC before I came to this place. I very much agree with the hon. Gentleman and put my money where my mouth is when it comes to tackling those fraudsters.

On the income tax take, the top 10% by way of income paid 36% of all tax in 2020-21. We are proud of the fact that our distributional analysis for the autumn statement shows that decisions made at that fiscal event are progressive: the lowest income households will receive the largest benefit in cash terms and as a percentage of income, and will on average be net beneficiaries of decisions made on tax, welfare and amendments to the energy price guarantee.

Draft Social Security (Class 2 National Insurance Contributions Increase of Threshold) Regulations 2022

Debate between James Murray and Victoria Atkins

Tuesday 29th November 2022 General Committees

[James Murray]

Absolutely, Mrs Cummins. I am simply asking the Minister to compare her comments on the regulations in front of us with what she said last night. She may choose to address that in her response.

[Victoria Atkins]

This is not in scope.

--- Later in debate ---

[Victoria Atkins]

Yes.

I am helpfully reminded that the Office for Budget Responsibility produced updated forecasts for the autumn statement, including on all previous measures. Any broader debates about the autumn statement should be dealt with tomorrow in the Finance Bill Committee.

[James Murray]

You have been very clear in your guidance, Mrs Cummins, about what is within and without scope. The points that I referenced about the tax information and impact note were referred to in the explanatory memorandum to the regulations. I therefore followed your judgment, Mrs Cummins, that they were within scope. If the Minister is not entirely clear of my argument, she can either consult Hansard or speak to me after the Committee rises.

[Victoria Atkins]

I have been assured that we produced updated forecasts, as I have already said, for the autumn statement. On the details about TIIMs, I will happily speak to him after the Committee, or write to him and put a copy of my response in the Library. We are in danger of encroaching on the Finance Bill, however, and—

[James Murray]

Will the Minister give way?

[Victoria Atkins]

I have already said to the shadow Minister that I will write to him on outstanding matters. I have taken that approach because we will be going through an awful lot of this tomorrow in the Committee stage of the Finance Bill.

Question put and agreed.