Jesse Norman
Main Page: Jesse Norman (Conservative - Hereford and South Herefordshire)Department Debates - View all Jesse Norman's debates with the HM Treasury
Thursday 2nd July 2020
(4 years, 5 months ago)
Commons ChamberRead Full debate Finance Act 2020 View all Finance Act 2020 Debates Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Consideration of Bill Amendments as at 2 July 2020 - (2 Jul 2020)
Ben Lake (Ceredigion) (PC)
Diolch, Madam Deputy Speaker, for calling me to contribute to this important debate, the importance of which is perhaps not reflected in the attendance in the Chamber today, but as the shadow Minister, the hon. Member for Houghton and Sunderland South (Bridget Phillipson) rightly said in her opening remarks, reviews of tax reliefs tend to be important not just for improving the transparency of their effectiveness but, as the hon. Member for Thirsk and Malton (Kevin Hollinrake) said in relation to the enterprise investment scheme and the future fund, for their transformative impacts on policy. I agree with him that one of the key things that we need to consider as we move ahead is how we can encourage greater investment, especially equity investment, in regions other than London. I hope to dwell a little on that point later in my remarks.
It is a pleasure to follow my hon. Friend the Member for Aberdeen South (Stephen Flynn), who not only laid out effectively the inefficiencies of the tax reliefs system but raised the important question, which I would like to address, of whether reliefs achieve their economic objectives in the current climate and context, as we try to rebuild or at least begin to consider how we can rebuild after covid-19. Tax reliefs will have an important part to play, and it will be vital that they are channelled to those who will rebuild the economy.
I wish to speak at greater length to amendment 1 and new clause 17, both of which are tabled in my name. Both are probing amendments. I seek to probe the Government’s commitment to levelling up every nation and region of the UK by requiring them to report on the differential territorial impacts of the changes that the Bill introduces to certain reliefs and tax incentives.
Most hon. Members will welcome the Conservatives’ efforts to see balanced economic growth throughout the UK and in particular to move away from what I consider to be a hub-and-spoke approach to economic development. Over the past decade, the Government have mainly concentrated on improving connectivity between rural areas and smaller towns and the supposed economic engines of the larger cities, as opposed to incentivising and supporting economic growth in those areas themselves.
Such a centralised model has inevitably concentrated economic activity in London and the south-east. As a consequence, Wales’ potential and that of other regions and nations of the UK has been overlooked. That is perhaps most apparent when we consider the way in which public funding for certain development has been allocated. Between 2001 and 2017, London R&D funding per head totalled almost twice the UK average— £3,900 per head compared with a national average of £2,300. What is more, the trend worsened in that time. The share of the core research budget spend across the three cities of Oxford, Cambridge and London—also known as the golden triangle—rose from 42.1% in 2002-03 to 46% in 2017-18.
Perhaps just as relevant to this debate is how public spending on transport infrastructure is allocated. I note that per-head spending in London in the past decade has averaged nearly three times that spent in the rest of the UK. During the same period, the city has received five times the average per-head spend on culture. It is perhaps unsurprising, therefore, given that disparity, that the golden triangle of London, the south-east of England and the east of England also attracts the lion’s share of venture capital. Indeed, the region received 73% of all venture capital between 2016 and 2018, according to the British Private Equity and Venture Capital Association. When we reflect on this concentration of venture capital in one region of the UK, as with R&D, not only are the failings of past economic development policy laid bare, but it is difficult to deny a popular saying in Ceredigion, “I’r pant y rhed y dŵr”—or in English, “To the hollow the water runs”.
It is clear that as the world moves increasingly to a knowledge-driven economy, expenditure on R&D will be vital not only as a source of innovation that can be commercialised to form the basis of the next generation of business, but as a means of equipping people with the requisite skills for the new economy and, as my hon. Friend the Member for Aberdeen South said, the post-covid economy. It follows, therefore, that the economy of any nation or region that does not receive the right level of support will be hindered in its attempt to adjust to the challenges of tomorrow. Government support for R&D is essential for Wales in particular, to address problems that range from a low-wage economy to a looming demographic time bomb, while also building an economic platform to take advantage of trends, including automation, that could otherwise cause quite a serious long-term social risk.
New clause 17 would require the Chancellor to report on the geographical impact of changes to several tax rules, including R&D expenditure credit. It would ensure that the UK Government consider how different geographic areas benefit from taxpayer-funded reliefs so that the financial incentives can be better tailored to overcome the UK’s chronic regional inequalities. I have previously drawn attention to the concentration of R&D funding in the golden triangle, but assessments might also provoke a debate within Government about how public spending on other priorities is allocated.
In a similar vein, my amendment 1 would require the Government to consider the unsustainable concentration of private investment in one region of the UK at the expense of the devolved nations and other regions of England. As the UK Government narrow the applicability of the enterprise investment scheme, they need to consider how that will affect firms in different areas of the UK. The EIS benefits us in a great many ways—the hon. Member for Thirsk and Malton outlined them effectively in his remarks. The ways in which the UK Government can encourage the establishment in the devolved nations of venture capital funds, and therefore private investment, is so important. The geographic disparities to which I have already referred are reflected in the EIS. To pick just one example, between 2015 and 2018, only 210 Welsh firms benefited from EIS, receiving just 1.3% of the total investment. By contrast, to pick on the golden triangle again, that area received 67% of all investment. The average UK business angel investment per firm has been some 40% greater than that in Wales.
Modern advanced economies such as Germany, the Netherlands and even the USA have ensured a better geographic spread of economic prosperity, so the Government’s intention to address this policy failure is to be welcomed. However, we must make sure that the rhetoric is backed up by the reality and that the measures designed to realise such lofty ambitions are fit for purpose. My amendment and new clause would require the Government to report on the effectiveness of some tax relief schemes in this regard, and I hope that the Minister can give them some serious consideration.
The Financial Secretary to the Treasury (Jesse Norman)
I am grateful to everyone who has contributed to this short but interesting debate. As colleagues have noted, when we think about tax transparency, we are in what might these days be referred to as a niche area of taxation—technical, but no less important. In some respects, it is more important that we do not get lost in the detail but can come back and talk about the issues more widely. If I may, I will address the different clauses and then come to the specific points raised in the debate.
New clause 27 would require the Government to review all
“tax reliefs contained in this Act”.
It states that the review must contain
“the number of tax reliefs…the effect on taxation revenue of each of the tax reliefs…and…an assessment of the efficacy of systems for designing, monitoring and evaluating the effect of the tax reliefs.”
It asks the Government to publish the number of tax reliefs in the Bill and their effect on taxation revenue.
As the House may be aware, the Government already publish tax changes and estimates of the Exchequer impacts of policy changes in the Budget documents at each fiscal event. Moreover, Her Majesty’s Revenue and Customs monitors the effect on taxation revenue of tax reliefs after they are introduced and issues an annual tax relief statistics publication—I am sure that is closely scrutinised by all Members—which includes estimates of the costs of tax reliefs. Building on this, HMRC is also undertaking a project to expand its published costs information. I remind the House that in May HMRC published cost estimates for a further 47 previously uncosted reliefs.
New clause 27 also asks for an assessment of the efficacy of systems for designing, monitoring and evaluating the effect of a relief. As the House will know, the Government consult on new tax reliefs and proposed changes to tax reliefs, bringing in external expertise as part of the policy making cycle wherever possible. Officials are constantly working on ways to improve the policy on development, administration and continuing management of reliefs. As colleagues will know, the Government, and particularly the Treasury, keep all reliefs under review.
The Government also do evaluations of different forms. This work has included evaluations of a number of significant reliefs—some 15 since 2015. These include our R&D tax credits and entrepreneurs relief, on both of which I will say a few words later. In 2015, HMRC published an evaluation of R&D tax credits. In 2017, it commissioned an evaluation of entrepreneurs relief that led to a series of reforms, most recently the significant reduction of its lifetime at spring Budget 2020, which is legislated for in this Bill. The hon. Member for Aberdeen South (Stephen Flynn) picked up on the point about entrepreneurs relief, which he somehow regards as “the tail wagging the dog”. What he calls “the tail wagging the dog” other people would call consultation across Parliament and discussion with stakeholders. Since the measure resulted in a 90% reduction in the scope of the relief, I do not think he can claim that there is any lack of ambition in it.
HMRC will continue to monitor and evaluate reliefs and will bring forward a pipeline of further evaluations in due course. It will also consider a proposal to which I have already said I am quite sympathetic—I thank the hon. Member for Houghton and Sunderland South (Bridget Phillipson); we have discussed this before: a more systematic evaluation programme for reliefs. In the light of all this, the Government do not believe that the new clause is necessary.
New clause 2 would require the Chancellor of the Exchequer to review the impacts of the reduction in the lifetime of entrepreneurs relief that is being legislated for in this Bill within six months of Royal Assent, and specifically to review the impacts on business investment, employment and productivity in the constituent nations and English regions of the United Kingdom. I would first highlight to hon. Members that the Government have already conducted an internal review of this relief that built on the 2017 independent research commissioned by HMRC. That review considered the distributional effects and benefits of the relief against its cost in order to better understand the targeting of the relief. This, in turn, has been used to inform the reform that is being legislated for in this Bill. It ensures that the majority of entrepreneurs are unaffected. A lot of the concern about entrepreneurs relief historically has been that it is not well targeted, and this measure greatly improves the targeting. Unfortunately, the effects of the changes to the relief will not be visible in six months’ time, and for that reason I urge the House to reject new clause 2.
New clause 4 concerns the structures and buildings allowance. It would require the Chancellor to review the impacts of clause 30, which makes miscellaneous amendments to the SBA, within six months of the passing of the Finance Act. Specifically, it would require the Chancellor to review the impacts on business investment, employment, productivity and energy efficiency. Again, I reassure Members that both HMRC and the Treasury already monitor tax reliefs according to the level of risk that they are deemed to pose. It is in the nature of a structures and buildings allowance that it is configured to reflect the fact that it can take many years to erect new buildings. Claims under the SBA are ordinarily settled when businesses bring buildings into use and submit tax returns at year end. For that reason, it would be neither possible nor appropriate to try to draw conclusions on the productivity or energy efficiency impacts of these changes within such a short period.
New clause 17 would require the Government, within 12 months, to assess and report on the geographical effects of changes to business reliefs across a variety of areas. There is a concern, which I recognise, that there are geographical disparities that reflect the historical evolution of our economy in different areas. It is by no means a uniform picture, even outside London.
HMRC does not routinely require businesses to provide geographical information about where expenditure is incurred as part of claims for the R&D expenditure credit, structures and buildings allowance or intangible fixed assets. To do that, changes would be required that would create additional burdens on businesses. Those claiming the reliefs, of course, could only provide information after the year end. For that reason, it would not be possible for HMRC to have information within the 12 months stated in the amendment, even if the amendment were passed. It is not capable of being fulfilled.
Jesse Norman
With permission, Madam Deputy Speaker, I will give way to my hon. Friend.
Kevin Hollinrake
I declare an interest as somebody who has benefited from entrepreneurs’ relief in the past. Is the Minister considering extending the reduction in entrepreneurs’ relief, which I support, to investors’ relief, which currently stands at the same figure as entrepreneurs’ relief used to stand at—£10 million?
Jesse Norman
If my hon. Friend is asking questions, he ought to stay for the next debate, because he is abusing the privilege of this debate. I thank him for his suggestion of a revenue-raising possibility for the Government; we take all those in great heart.
Bridget Phillipson
Could the Minister say a little more about the social investment tax relief? I am not aware that he responded on that point.
Jesse Norman
The hon. Lady is absolutely right. Let me address that. As she knows, the relief remains in place until next year. Even its doughtiest supporters would agree that so far it has not been anything like as effective as anyone would have liked or as had been projected or anticipated. Only £11.2 million has been raised under it in the period 2014 to 2018-19.
We are looking at it closely. As I mentioned in Committee, I am in discussions with leading figures across the social investment world about whether we can get some more visibility on the sources of funds that would use such a relief and the sources of projects that those funds would support. If we do not get that and we cannot have that in a slightly more concrete form, it looks like quite an empty request, but there may be other things that we can do to support social investment. As the hon. Lady knows, I have written a book on the big society. It is an area that I care deeply about, so I am happy to respond and I am grateful for her question.
Bridget Phillipson
We do not intend to divide the House on the new clause, but I will make a few brief points in response to what the Minister has said. I am glad that he shares our assessment that the current situation and system are unwieldy, and therefore we look forward to seeing real progress in that area. Frankly, it is not good enough that of those 362 tax reliefs, only 15 have had published evaluations since 2015, at a time when costs have risen.
During these extraordinary times, we need to see much more from the Government, not just on tackling tax avoidance, as we discussed at some length yesterday. There needs to be a renewed focus on taxpayer value for money, with greater opportunities for scrutiny of tax reliefs in this place and from external experts. Although we are not seeking to divide the House, I hope that we will see progress in that area. It is an issue to which we intend to return. I beg to ask leave to withdraw the motion.
Clause, by leave, withdrawn.
Madam Deputy Speaker (Dame Rosie Winterton)
With this it will be convenient to discuss the following:
Government new clause 20—Protected pension age of members re-employed as a result of coronavirus.
Government new clause 21—Modifications of the statutory residence test in connection with coronavirus.
Government new clause 22—Future Fund: EIS and SEIS relief. Government new clause 23—Interest on unpaid tax in case of disaster etc of national significance.
Government new clause 24—Exceptional circumstances preventing disposal of interest in three year period.
Government new clause 25—HGV road user levy. Government new clause 32—Enterprise management incentives: disqualifying events. Government new schedule 1—Taxation of coronavirus support payments.
New clause 29—Review of impact of Act on poverty—
‘(1) The Chancellor of the Exchequer must conduct an assessment of the impact of this Act on poverty and lay this before the House of Commons within six months of Royal Assent.
(2) This assessment must consider—
(a) the impact on absolute poverty,
(b) the impact on relative poverty, and
(c) whether such a study should in future be a regular duty of the Office for Budget Responsibility.’
This new clause would require the Chancellor of the Exchequer to review the impact of the Bill on poverty and consider whether the OBR should conduct such assessments as a regular duty.
New clause 10—Impact of provisions of the Act on child poverty—
‘(1) The Chancellor of the Exchequer must review the impact of the provisions of this Act on child poverty and lay a report of that review before the House of Commons within six months of the passing of this Act.
(2) A review under this section must consider the impact on—
(a) households at different levels of income,
(b) the Treasury’s compliance with the public sector equality duty under section 149 of the Equality Act 2010,
(c) different parts of the United Kingdom and different regions of England, and
(d) levels of relative and absolute child poverty in the United Kingdom.
(3) In this section—
“parts of the United Kingdom” means—
(a) England,
(b) Scotland,
(c) Wales, and
(d) Northern Ireland;
and “regions of England” has the same meaning as that used by the Office for National Statistics.’
This new clause would require the Chancellor of the Exchequer to review the impact of the Bill on child poverty.
New clause 3—Review of changes to capital allowances—
‘(1) The Chancellor of the Exchequer must review the effect of the changes to chargeable gains with respect to corporate capital losses in this Act in each part of the United Kingdom and each region of England and lay a report of that review before the House of Commons within two months of the passing of this Act.
(2) A review under this section must consider the effects of the changes on—
(a) business investment
(b) employment, and
(c) productivity.
(3) A review under this section must consider the effects in the current and each of the subsequent four financial years.
(4) The review must also estimate the effects on the changes in the event of each of the following—
(a) the UK leaves the EU withdrawal transition period without a negotiated comprehensive free trade agreement,
(b) the UK leaves the EU withdrawal transition period with a negotiated agreement, and remains in the single market and customs union, or
(c) the UK leaves the EU withdrawal transition period with a negotiated comprehensive free trade agreement, and does not remain in the single market and customs union.
(5) The review must also estimate the effects on the changes if the UK signs a free trade agreement with the United States.
(6) In this section—
“parts of the United Kingdom” means—
(a) England,
(b) Scotland,
(c) Wales, and
(d) Northern Ireland;
and “regions of England” has the same meaning as that used by the Office for National Statistics.”
This new clause requires a review of the impact on investment, employment and productivity of the changes to chargeable gains with respect to corporate capital losses over time; in the event of a free trade agreement with the USA; and in the event of leaving the EU without a trade agreement, with an agreement to retain single market and customs union membership, or with a trade agreement that does not include single market and customs union membership.
New clause 6—General anti-abuse rule: review of effect on tax revenues—
‘(1) The Chancellor of the Exchequer must review the effects on tax revenues of section 99 and Schedule 14 and lay a report of that review before the House of Commons within six months of the passing of this Act.
(2) The review under sub-paragraph (1) must consider—
(a) the expected change in corporation and income tax paid attributable to the provisions in this Schedule; and
(b) an estimate of any change, attributable to the provisions in this Schedule, in the difference between the amount of tax required to be paid to the Commissioners and the amount paid.
(3) The review under subparagraph (2)(b) must consider taxes payable by the owners and employees of Scottish Limited Partnerships.’
This new clause would require the Chancellor of the Exchequer to review the effect on public finances, and on reducing the tax gap, of Clause 99 and Schedule 14, and in particular on the taxes payable by owners and employees of Scottish Limited Partnerships.
New clause 7—Call-off stock arrangements: sectoral review of impact—
‘(1) The Chancellor of the Exchequer must make an assessment of the impact of section 79 on the sectors listed in (2) below and lay a report of that assessment before the House of Commons within six months of the passing of this Act.
(2) The sectors to be assessed under (1) are—
(a) leisure,
(b) retail,
(c) hospitality,
(d) tourism,
(e) financial services,
(f) business services,
(g) health/life/medical services,
(h) haulage/logistics,
(i) aviation,
(j) transport,
(k) professional sport,
(l) oil and gas,
(m) universities, and
(n) fairs.’
This new clause would require the Government to report on the effect of Clause 79 on a number of business sectors.
New clause 8—Review of effects on measures in Act of certain changes in migration levels—
‘(1) The Chancellor of the Exchequer must review the effects on the provisions of this Act of migration in each of the scenarios in subsection (2) and lay a report of that review before the House of Commons within one month of the passing of this Act.
(2) Those scenarios are that—
(a) the UK leaves the EU withdrawal transition period without a negotiated future trade agreement,
(b) the UK leaves the EU withdrawal transition period following a negotiated future trade agreement, and remains in the single market and customs union, and
(c) the UK leaves the EU withdrawal transition period following a negotiated trade agreement, and does not remain in the single market and customs union.
(3) In respect of each of those scenarios the review must consider separately the effects of—
(a) migration by EU nationals, and
(b) migration by non-EU nationals.
(4) In respect of each of those scenarios the review must consider separately the effects on the measures in each part of the United Kingdom and each region of England.
(5) In this section—
“parts of the United Kingdom” means—
(a) England,
(b) Scotland,
(c) Wales, and
(d) Northern Ireland;
and “regions of England” has the same meaning as that used by the Office for National Statistics.’
This new clause would require a Government review of the effects on measures in the Bill of certain changes in migration levels.
New clause 9—Review of effects on migration of measures in Act—
‘(1) The Chancellor of the Exchequer must review the effects on migration of the provisions of this Act in each of the scenarios in subsection (2) and lay a report of that review before the House of Commons within one month of the passing of this Act.
(2) Those scenarios are that—
(a) the UK leaves the EU withdrawal transition period without a negotiated future trade agreement
(b) the UK leaves the EU withdrawal transition period following a negotiated future trade agreement, and remains in the single market and customs union, and
(c) the UK leaves the EU withdrawal transition period following a negotiated trade agreement, and does not remain in the single market and customs union.
(3) In respect of each of those scenarios the review must consider separately the effects on—
(a) migration by EU nationals, and
(b) migration by non-EU nationals.
(4) In respect of each of those scenarios the review must consider separately the effects in each part of the United Kingdom and each region of England.
(5) In this section—
“parts of the United Kingdom” means—
(a) England,
(b) Scotland,
(c) Wales, and
(d) Northern Ireland;
and “regions of England” has the same meaning as that used by the Office for National Statistics.”
This new clause would require a Government review of the effects of the measures in the Bill on migration levels.
New clause 11—Assessment of equality impact of measures in Act—
‘(1) The Chancellor of the Exchequer must lay before the House of Commons a report assessing the effects on equalities of the provisions of this Act within 12 months of the passing of this Act.
(2) The review must make a separate assessment with respect to each of the protected characteristics set out in section 4 of the Equality Act 2010.
(3) Each assessment under (2) must report separately on the effects in in each part of the United Kingdom and each region of England.
(4) In this section—
“parts of the United Kingdom” means—
(a) England,
(b) Scotland,
(c) Wales, and
(d) Northern Ireland;
“regions of England” has the same meaning as that used by the Office for National Statistics.’
This new clause would require the Chancellor of the Exchequer to review the impact of the Bill on equalities.
New clause 15—Sectoral review of impact of Act—
‘(1) The Chancellor of the Exchequer must make an assessment of the impact of this Act on the sectors listed in (2) below and lay a report of that assessment before the House of Commons within six months of Royal Assent.
(2) The sectors to be assessed under (1) are—
(a) leisure,
(b) retail,
(c) hospitality,
(d) tourism,
(e) financial services,
(f) business services,
(g) health/life/medical services,
(h) haulage/logistics,
(i) aviation,
(j) transport,
(k) professional sport,
(l) oil and gas,
(m) universities, and
(n) fairs.’
This new clause would require the Government to report on the effect of the Bill on a number of business sectors.
New clause 16—Review of effect of Act on tax revenues—
‘(1) The Chancellor of the Exchequer must review the effects on tax revenues of the Act and lay a report of that review before the House of Commons within six months of Royal Assent.
(2) The review under (1) must contain an estimate of any change attributable to the provisions in this Act in the difference between the amount of tax required to be paid to the Commissioners and the amount paid.
(3) The estimate under (2) must report separately on taxes payable by the owners and employees of Scottish Limited Partnerships.’
This new clause would require the Chancellor of the Exchequer to review the effect on public finances, and on reducing the tax gap, of the Bill; and in particular on the taxes payable by owners and employees of Scottish Limited Partnerships.
New clause 30—Review of rates of air passenger duty—
‘(1) The provisions of section 88 shall not come into effect until the Treasury has carried out and published a review of the likely effect of changes to rates of air passenger duty on the aviation sector.
(2) The review must take into account the effects of Covid-19 on the sector.
(3) The review must be published no later than 1 October 2020.’
This new clause would require that the changes to APD in clause 88 not come into force until a review of the effect of changes to APD has been published by the Treasury.
Amendment 2, in clause 80, page 68, line 2, at end insert—
‘(3) The Chancellor of the Exchequer must review the expected effects on public health of the changes made to the Alcoholic Liquor Duties Act 1979 by this Section and lay a report of that review before the House of Commons within one year of the passing of this Act.’
This amendment would require the Government to review the impact of the proposed changes to alcohol liquor duties on public health.
Amendment 3, in clause 81, page 68, line 21, at end insert—
‘(3) The Chancellor of the Exchequer must review the expected effects on public health of the changes made to the TPDA 1979 by this Section and lay a report of that review before the House of Commons within one year of the passing of this Act.’
This amendment would require the Government to review the expected impact of the revised rates of duty on tobacco products on public health.
Amendment 4, in clause 86, page 73, line 20, after “supplies” insert “, including human breastmilk”
This amendment would ensure that vehicles carrying human breastmilk would benefit from the exemption from Vehicle Excise Duty.
Amendment 5, page 77, line 10, leave out Clause 95
Amendment 6, in clause 95, page 77, line 14, at end insert—
‘(2) The Government must lay before the House of Commons by 9 September 2020 a statement of the conditions under which it would consider it appropriate to vary rates of import duty under this Section.’
This amendment would require the Government to state the conditions under which it would consider it appropriate to vary rates of import duty in an international trade dispute.
Amendment 7, page 77, line 14, at end insert—
‘(2) No regulations under this section may be made unless a draft has been laid before and approved by a resolution of the House of Commons.’
This amendment would require the Government to seek the approval of the House before making regulations varying rates of import duty in an international trade dispute.
Amendment 8, page 77, line 14, at end insert—
‘(2) The Chancellor of the Exchequer must, no later than a month before any exercise of the power in subsection (1), lay before the House of Commons a report containing the following—
(a) an assessment of the fiscal and economic effects of the exercise of the powers in subsection (1);
(b) a comparison of those fiscal and economic effects with the effects of the UK being within the EU Customs Union;
(c) an assessment any differences in the exercise of those powers in respect of—
(i) England,
(ii) Scotland,
(iii) Wales, and
(iv) Northern Ireland; and
(d) an assessment of any differential effects in relation to the matters specified in paragraphs (a) and (b) between—
(i) England,
(ii) Scotland,
(iii) Wales, and
(iv) Northern Ireland.’
This would require a review of the economic and fiscal impact of the use of the powers in clause 95 including comparing those effects with EU Customs Union membership.
Amendment 9, in clause 96, page 77, line 26, after “tax” insert
‘which is due at the relevant date from the debtor and which became due in the 12 months immediately preceding that date, and/’
This amendment seeks to limit the extent of HMRC’s status as a preferential creditor in insolvencies by preventing the policy from being applied retrospectively and by limiting that preference to only those taxes which became due in the 12 months before the relevant date as given in the Bill (1st December 2020).
Amendment 10, page 77, line 27, after “deduction”, insert
‘from a payment made by the debtor in the period of 12 months immediately preceding the relevant date.’
This amendment seeks to limit the extent of HMRC’s status as a preferential creditor in insolvencies by preventing the policy from being applied retrospectively and by limiting that preference to only those taxes which became due in the 12 months before the relevant date as given in the Bill (1st December 2020).
Amendment 11, page 78, line 11, after “tax”, insert
‘which is due at the relevant date from the debtor and which became due in the 12 months immediately preceding that date, and/’
This amendment seeks to limit the extent of HMRC’s status as a preferential creditor in insolvencies by preventing the policy from being applied retrospectively and by limiting that preference to only those taxes which became due in the 12 months before the relevant date as given in the Bill (1st December 2020).
Amendment 12, page 78, line 12, after “deduction”, insert
‘from a payment made by the debtor in the period of 12 months immediately preceding the relevant date.’
This amendment seeks to limit the extent of HMRC’s status as a preferential creditor in insolvencies by preventing the policy from being applied retrospectively and by limiting that preference to only those taxes which became due in the 12 months before the relevant date as given in the Bill (1st December 2020).
Amendment 13, page 78, line 35, after “tax”, insert
‘which is due at the relevant date from the debtor and which became due in the 12 months immediately preceding that date, and/’
This amendment seeks to limit the extent of HMRC’s status as a preferential creditor in insolvencies by preventing the policy from being applied retrospectively and by limiting that preference to only those taxes which became due in the 12 months before the relevant date as given in the Bill (1st December 2020).
Amendment 14, page 78, line 36, after “deduction”, insert
‘from a payment made by the debtor in the period of 12 months immediately preceding the relevant date.’
This amendment seeks to limit the extent of HMRC’s status as a preferential creditor in insolvencies by preventing the policy from being applied retrospectively and by limiting that preference to only those taxes which became due in the 12 months before the relevant date as given in the Bill (1st December 2020).
Amendment 15, page 79, line 10, at end insert—
‘(8) The amendments made by this section do not apply to any debt secured by a floating charge in respect of monies were advanced to the debtor before 1 December 2020.’
This amendment seeks to limit the extent of HMRC’s status as a preferential creditor in insolvencies by preventing the policy from being applied retrospectively and by limiting that preference to only those taxes which became due in the 12 months before the relevant date as given in the Bill (1st December 2020).
Jesse Norman
The Government have tabled eight new clauses to the Bill, the majority of which are in response to the covid-19 pandemic. I would like to start by offering Members an explanation for why these new clauses are being brought forward on Report. The Government have been working very hard to combat the pandemic, as the House will know, and these measures are just a small part of a much more extensive and wide-ranging response. I am sure that colleagues across the House will appreciate that Ministers and civil servants have been working in extraordinary circumstances in the past three months. As I often do, I again pay great tribute to officials at the Treasury and Her Majesty’s Revenue and Customs. Without their work, it would not have been possible to deliver many, if any, of these aspects of this extremely comprehensive response, let alone in such a rapid timeframe as, for example, with the coronavirus job retention scheme.
We have brought forward these new clauses at the earliest possible opportunity, and for technical reasons, it is on Report. We have also been slightly limited by the fact that to table each new clause requires a new Ways and Means resolution to be agreed by the House. Report was the first amendable stage of the Bill to take place after the Government had been able to agree the necessary Ways and Means resolution on the Floor of the House. I hope the House will agree that there is a clear need for each of these new clauses to stand part of the Bill.
I will touch on each new clause briefly. New clause 19 seeks to do two things. First, it confirms that grants made under covid-related schemes—for example, the furlough scheme, the self-employment scheme, the small business grant fund, the retail, hospitality and leisure grant fund, the local authority discretionary grant fund and schemes corresponding to those grants within the devolved Administrations—are subject to tax. The new clause also includes a delegated power to add or remove further grant schemes through a statutory instrument, which provides sensible flexibility, so that the Government can continue to support the economy in their response to the pandemic.
The second part of the new clause ensures that HMRC has appropriate and proportionate compliance and enforcement powers in relation to the furlough scheme and the self-employment income support scheme. To ensure that taxpayer money is going only to those who are eligible, the new clause gives HMRC powers to recover overpayments and to impose penalties where there is deliberate non-compliance. HMRC has given a clear undertaking that these powers will not be used to penalise taxpayers who may be going through difficult times but make honest mistakes in their applications. As previously stated, the powers are designed to be proportionate, and they balance the fact that we are in unprecedented and uncertain times with the need to ensure that HMRC has sufficient powers to enforce the schemes according to eligibility criteria set out and to protect the Exchequer.
New clause 20 seeks to mitigate potential pensions impacts for those with a protected pension age returning to work to help in the battle against the pandemic. Its purpose is to provide certainty for those people by temporarily suspending rules that would otherwise see the pension income of recently retired people reduced if they were to return to work in crucial workforces at this important time. These retirees have been and will remain critical to the Government’s response to covid, and this new clause temporarily removes restrictions that might impede a flexible response.
New clause 21 temporarily relaxes the statutory residence test so that highly-skilled individuals from across the world are not discouraged from coming to the UK and helping this country to respond to the unprecedented health emergency. The actions and presence of normally non-resident individuals in the UK could have inadvertently affected their tax residence status. The measure is to be restricted, however, to ensure that it applies only between 1 March and 1 June 2020 for time spent in the UK by individuals who worked specifically on coronavirus disease-related activities in specified sectors. That time will not count towards the residence test.
Jesse Norman
I am grateful to the hon. Gentleman for his question. As the House will be aware, HMRC is often responsive and generally extremely responsive to such issues. I will happily look at any correspondence he wants to send me, and I will ensure that there is a properly engaged response to the extent that my limited powers over HMRC permit me. I hope that will be effective.
New clause 23 enables the Treasury to specify in an order made under section 135 of the Finance Act 2008 which payments of tax and other liabilities will not attract late payment interest or surcharge as a result of being deferred by agreement during a period of national disaster or emergency. It also enables the Treasury to set specific relief periods for different deferred taxes or liabilities. As the House will know, the Government have announced an unprecedented package of economic support for businesses and individuals affected by covid. The new clause ensures that late payment interest that would normally accrue automatically where tax is paid late does not apply, supporting taxpayers further and in ways in which I am sure the whole House will support. The payment deferral for VAT that we have announced provides taxpayers with a much-needed cash flow boost. HMRC is using its existing powers as set out in the Commissioners for Revenue and Customs Act 2005 to defer those payments of tax.
New clause 24 allows a refund of the additional 3% higher rate of stamp duty where exceptional circumstances prevented the sale of the previous main residence in the three-year window within which a sale must ordinarily take place. The new clause applies to those whose refund window ended on or after 1 January 2020. It is to ensure that responsible actions taken by people do not lead to negative tax implications and that those who would otherwise have received a stamp duty land tax refund are still able to receive it, despite the pandemic.
New clause 25 suspends the heavy goods vehicle road user levy for a period of 12 months, cutting fixed operational costs to the logistics and haulage industries as the economy begins to recover from the pandemic. These industries support many other industries, and temporarily easing their financial burden will support the haulage sector, reducing fixed costs as the economy recovers over time.
I turn finally to new clause 32, which makes minor changes to the existing enterprise management incentives legislation, introducing a time-limited exception to the disqualifying event rule so that EMI option holders who can no longer meet the EMI working time requirement due only to the pandemic are not forced to forfeit their options or to exercise them earlier than planned. This has the effect of protecting employees furloughed under the coronavirus job retention scheme or who have taken unpaid leave and had their working hours reduced. The measure means that affected employees will not forfeit their options or be forced to exercise them within the statutory 90 days normally required.
Since the point of EMI schemes is to help high-growth small and medium-sized enterprises recruit and retain skilled employees by giving them tax-advantaged share options, I am sure the House will understand that the measure supports a very important sector that is also likely to be important to our recovery. The changes will be effective from 19 March to ensure that employees who were furloughed or had to reduce their hours do not lose out. I hope the House will accept the need for the new clauses in these highly uncertain and unusual times. I commend them to the House.
Wes Streeting (Ilford North) (Lab)
I thank the Financial Secretary for making the case for the Government’s new clauses this afternoon. Throughout the coronavirus pandemic, the Labour party has made clear as the official Opposition that we seek to work constructively with the Government in response to this unprecedented public health crisis which, as we have seen, has brought about an economic crisis to follow it. In that spirit, and to ensure the smooth passage of legislation, we have helped to expedite the progressive measures taken by the Government, and this afternoon will be no exception.
I wish to speak to new clause 29, which has been tabled in the name of my hon. Friend the Member for Oxford East (Anneliese Dodds), the shadow Chancellor, and other hon. and right hon. colleagues. Yesterday afternoon, I addressed the Government’s poverty of ambition on climate change. This afternoon, I want to address their poverty of ambition on tackling poverty itself.
The Conservative party has now been in government either alone or in coalition for a decade. Over the past 10 years, their record on poverty in this country and on tackling poverty in this country has been absolutely lamentable. According to the Government’s own Social Mobility Commission, 600,000 more children are now living in relative poverty than in 2012, and that is projected to increase further due to benefit changes and the obvious economic impact of covid-19. As of 20 February this year, some 14 million people were in poverty, according to the Joseph Rowntree Foundation, including 2 million pensioners and 4 million children. We know that the impacts of poverty are felt disproportion- ately among different communities. Children from black and minority ethnic groups, for example, are more likely to be in poverty, with 45% of BAME children living in poverty, as compared with 26% of children in white British families.
We believe that the Government are failing on something that should be the most basic of priorities for any Government. That is not just our view as the Opposition party; the Government’s own Social Mobility Commission has said:
“The government should be more proactive in addressing poverty overall.”
It is worth bearing in mind that behind every statistic is a child, and 30 years ago I was one of those children in the child poverty statistics, growing up on a council estate in London’s east end, sandwiched between the bright lights of the City of London and the glistening lights of what was then the blossoming London Docklands Development Corporation land, which has become Canary Wharf. Today, they are two global financial centres at the centre of our global city. In between is a vista of poverty that was bad then and remains bad now.
One of the things I find most frustrating about the experience I had growing up in a council flat in the east end in the 1980s is that I look back, and I think about the conditions of the council flat I lived in and the embarrassment of not wanting to bring friends home from school because the conditions were not ones that we were proud of. It was a source of shame and embarrassment. I think about the experience of relying on free school meals, and the stigma that arises from having to collect a dinner ticket while other children go and pay for their food quickly—and get the best food, I hasten to add, while handing over their cash. I think about the difficulties my mum had as a single mum, balancing the challenge of bringing up a child while relying on the benefits system, and having to make compromises in choosing how she spent the family budget: the choice between putting food in the fridge or some extra money in the electricity meter.
One of the things that makes me most angry is that, when I think about my experience, which I thought was bad in the 1980s, and compare it with that of children growing up in the same circumstances today, as seen in my own constituency casework, things have got worse for children in the decades following my childhood, when things ought to be getting better. Whereas I had the stability of a council flat—albeit not a nice one—and a roof over my head, children in my constituency today, and no doubt in those of so many others across the Chamber, are growing up in temporary bed-and-breakfast accommodation, being moved from pillar to post and living in substandard accommodation, with disruptive consequences for their education and their schooling, and the inability for them to form lasting friendships and for their families to build supportive networks and family relationships.
When I think about the enormous strides that were made, particularly by the last Labour Government, in tackling educational disadvantage, I think it is outrageous that, in this country in the 21st century, children still today arrive at school at the age of five with their life chances already limited and in many cases predetermined, because we failed to get early years right. Sure Start centres have closed, and the support for families is no longer there. As a result, children arrive at school, at five, less prepared than their peers from more affluent backgrounds. It makes me angry that, for all the difference made to my education through programmes under the last Labour Government and the impact they have had on children since—the London Challenge and Excellence in Cities—today children are leaving school at 16 at a time when the attainment gap between children from the most advantaged backgrounds and the least advantaged backgrounds is actually widening, and where the further education system in which many working-class young people go on to study has been described by the Government’s own Social Mobility Commission as “undervalued and underfunded”. This is at a time when the changing nature of our economy and the changing nature of the world of work make post-16 adult education delivered in further education settings more important, not less. We should be making progress, but we are in reverse gear.
Jesse Norman
the hon. Gentleman is making a powerful speech, but he did not say whether the Blair Government hit their target of halving child poverty by 2010. Did they or not?
Wes Streeting
I am delighted that the Minister asked that question, because I am about to lay out, in full, the record of the previous Labour Government. According to the London School of Economics and its Centre for Analysis of Social Exclusion, by the end of the new Labour Government’s period in office, child poverty and pensioner poverty had fallen considerably, in circumstances where child poverty would have risen without those reforms, and pensioner poverty would have fallen less far. In terms of absolute poverty, child poverty fell by more than 2 million from 1997-98 to 2009-10, and pensioner poverty fell by almost 3 million in the same period. In terms of relative poverty, child poverty fell by 800,000 between 1997-98 and 2009-10, and the number of pensioners in relative poverty fell by more than 1 million in the same period.
That Labour Government oversaw an £18 billion annual increase in spending on social security for families with children, as well as an £11 billion rise in payments for pensioners by 2010. Those rises were supported by other anti-poverty policies, including Sure Start, the national minimum wage, increased childcare support, and increases in education spending, which rose from £56 billion in 1996-97, to £103 billion in 2009-10—a real-terms increase of 83%. The last Labour Government pretty much eradicated homelessness and made ending insecure housing a priority, reducing the number of households in priority need of housing from 135,000 in 2003-04 to just 40,000 in 2009. They pursued the decent homes standard to boot, ensuring that children were growing up in far better conditions than I did. That is a record to be proud of—a record of a Government who got their priorities right.
It took a celebrity footballer to get this Government to do the right thing on something as basic as ensuring that children who would otherwise have gone hungry were fed this summer. It is not just that the Government do not have their head in the right place; they do not have their heart in the right place either. Unfortunately, we cannot rely on Marcus Rashford being on speed dial to get the Prime Minister to do the right thing on every occasion, and we cannot rely on the Chancellor to do the right thing on every occasion either. That is why it is important, as we have laid out in new clause 29, that we ensure that what counts is what is measured.
New clause 29 would require the Chancellor to conduct a review of the impact of this Bill—no doubt, very soon, this Act—on poverty in the United Kingdom. As with the Government’s environmental ambitions, I doubt that this Bill will move the dial on poverty much, if at all.
The Government’s own Social Mobility Commission has asked for the Office for Budget Responsibility to conduct assessments of all the fiscal statements that it usually does, but this time to look at child poverty and anti-poverty measures in particular. I urge Ministers to look carefully at this issue again. We raised it in Committee and were not successful in persuading the Minister of the case then, but I hope that we can persuade him of the case now. If Treasury Ministers and officials know that the OBR will be looking at those numbers in the same way that it does the other numbers in its assessments of Government fiscal events, perhaps it will concentrate the minds of people in the Treasury to get their priorities right.
Next week, the Chancellor will be coming before the House to deliver an economic update. After the Prime Minister’s statement this week, I think he needs to do a lot better than his apparent boss did when making a speech that was trailed as a new deal. It was not a new deal. Its ambitions were modest and much of the content was re-announcement. It certainly was not a green new deal. Perhaps when the Chancellor here next week, he can do the opposite of the Prime Minister. The Prime Minister over-promised and under-delivered. Given the way in which the economic update has been trailed, perhaps the Chancellor can under-promise and over-deliver next week, because he has a golden opportunity in the wake of this crisis to think seriously and substantially about the way in which our economy works and whose interests it serves.
I hope that when he comes forward next week, he does so with the full Budget that the shadow Chancellor has called for—a back-to-work Budget that is focused on jobs, jobs, jobs, that can actually tackle the gross inequalities and injustices of our society, and that puts us back on track to eradicate child poverty within a generation and to eradicate poverty for everyone because, for all the challenges of the last decade and all the challenges that we are living through now, this remains one of the wealthiest countries in the world.
This also happens to be a great country that is full of opportunities for so many people—in education, industry, arts, science and imagination—but those opportunities are not available to everyone. That should keep Ministers awake at night. It keeps me awake at night. But having listened to our Prime Minister only weeks ago in this Chamber, when it comes to tackling child poverty in this country, I do wonder whether his heart is really in it at all.
Jesse Norman
As is customary at the conclusion of Report stage, I will speak to the issues that have been raised, rather than the full content of the Bill. Let me start by saying how much I enjoyed the splendidly generous and warm speech by my great and hon. Friend the Member for Workington (Mark Jenkinson). As Members across the House noted, Workington will have a fine voice in the Chamber for many years to come. I was impressed by his ability to smuggle some Cumbrian dialect into the Chamber—I do not know whether it counts as a foreign language, but it was certainly unintelligible to me, which may be true for other colleagues. I take my hat off not only to Mr Harris for identifying his prime ministerial potential but to my hon. Friend for his robust sense of self-confidence. Colleagues normally play down their prime ministerial potential early in their political careers, and I admire his chutzpah, to use a different piece of dialect, in bringing our attention to that. He also acknowledged his predecessor’s capacity to align himself with the Opposition rather than the Whip; I am grateful to him for that. He made some valuable points, and I congratulate him on his maiden speech.
Labour’s new clause 29 and the SNP’s new clause 10 would require the Chancellor to review the impact of provisions in the Bill on child poverty and total poverty and to lay a report before Parliament within six months of Royal Assent. We were treated to a moving and personal speech from the hon. Member for Ilford North (Wes Streeting). I congratulate him on his achievement in getting to Cambridge University on the back of that personal experience. Of course, he is right to focus on the importance of combating educational disadvantage—a cause that every Member of the House believes in. I found it surprising that he did not go on to acknowledge the achievement of this Government in raising the number of good or outstanding schools from 68% in 2010 to 86% today, or the fact that the proportion of 18-year-olds from disadvantaged backgrounds going to university went from only 13% in 2009-10 to 21% in 2019.
The hon. Member talked about pensioner poverty but neglected to mention that there are 100,000 fewer pensioners in poverty now than there were in 2010. He talked about jobs but without acknowledging that, at least until the pandemic, which has struck us all and will have had unfathomable effects, as we know, 3.9 million more people were in employment. Specifically, the employment of the poorest 20% was 9% higher under this Government than in 2009-10.
The hon. Member was right to say that the tragedy of an economic crisis is that it hits the least well off the hardest, and that is precisely the inheritance that this Government’s predecessors left to us in 2009-10. As I never cease to remind the House, the financial crisis of 2007-08 was brought about because bank leverage was allowed to rise from 20 times, where it had been for the previous 40 years, to 50 times in seven years under the Blair Government. If hon. Members do not believe me, they can look at the independent report on banking published under Professor Vickers.
I should, however, return to new clauses 29 and 10, some of which are not necessary because the information they seek is largely already in the public domain, including on the distributional effect of tax, welfare and spending policies, on the equalities impacts of tax measures and on poverty rates.
I thank my hon. Friend the Member for Altrincham and Sale West (Sir Graham Brady) for his probing new clause 30. I admire his range of references. I thought he was going to reference Stephen Colbert, the American talk show host, but tragically it was Jean-Baptiste Colbert, who produced the line about plucking the feathers from the goose. He is absolutely right. No one would describe him as a hisser, but we do pay careful attention to the points he has made, and I am very grateful to him for raising them. I would also single out my hon. Friend the Member for Arundel and South Downs (Andrew Griffith), who rightly pointed out that the configuration between APD and the environmental performance of flights is a very blunt relationship indeed, so I thank him for that.
Colleagues across the House will know that new clause 30 would ask the Treasury to review the effect of proposed rate changes on APD. We are working closely with the sector and are closely attuned to its concerns in the face of the pandemic, and of course we have paid close attention to the points my hon. Friend raised. I am sure colleagues will be aware that, even as it is, the current rate will only take effect in April 2021 and will rise by only £2 for a long-haul economy flight, which is the cost of a rather inexpensive coffee at airport prices. It may not be quite as urgent, but the point about the wider need to look at this is well made.
I turn quickly to amendment 4, which seeks to extend the exemption from vehicle excise duty for medical courier charities in clause 86 explicitly to include vehicles carrying human breast milk. The hon. Member for Glasgow Central (Alison Thewliss) will know that this amendment is not necessary because the clause already provides for the transportation of human breast milk. The purpose-built vehicles used by the medical courier charities, which are exempt from VED, do not merely transport blood; they transport a wide range of medical product, including X-rays, MRA scans, plasma and human breast milk.
There are many other things I could say in response to other comments, but I will leave it there.
Question put and agreed to.
New clause 19 accordingly read a Second time, and added to the Bill.
New Clause 20
Protected pension age of members re-employed as a result of coronavirus
“(1) In FA 2004, in Schedule 36 (pension schemes etc), paragraph 22 (rights to take benefit before normal minimum pension age) is amended as follows.
(2) In sub-paragraph (7F), at the end of paragraph (b) insert “, and
(c) that the member is or was employed as mentioned in sub-paragraph (7B)(a) where—
(i) the employment began at any time during the coronavirus period, and
(ii) the only or main reason that the member was taken into employment was to help the employer to respond to the public health, social, economic or other effects of coronavirus.”
(3) After sub-paragraph (7J) insert—
“(7K) In sub-paragraph (7F)(c)—
“coronavirus” has the same meaning as in the Coronavirus Act 2020 (see section 1(1) of that Act);
“the coronavirus period” means the period beginning with 1 March 2020 and ending with 1 November 2020.
(7L) The Treasury may by regulations amend the definition of “the coronavirus period” in sub-paragraph (7K) so as to replace the later of the dates specified in it with another date falling before 6 April 2021.
(7M) The power in sub-paragraph (7L) may be exercised on more than one occasion.”
(4) The amendments made by this section are treated as having come into force on 1 March 2020.”—(Jesse Norman.)
In certain circumstances, people who have a protected pension age under a pension scheme (i.e. a right to receive pension benefits at an age below the normal minimum pension age) can lose it on being re-employed. This new clause prevents that happening for people re-employed as part of the response to coronavirus.
Brought up, read the First and Second time, and added to the Bill.
New Clause 21
Modifications of the statutory residence test in connection with coronavirus
“(1) This section applies for the purposes of determining—
(a) whether an individual was or was not resident in the United Kingdom for the tax year 2019-20 for the purposes of relevant tax, and
(b) if an individual was not so resident in the United Kingdom for the tax year 2019-20 (including as a result of this section), whether the individual was or was not resident in the United Kingdom for the tax year 2020-21 for the purposes of relevant tax.
“Relevant tax” has the meaning given by paragraph 1(4) of Schedule 45 to FA 2013 (statutory residence test).
(2) That Schedule is modified in accordance with subsections (5) to (13).
(3) Paragraph 8 (second automatic UK test: days at overseas homes) has effect as if after sub-paragraph (5) there were inserted—
“(5A) For the purposes of sub-paragraphs (1)(b) and (4), a day does not count as a day when P is present at a home of P’s in the UK if it is a day that would fall within the third case in paragraph 22(7) (if P were present in the UK at the end of it).”
(4) Paragraph 22 (key concepts: days spent) has effect as if—
(a) in sub-paragraph (2), for “two cases” there were substituted “three cases”;
(b) after sub-paragraph (6) there were inserted—
“(7) The third case is where—
(a) that day falls within the period beginning with 1 March 2020 and ending with 1 June 2020,
(b) on that day P is present in the UK for an applicable reason related to coronavirus disease, and
(c) in the tax year in question, P is resident in a territory outside the UK (“the overseas territory”).
(8) The following are applicable reasons related to coronavirus disease—
(a) that P is present in the UK as a medical or healthcare professional for purposes connected with the detection, treatment or prevention of coronavirus disease;
(b) that P is present in the UK for purposes connected with the development or production of medicinal products (including vaccines), devices, equipment or facilities related to the detection, treatment or prevention of coronavirus disease.
(9) For the purposes of paragraph (7)(c), P is resident in an overseas territory in the tax year in question if P is considered for tax purposes to be a resident of that territory in accordance with the laws of that territory.
(10) The Treasury may by regulations made by statutory instrument—
(a) amend sub-paragraph (7)(a) so as to replace the later of the dates specified in it with another date falling before 6 April 2021;
(b) amend this paragraph so as to add one or more applicable reasons related to coronavirus disease.
(11) The powers under sub-paragraph (10) may be exercised on more than one occasion.
(12) A statutory instrument containing regulations under sub-paragraph (10) is subject to annulment in pursuance of a resolution of the House of Commons.”
(5) Paragraph 23 (key concepts: days spent and the deeming rule) has effect as if after sub-paragraph (5) there were inserted—
“(5A) For the purposes of sub-paragraph (3)(b) and (4), a day does not count as a qualifying day if it is a day that would fall within the third case in paragraph 22(7) (if P were present in the UK at the end of it).”
(6) Paragraph 28(2) (rules for calculating the reference period) has effect as if—
(a) in paragraph (b) the “and” at the end were omitted;
(b) after paragraph (b) there were inserted—
“(ba) absences from work at times during the period specified in an emergency volunteering certificate issued to P under Schedule 7 to the Coronavirus Act 2020 (emergency volunteering leave), and”;
(c) in paragraph (c), for “or (b)” there were substituted “, (b) or (ba)”.
(7) Paragraph 29 (significant breaks from UK or overseas work) has effect as if in sub-paragraphs (1)(b) and (2)(b), for “or parenting leave” there were substituted “, parenting leave or emergency volunteering leave under Schedule 7 to the Coronavirus Act 2020”.
(8) Paragraph 32 (family tie) has effect as if after sub-paragraph (4) there were inserted—
“(4A) But a day does not count as a day on which P sees the child if the day on which P sees the child would be a day falling within the third case in paragraph 22(7) (if P were present in the UK at the end of it).”
(9) Paragraph 34 (accommodation tie) has effect as if after sub-paragraph (1) there were inserted—
“(1A) For the purposes of sub-paragraph (1)—
(a) if the place is available to P on a day that would fall within the third case in paragraph 22(7) (if P were present in the UK at the end of that day), that day is to be disregarded for the purposes of sub-paragraph (b), and
(b) a night spent by P at the place immediately before or after a day that would fall within the third case in paragraph 22(7) (if P were present in the UK at the end of that day) is to be disregarded for the purposes of sub-paragraph (c).”
(10) Paragraph 35 (work tie) has effect as if after sub-paragraph (2) there were inserted—
“(3) But a day that would fall within the third case in paragraph 22(7) (if P were present in the UK at the end of it) does not count as a day on which P works in the UK.”
(11) Paragraph 37 (90-day tie) has effect as if—
(a) the existing text were sub-paragraph (1);
(b) after that sub-paragraph, there were inserted—
“(2) For the purposes of sub-paragraph (1), a day that would fall within the third case in paragraph 22(7) (if P were present in the UK at the end of it) does not count as a day P has spent in the UK in the year in question.”
(12) Paragraph 38 (country tie) has effect as if after sub-paragraph (3) there were inserted—
“(4) For the purposes of sub-paragraph (3), P is to be treated as not being present in the UK at the end of a day that would fall within the third case in paragraph 22(7) (if P were present in the UK at the end of that day).”
(13) Paragraph 145 (interpretation) has effect as if at the appropriate place there were inserted—
““coronavirus disease” has the same meaning as in the Coronavirus Act 2020 (see section 1(1) of that Act);”.”—(Jesse Norman.)
This new clause modifies the statutory residence test in Schedule 45 to the Finance Act 2013 so that the presence of certain individuals in the UK for purposes connected with coronavirus is discounted for the purposes of determining whether they are resident in the UK in the tax years 2019-20 and 2020-21.
Brought up, read the First and Second time, and added to the Bill.
New Clause 22
Future Fund: EIS and SEIS relief
“(1) This section applies if an individual to whom shares in a company have been issued—
(a) enters into a convertible loan agreement with the company under the Future Fund on or after 20 May 2020, and
(b) subsequently receives value from the company under the terms of the agreement.
(2) If, as a result of the receipt of value, any EIS relief attributable to shares issued before the relevant time would (apart from this subsection) be withdrawn or reduced under section 213 of ITA 2007, the value received is to be ignored for the purposes of that section.
(3) If, as a result of the receipt of value, any SEIS relief attributable to shares issued before the relevant time would (apart from this subsection) be withdrawn or reduced under section 257FE of ITA 2007, the value received is to be ignored for the purposes of that section.
(4) If, as a result of the receipt of value, shares issued before the relevant time would (apart from this subsection) cease to be eligible shares by reason of paragraph 13(1)(b) of Schedule 5B to TCGA 1992, the value received is to be ignored for the purposes of that paragraph.
(5) In this section—
“the Future Fund” means the scheme of that name operated from 20 May 2020 by the British Business Bank plc on behalf of the Secretary of State;
“the relevant time” means the time when the individual enters into the convertible loan agreement.”—(Jesse Norman.)
This new clause prevents EIS and SEIS relief from being withdrawn or reduced for the purposes of income tax and capital gains tax in cases where an individual enters into a convertible loan agreement under the Future Fund with a company and subsequently receives value from the company under the agreement.
Brought up, read the First and Second time, and added to the Bill.
New Clause 23
Interest on unpaid tax in case of disaster etc of national significance
“(1) Section 135 of FA 2008 (interest on unpaid tax in case of disaster etc of national significance) is amended as follows.
(2) In subsection (2), for the words from “arising” to the end substitute “that—
(d) arises under or by virtue of an enactment or a contract settlement, and
(e) is of a description (if any) specified in the order.”
(3) In subsection (4)—
(a) after “relief period” insert “, in relation to a deferred amount,”;
(b) in paragraph (b), after “revoked” insert “or amended so that it ceases to have effect in relation to the deferred amount”.
(4) In subsection (10)—
(a) at the end of paragraph (a), omit “and”;
(b) at the end of paragraph (b) insert “, and
(c) may specify different dates in relation to liabilities of different descriptions.”
(5) The amendments made by this section have effect from 20 March 2020.”—(Jesse Norman.)
This new clause amends section 135 of the Finance Act 2008 to enable the Treasury to specify in an order under that section which payments of tax and other liabilities that are deferred by agreement during a period of national disaster or emergency will not attract interest or surcharges.
Brought up, read the First and Second time, and added to the Bill.
New Clause 24
Exceptional circumstances preventing disposal of interest in three year period
“(1) In FA 2003, Schedule 4ZA (stamp duty land tax: higher rates for additional dwellings etc) is amended as follows.
(2) In paragraph 3 (single dwelling transactions)—
(a) in sub-paragraph (7)(b) for “the period of three years beginning with the day after the effective date of the transaction concerned” substitute “a permitted period”;
(b) after sub-paragraph (7) insert—
“(7A) For the purposes of sub-paragraph (7)(b), the permitted periods are—
(a) the period of three years beginning with the day after the effective date of the transaction concerned, or
(b) if HMRC are satisfied that the purchaser or the purchaser’s spouse or civil partner would have disposed of the major interest in the sold dwelling within that three year period but was prevented from doing so by exceptional circumstances that could not reasonably have been foreseen, such longer period as HMRC may allow in response to an application made in accordance with sub-paragraph (7B).
(7B) An application for the purposes of sub-paragraph (7A)(b) must—
(a) be made within the period of 12 months beginning with the effective date of the transaction disposing of the major interest in the sold dwelling, and
(b) be made in such form and manner, and contain such information, as may be specified by HMRC.
(7C) Schedule 11A (claims not included in returns) does not apply in relation to an application made in accordance with sub-paragraph (7B).”
(3) In paragraph 8 (further provision in connection with paragraph 3(6) and (7))—
(a) in sub-paragraph (3), after “paragraph 3(7)” insert “by virtue of paragraph 3(7A)(a)”;
(b) in sub-paragraph (4), after “paragraph 3(7)” insert “by virtue of paragraph 3(7A)(a)”;
(c) after sub-paragraph (4) insert—
“(5) Where HMRC grant an application made in accordance with paragraph 3(7B)—
(a) the land transaction return in respect of the transaction concerned is treated as having been amended to take account of the application of paragraph 3(7) by virtue of paragraph 3(7A)(b), and
(b) HMRC must notify the purchaser accordingly.”
(4) The amendments made by this section have effect in a case where the effective date of the transaction concerned is on or after 1 January 2017.”—(Jesse Norman.)
This new clause amends Schedule 4ZA to the Finance Act 2003 to provide that where a person purchases a dwelling intending it to be their only or main residence, the three-year period within which a major interest in the previous dwelling must be disposed of to be able to obtain a refund of the higher rate stamp duty land tax may be extended to a longer period if, because of exceptional circumstances, the interest was not disposed of in that three-year period.
Brought up, read the First and Second time, and added to the Bill.
New Clause 25
HGV road user levy
“(1) Section 5(2) of the HGV Road User Levy Act 2013 (HGV road user levy charged for all periods for which a UK heavy goods vehicle is charged to vehicle excise duty) does not apply where the period for which a UK heavy goods vehicle is charged to vehicle excise duty is a period that begins in the exempt period.
(2) Section 6(2) of the 2013 Act (HGV road user levy charged in respect of non-UK heavy goods vehicle for each day on which the vehicle is used or kept on a road to which the Act applies) does not apply in respect of any day in the exempt period.
(3) The exempt period is the period of 12 months beginning with 1 August 2020.
(4) Section 7 of the 2013 Act (rebate of levy) has effect as if, after subsection (2A), there were inserted—
“(2B) A rebate entitlement also arises where HGV road user levy has been paid in respect of a non-UK heavy goods vehicle in accordance with section 6(2) in respect of any part of the exempt period within the meaning of section (HGV road user levy)(3) of the Finance Act 2020.””—(Jesse Norman.)
This new clause provides that HGV road user levy is not chargeable in respect of the period of 12 months beginning with 1 August 2020. It provides that where the levy has been paid in respect of a non-UK heavy goods vehicle in respect of the exempt period a rebate can be claimed (no equivalent provision being required for UK heavy goods vehicles which will benefit from the exemption in respect of any period for which the levy would otherwise be paid that begins during the exempt period).
Brought up, read the First and Second time, and added to the Bill.
New Clause 32
Enterprise management incentives: disqualifying events
“(1) The modifications made by this section apply for the purposes of determining whether a disqualifying event occurs or is treated as occurring in relation to an employee in accordance with section 535 of ITEPA 2003 (enterprise management incentives: disqualifying events relating to employee).
(2) Paragraph 26 of Schedule 5 to ITEPA 2003 (requirement as to commitment of working time) has effect as if, in sub-paragraph (3)—
(a) the “or” at the end of paragraph (c) were omitted, and
(b) at the end of paragraph (d), there were inserted “, or
(e) not being required to work for reasons connected with coronavirus disease (within the meaning given by section 1(1) of the Coronavirus Act 2020).”
(3) Paragraph 27 of that Schedule (meaning of “working time”) has effect as if, in sub-paragraph (1)(b), for “(d)” there were substituted “(e)”.
(4) Section 535 of ITEPA 2003 has effect as if, in the closing words of subsection (3), for “(d)” there were substituted “(e)”.
(5) The modifications made by this section have effect in relation to the period—
(a) beginning with 19 March 2020, and
(b) ending with 5 April 2021.
(6) The Treasury may by regulations made in the tax year 2020-21 amend subsection (5)(b) by replacing “2021” with “2022”.”—(Jesse Norman.)
This new clause provides that a disqualifying event does not occur in relation to an individual as regards enterprise management incentives as a result of the individual taking leave, being furloughed or working reduced hours because of coronavirus disease.
Brought up, read the First and Second time, and added to the Bill.
New Schedule 1
Taxation of coronavirus support payments
Accounting for coronavirus support payments referable to a business
1 (1) This paragraph applies if a person carrying on, or who carried on, a business (whether alone or in partnership) receives a coronavirus support payment that is referable to the business.
(2) So much of the coronavirus support payment as is referable to the business is a receipt of a revenue nature for income tax or corporation tax purposes and is to be brought into account in calculating the profits of that business—
(a) under the applicable provisions of the Income Tax Acts, or
(b) under the applicable provisions of the Corporation Tax Acts.
(3) Subject to paragraph 2(5), sub-paragraph (2) does not apply to an amount of a coronavirus support payment if—
(a) the business to which the amount is referable is no longer carried on by the recipient of the amount, and
(b) the amount is not referable to activities of the business undertaken at a time when it was being carried on by the recipient of the amount.
(4) If an amount of the coronavirus support payment is referable to more than one business or business activity, the amount is to be allocated between those businesses or activities on a just and reasonable basis.
(5) Paragraph 3 contains provision about when, in certain cases, an amount of a coronavirus support payment is, or is not, referable to a business for the purposes of this paragraph and paragraph 2.
(6) In this Schedule “business” includes—
(a) a trade, profession or vocation;
(b) a UK property business or an overseas property business;
(c) a business consisting wholly or partly of making investments.
Amounts not referable to activities of a business which is being carried on
2 (1) This paragraph applies if a person who carried on a business (whether alone or in partnership) receives a coronavirus support payment that—
(a) is referable to the business, and
(b) is not wholly referable to activities of the business undertaken while the business was being carried on by the recipient of the payment.
(2) So much of the coronavirus support payment as is referable to the business but which is not referable to activities of the business undertaken while the business was being carried on by the recipient of the payment is to be treated as follows.
(3) An amount referable to a trade, profession or vocation is to be treated as a post-cessation receipt for the purposes of Chapter 18 of Part 2 of ITTOIA 2005 or Chapter 15 of Part 3 of CTA 2009 (trading income: post-cessation receipts), and—
(a) in the application of Chapter 18 of Part 2 of ITTOIA 2005 to that amount, section 243 (extent of charge to tax) is omitted, and
(b) in the application of Chapter 15 of Part 3 of CTA 2009 to that amount, section 189 (extent of charge to tax) is omitted.
(4) An amount referable to a UK property business or an overseas property business is to be treated (in either case) as a post-cessation receipt from a UK property business for the purposes of Chapter 10 of Part 3 of ITTOIA 2005 or Chapter 9 of Part 4 of CTA 2009 (property income: post- cessation receipts), and—
(a) in the application of Chapter 10 of Part 3 of ITTOIA 2005 to that amount, section 350 (extent of charge to tax) is omitted, and
(b) in the application of Chapter 9 of Part 4 of CTA 2009 to that amount, section 281 (extent of charge to tax) is omitted.
(5) In any other case, for the purposes of paragraph 1(3)—
(a) the recipient of the amount is to be treated as if carrying on the business to which the amount is referable to at the time of the receipt of the amount, and
(b) the amount is to be treated as if it were referable to activities undertaken by the business at that time.
(6) Where the recipient of the amount has incurred expenses that—
(a) are referable to the amount, and
(b) would be deductible in calculating the profits of the business if it were being carried on at the time of receipt of the amount,
the amount brought into account under paragraph 1(2) by virtue of sub-paragraph (5) is to be reduced by the amount of those expenses.
(7) But sub-paragraph (6) does not apply to expenses of a person that arise directly or indirectly from the person ceasing to carry on business.
Amounts referable to businesses in certain cases
3 (1) An amount of a coronavirus support payment made under an employment-related scheme—
(a) is referable to the business of the person entitled to the payment as an employer (even if the person is not for other purposes the employer of the employees to whom the payment relates), and
(b) is not referable to any other business (and no deduction for any expenses in respect of the same employment costs which are the subject of the payment is allowed in calculating the profits of any other business or in calculating the liability of any other person to tax charged under section 242 or 349 of ITTOIA 2005 or section 188 or 280 of CTA 2009 (post-cessation receipts)).
(2) A coronavirus support payment made under the self-employment income support scheme is referable to the business of the individual to whom the payment relates.
(3) Where an amount of a coronavirus support payment made under the self-employment income support scheme is brought into account under paragraph 1(2), the whole of the amount is to be treated as a receipt of a revenue nature of the tax year 2020-21 (irrespective of its treatment for accounting purposes).
(4) But sub-paragraph (3) does not apply to an amount of a coronavirus support payment made under the self-employment income support scheme in respect of a partner of a firm where the amount is distributed amongst the partners (rather than being retained by the partner).
(5) An amount of a coronavirus support payment made under the self-employment income support scheme in respect of a partner of a firm that is retained by the partner (rather than being distributed amongst the partners) is not to be treated as a receipt of the firm.
(6) Accordingly—
(a) the receipt is not to be included in the calculation of the firm’s profits for the purposes of determining the share of profits or losses for each partner of the firm (see sections 849 to 850E of ITTOIA 2005 and sections 1259 to 1265 of CTA 2009), and
(b) the receipt is then to be added to the partner’s share.
Exemptions, reliefs and deductions
4 (1) An amount of a coronavirus support payment that relates only to mutual activities of a business that carries on a mutual trade is to be treated as if it were income arising from those activities (and accordingly the amount is not taxable).
(2) A coronavirus support payment is to be ignored when carrying out the calculation—
(a) in section 528(1) of ITA 2007 (incoming resources limit for charitable exemptions);
(b) in section 482(1) of CTA 2010 (incoming resources limit for charitable companies);
(c) in section 661CA(1) of CTA 2010 (income condition for community amateur sports clubs).
(3) A coronavirus support payment made under an employment-related scheme is to be ignored when carrying out the calculation—
(a) in section 662(2) of CTA 2010 (exemption from corporation tax for UK trading income of community amateur sports clubs);
(b) in section 663(2) of that Act (exemption from corporation tax for UK property income community amateur sports clubs).
(4) No relief under Chapter 1 of Part 6A of ITTOIA 2005 (trading allowance) is given to an individual on an amount of a coronavirus support payment made under the self-employment income support scheme brought into account under paragraph 1(2) as profits of that tax year.
(5) For the purposes of that Part, such an amount is to be ignored when calculating the individual’s “relevant income” for that tax year under Chapter 1 of that Part.
(6) Neither section 57 of ITTOIA 2005 nor section 61 of CTA 2009 (deductions for pre-trading expenses) (including as they apply by virtue of sections 272 and 272ZA of ITTOIA 2005 and section 210 of CTA 2009) apply to employment costs where an amount of a coronavirus support payment made under an employment-related scheme relates to those costs.
Charge where employment costs deductible by another
5 (1) Income tax is charged on an amount of a coronavirus support payment made under an employment-related scheme if conditions A and B are met.
(2) Condition A is that the amount is neither brought into account under paragraph 1(2) in calculating the profits of a business carried on by the person entitled to the payment as an employer nor treated, by virtue of paragraph 2(3) or (4), as a post-cessation receipt arising from the carrying on of such a business.
(3) Condition B is that expenses incurred by another person in respect of the same employment costs which are the subject of the coronavirus support payment and to which the amount relates are deductible—
(a) in calculating the profits of a business carried on by that other person (for income or corporation tax purposes), or
(b) in calculating the liability of that other person to tax charged under section 242 or 349 of ITTOIA 2005 or section 188 or 280 of CTA 2009 (post-cessation receipts).
(4) Tax is charged under sub-paragraph (1) on the whole of the amount to which that sub-paragraph applies.
(5) The person liable for tax charged under sub-paragraph (1) is the person entitled to the coronavirus support payment as an employer.
(6) Section 3(1) of CTA 2009 (exclusion of charge to income tax) does not apply to an amount of a coronavirus support payment that is charged under this paragraph.
Charge where no business carried on
6 (1) Tax is charged on an amount of a coronavirus support payment, other than a payment made under an employment-related scheme or the self-employment income support scheme, if—
(a) the amount is neither brought into account under paragraph 1(2) in calculating the profits of a business nor treated as a post-cessation receipt by virtue of paragraph 2(3) or (4), and
(b) at the time the coronavirus support payment was received, the recipient did not carry on a business whose profits are charged to tax and to which the payment could be referable.
(2) In this paragraph “tax” means—
(a) corporation tax, in the case of a company that (apart from this paragraph) is chargeable to corporation tax, or to any amount chargeable as if it was corporation tax, or
(b) income tax, in any other case.
(3) Tax is charged under sub-paragraph (1) on the whole of the amount to which that sub-paragraph applies.
(4) The person liable for tax charged under sub-paragraph (1) is the recipient of that amount.
(5) Where income tax is charged under sub-paragraph (1), sections 527 and 528 of ITA 2007 (exemption and income condition for charitable trusts) have effect as if sub-paragraph (1) were a provision to which section 1016 of that Act applies.
(6) Where corporation tax is charged under sub-paragraph (1), sections 481 and 482 of CTA 2010 (exemption and income condition for charitable companies) have effect as if sub-paragraph (1) were a provision to which section 1173 of that Act applies.
Modification of the Tax Acts
7 The Treasury may by regulations modify the application of any provision of the Tax Acts that affects (or that otherwise would affect) the treatment of—
(a) receipts brought into account under paragraph 1(2),
(b) amounts treated as post-cessation receipts under paragraph 2(3) or (4), or
(c) amounts charged under paragraph 5(1) or 6(1).
Charge if person not entitled to coronavirus support payment
8 (1) A recipient of an amount of a coronavirus support payment is liable to income tax under this paragraph if the recipient is not entitled to the amount in accordance with the scheme under which the payment was made.
(2) But sub-paragraph (1) does not apply to an amount of a coronavirus support payment made under a coronavirus business support grant scheme or the coronavirus statutory sick pay rebate scheme.
(3) For the purposes of this Schedule, references to a person not being entitled to an amount include, in the case of an amount of a coronavirus support payment made under the coronavirus job retention scheme, a case where the person ceases to be entitled to retain the amount after it was received—
(a) because of a change in circumstances, or
(b) because the person has not, within a reasonable period, used the amount to pay the costs which it was intended to reimburse.
(4) Income tax becomes chargeable under this paragraph—
(a) in a case where the person was entitled to an amount of a coronavirus support payment paid under the coronavirus job retention scheme but subsequently ceases to be entitled to retain it, at the time the person ceases to be entitled to retain the amount, or
(b) in any other case, at the time the coronavirus support payment is received.
(5) The amount of income tax chargeable under this paragraph is the amount equal to so much of the coronavirus support payment—
(a) as the recipient is not entitled to, and
(b) as has not been repaid to the person who made the coronavirus support payment.
(6) Where income tax which is chargeable under this paragraph is the subject of an assessment (whether under paragraph 9 or otherwise)—
(a) paragraphs 1 to 6 do not apply to the amount of the coronavirus support payment that is the subject of the assessment,
(b) that amount is not, for the purposes of Step 1 of the calculation in section 23 of ITA 2007 (calculation of income tax liability), to be treated as an amount of income on which the taxpayer is charged to income tax (but see paragraph 10 which makes further provision about the application of that section), and
(c) that amount is not to be treated as income of a company for the purposes of section 3 of CTA 2009 (and accordingly the exclusion of the application of the provisions of the Income Tax Acts to the income of certain companies does not apply to the receipt of an amount charged under this paragraph).
(7) No loss, deficit, expense or allowance may be taken into account in calculating, or may be deducted from or set off against, any amount of income tax charged under this paragraph.
(8) In calculating profits or losses for the purposes of corporation tax, no deduction is allowed in respect of the payment of income tax charged under this paragraph.
(9) For the purposes of this paragraph and paragraphs 9(4) and 14, a firm is not to be regarded as receiving an amount of a coronavirus support payment made under the self-employment income support scheme in respect of a partner of that firm that is retained by the partner (rather than being distributed amongst the partners).
Assessments of income tax chargeable under paragraph 8
9 (1) If an officer of Revenue and Customs considers (whether on the basis of information or documents obtained by virtue of the exercise of powers under Schedule 36 to FA 2008 or otherwise) that a person has received an amount of a coronavirus support payment to which the person is not entitled, the officer may make an assessment in the amount which ought in the officer’s opinion to be charged under paragraph 8.
(2) An assessment under sub-paragraph (1) may be made at any time, but this is subject to sections 34 and 36 of TMA 1970.
(3) Parts 4 to 6 of TMA 1970 contain other provisions that are relevant to an assessment under sub-paragraph (1) (for example, section 31 makes provision about appeals and section 59B(6) makes provision about the time to pay income tax payable by virtue of an assessment).
(4) Where income tax is chargeable under paragraph 8 in relation to an amount of a coronavirus support payment received by a firm—
(a) an assessment (under sub-paragraph (1) or otherwise) may be made on any of the partners in respect of the total amount of tax that is chargeable,
(b) each of the partners is jointly and severally liable for the tax so assessed, and
(c) if the total amount of tax that is chargeable is included in a return under section 8 of TMA 1970 made by one of the partners, the other partners are not required to include the tax in returns made by them under that section.
Calculation of income tax liability
10 (1) Section 23 of ITA 2007 (calculation of income tax liability) applies in relation to a person liable to income tax charged under paragraph 8 as if that paragraph were included in the lists of provisions in subsections (1) and (2) of section 30 of that Act (amounts of tax added at step 7).
(2) For the purposes of paragraph 7(2) of Schedule 41 to FA 2008, a relevant obligation relating to income tax charged under paragraph 8 of this Schedule relates to a tax year if the income tax became chargeable in that tax year.
(3) But this paragraph does not apply to a company to which paragraph 11 (companies chargeable to corporation tax) applies.
Calculation of tax liability: companies chargeable to corporation tax
11 (1) This paragraph applies where a person liable to income tax charged under paragraph 8 is a company that is chargeable to corporation tax, or to any amount chargeable as if it was corporation tax, in relation to a period within which the income tax became chargeable.
(2) Part 5A of TMA 1970 (payment of tax) applies in relation to that company as if—
(a) the reference to “corporation tax” in subsection (1) of section 59D (general rule as to when corporation tax is due and payable) included income tax charged under paragraph 8 of this Schedule;
(b) an amount of income tax charged under paragraph 8 of this Schedule were an amount within subsection (6) of section 59F (arrangements for paying tax on behalf of group members);
(c) any reference in section 59G (managed payment plans) to “corporation tax” included income tax charged under paragraph 8 of this Schedule.
(3) Part 9 of that Act (interest on overdue tax) applies in relation to that company as if—
(a) the references in section 86 (interest on overdue income tax and capital gains tax) to “income tax” did not include income tax charged under paragraph 8 of this Schedule;
(b) in subsection (1) of section 87A (interest on overdue corporation tax) the reference to “corporation tax” included income tax charged under paragraph 8 of this Schedule.
(4) Schedule 18 to FA 1998 (company tax returns etc.) applies in relation to that company as if—
(a) any reference in that Schedule to “tax”, other than the references in paragraph 2 of that Schedule (duty to give notice of chargeability), included income tax charged under paragraph 8 of this Schedule, and
(b) in paragraph 8(1) of that Schedule (calculation of tax payable), at the end there were inserted—
“Sixth step
Add any amount of income tax chargeable under paragraph 8 of Schedule (Taxation of coronavirus support payments) to the Finance Act 2020.”
(5) But the modifications of that Schedule are to be ignored for the purposes of the Corporation Tax (Instalment Payments) Regulations 1998 (S.I. 1998/3175).
(6) Schedule 41 to FA 2008 applies in relation to that company as if —
(a) the references to “income tax” in paragraph 7(2) did not include income tax charged under paragraph 8 of this Schedule;
(b) the reference to “corporation tax” in paragraph 7(3) included income tax charged under paragraph 8 of this Schedule;
(but see paragraph 13(5) of this Schedule which has the effect that paragraph 7 of that Schedule does not apply in certain circumstances).
(7) For the purposes of paragraph 7(3) of Schedule 41 to FA 2008 (as modified by sub-paragraph (6)), a relevant obligation relating to income tax charged under paragraph 8 of this Schedule relates to an accounting period if the income tax became chargeable in that period.
Notification of liability under paragraph 8
12 (1) Section 7 of TMA 1970 (notice of liability to income tax and capital gains tax) applies in relation to income tax chargeable under paragraph 8 as provided for in sub-paragraphs (2) to (5).
(2) Subsection (1) has effect as if paragraph (b) (and the “and” before it) were omitted.
(3) Subsection (1) has effect as if the reference to “the notification period” were to the period commencing on the day on which the income tax became chargeable and ending on the later of—
(a) the 90th day after the day on which this Act is passed, or
(b) the 90th day after the day on which the income tax became chargeable.
(4) Subsection (3)(c) has effect as if after “child benefit charge” there were inserted “or to income tax under paragraph 8 of Schedule (Taxation of coronavirus support payments) to the Finance Act 2020”.
(5) In relation to income tax chargeable under paragraph 8 in relation to an amount of a coronavirus support payment received by a firm, the duty in subsection (1) (as it has effect by virtue of sub-paragraphs (2) and (3)) is taken to have been complied with by each of the partners if one of the partners has complied with it.
(6) The reference in section 36(1A)(b) of TMA 1970 (20 year period for assessment in a case involving a loss of income tax) to a failure to comply with an obligation under section 7 of that Act is not to be taken as including a failure arising by virtue of the modification of that section by this paragraph, unless the failure is one to which paragraph 13 applies.
Penalty for failure to notify: knowledge of non-entitlement to payment
13 (1) This paragraph applies to a failure of a person to notify, under section 7 of TMA 1970 (as modified by paragraph 12), a liability to income tax chargeable under paragraph 8 where the person knew, at the time the income tax first became chargeable, that the person was not entitled to the amount of the coronavirus support payment in relation to which the tax is chargeable.
(2) Schedule 41 to FA 2008 (failure to notify) applies to a failure described in sub-paragraph (1) as follows.
(3) The failure is to be treated as deliberate and concealed.
(4) Accordingly, paragraph 6 of that Schedule has effect as if the references to a penalty for “a deliberate but not concealed failure” or for “any other case” were omitted.
(5) For the purposes of that Schedule (except in a case falling within paragraph 14 of this Schedule), the “potential lost revenue” is to be treated as being the amount of income tax which would have been assessable on the person at the end of the last day of the notification period (see paragraph 12(3)).
Penalties: partnerships
14 (1) This paragraph applies to a failure to notify, under section 7 of TMA 1970 (as modified by paragraph 12), a liability to income tax chargeable under paragraph 8 by a partner of a firm that received the amount of the coronavirus support payment in relation to which the tax is chargeable.
(2) For the purposes of paragraph 13(1) of this Schedule, each partner is taken to know anything that any of the other partners knows.
(3) Where a partner would be liable to a penalty under Schedule 41 to FA 2008 (whether in a case falling within paragraph 13 or otherwise), the partner is instead jointly and severally liable with the other partners to a single penalty under that Schedule for the failures by each of them to notify.
(4) In a case not falling within paragraph 13, if the failure of at least one of the partners—
(a) was deliberate and concealed, the single penalty is to be treated as a penalty for a deliberate and concealed failure;
(b) was deliberate but not concealed, the single penalty is to be treated as a penalty for a deliberate but not concealed failure.
(5) For the purposes of Schedule 41 to FA 2008, the “potential lost revenue” is to be treated as being the amount of income tax which would have been assessable on any one of the partners (see paragraph 9(4)(a))—
(a) in a case falling within paragraph 13, at the end of the last day of the notification period, or
(b) in any other case, at the end of 31 January following the tax year in which the amount of coronavirus support payment was received by the firm.
(6) Paragraph 22 of that Schedule (limited liability partnerships: members’ liability) does not apply.
Liability of officers of insolvent companies
15 (1) This paragraph—
(a) provides for an individual to be jointly and severally liable to the Commissioners for Her Majesty’s Revenue and Customs for a liability of a company to income tax charged under paragraph 8, where a notice under sub-paragraph (2) is given to the individual, and
(b) applies paragraphs 10 to 15 and 17 of Schedule 13 (joint liability notices: tax avoidance, tax evasion and repeated insolvency and non-payment) to such a notice.
(2) An officer of Revenue and Customs may give a notice under this sub-paragraph to an individual if it appears to the officer that conditions A to D are met.
(3) Condition A is that—
(a) the company is subject to an insolvency procedure, or
(b) there is a serious possibility of the company becoming subject to an insolvency procedure.
(4) Condition B is that the company is liable to income tax under paragraph 8.
(5) Condition C is that the individual was responsible for the management of the company at the time the income tax first became chargeable and the individual knew (at that time) that the company was not entitled to the amount of the coronavirus support payment in relation to which the tax is chargeable.
(6) Condition D is that there is a serious possibility that some or all of the income tax liability will not be paid.
(7) For the purposes of sub-paragraph (5) the individual is responsible for the management of a company if the individual—
(a) is a director or shadow director of the company, or
(b) is concerned (whether directly or indirectly) in, or takes part in, the management of the company.
(8) A notice under sub-paragraph (2) must—
(a) specify the company to which the notice relates;
(b) set out the reasons for which it appears to the officer that conditions A to D are met;
(c) specify the amount of the income tax liability;
(d) state the effect of the notice;
(e) offer the individual a review of the decision to give the notice and explain the effect of paragraph 11 of Schedule 13 (right of review);
(f) explain the effect of paragraph 13 of that Schedule (right of appeal).
(9) An individual who is given a notice under sub-paragraph (2) is jointly and severally liable with the company (and with any other individual who is given such a notice) to the amount of the income tax liability specified under sub-paragraph (8)(c).
For provision under which the amount so specified may be varied, see—
(a) paragraph 10 of Schedule 13 (modification etc),
(b) paragraphs 11 and 12 of that Schedule (review), and
(c) paragraphs 13 and 14 of that Schedule (appeal).
(10) Paragraphs 10 to 15 and 17 of Schedule 13 apply to a notice under sub-paragraph (2) as they apply to a joint liability notice (see paragraph 1(2) of that Schedule) as if—
(a) the references in those paragraphs to “relevant conditions” were to conditions A to D in this paragraph;
(b) sub-paragraphs (3) and (4) of paragraph 10 were omitted (and references to sub-paragraph (3) in that paragraph were omitted);
(c) in paragraph 10(6)(a), after “or (9)” there were inserted “or paragraph 15(8)(c) of Schedule (Taxation of coronavirus support payments)”;
(d) in paragraph 12(6)(b) after “5(9)” there were inserted “or paragraph 15(8)(c) of Schedule (Taxation of coronavirus support payments)”.
(11) Expressions used in this paragraph and in Schedule 13 have the same meaning in this paragraph as they have in that Schedule (subject to the modification made by sub-paragraph (10)(a)).”—(Jesse Norman.)
This new Schedule makes provision about the taxation of payments made under various coronavirus related business support schemes, including the coronavirus job retention scheme (“CJRS”) and the self-employment income support scheme (“SEISS”). Paragraphs 1 to 7 clarify how payments under those schemes are to be subject to tax, following (with some exceptions) the normal principles for taxing receipts of a business. Paragraph 8 provides that where a person receives an amount to which they were not entitled under CJRS or SEISS, or misapplies an amount paid under CJRS, the person will be liable to income tax at the rate of 100% in relation to so much of that amount as was not repaid to HMRC. Paragraphs 9 to 15 make provision in connection with that charge (for example in relation to assessments and penalties).
Brought up, read the First and Second time, and added to the Bill.
Third Reading
Jesse Norman
I beg to move, That the Bill be now read the Third time.
This Finance Bill stands in the shadow of a pandemic unprecedented in its scale and reach. We are keenly aware of the immense challenges and pressures that that has placed on us. These conditions—this situation—cannot and will not be ignored. The Government are working flat out to alleviate the impact of covid-19 on the economy, on the public finances, and, most importantly, on the health and wellbeing of every person and family in the United Kingdom.
My right hon. Friend the Chancellor has announced numerous measures over the past few months in response to the virus, including the job retention scheme, the business interruption loan scheme, and the self-employment income scheme. Together, this represents, contrary to many of the comments made in the previous debate, an economic intervention by Government on a scale hitherto unseen in peacetime, and necessarily so. At such a difficult time for millions of people around the United Kingdom, the Government have worked to protect businesses and are specifically focused on the wellbeing of the most vulnerable in society.
Of course we recognise, and the House must recognise, that this is a still a work in progress and there is a way to go. The crisis is not over. The pandemic continues. People around this country are still suffering and may do so for many months yet. The Government will continue to work to lessen the impact, but it remains the responsibility, the duty and the important role of businesses, families and individuals to play their part, too, in this colossal collective national effort. Together, we must work to bring ourselves through and out of this crisis.
The Bill supports the emergency services as they go about their vital duties and exempts from vehicle excise duty vehicles that have been purpose-built to transport NHS products. The Government have introduced new clauses that were considered today to ensure that workers who have returned to public sector jobs to help fight the effects of the pandemic will face no adverse pensions consequences from doing so. The Bill reforms the tapered annual allowance so that doctors can spend more time treating patients without facing precipitous tax bills. This pandemic has brought out, in many ways, the best in our society, and I am certain that the Britain that emerges from it will be stronger and fairer.
The Bill provides tax exemptions specifically for those who receive payments under the Windrush compensation scheme, the troubles permanent disablement payment scheme and the Kindertransport fund, as well as for care leavers who are starting apprenticeships, and rightly so.
The necessary focus on the here and now must not come at the expense of tomorrow. In the words of the Prime Minister, our great national hibernation is coming to an end, and we must and will now at last look to the future. Now is the time to start to rebuild the economy and to restore our public finances. Our police, our teachers, our armed forces and many other public sector workers have all played their part in combating this pandemic alongside the NHS. I would also single out, as I have said, our public servants in the civil service, particularly in my own area of HM Treasury and within HMRC.
This public sector support cannot be provided for if the public finances are not supported, in turn, with a fair and sustainable tax system. That is a key fact. We do that while seeking to remain competitive internationally, and maintaining the corporation tax rate at 19% is therefore the right approach. Even at that level, it is still the lowest headline rate in the G20, and it reminds the world of UK strength as a location for inward investment.
But we have also been clear about fairness. Everyone must pay their fair share of tax. That is one reason we have introduced the digital services tax, for which this Bill also legislates. A tax set at a rate of 2% on revenues from digital services will ensure that digital businesses pay a fairer share of UK tax that more accurately reflects the significant value that they derive from their UK users. As we look to recovery, we want business to receive the support that it needs. That is why we have delayed the extension of the off-payroll working reforms in the private sector to April 2021.
Businesses need time to prepare for the reforms, and it would have been burdensome to ask them to do so during the pandemic.
We focus on innovation in the Finance Bill. We wish to go further to support enterprise in this country, which will be desperately needed in the coming months. This country has a proud history of innovation, and increasing the research and development expenditure credit rate to 13% will allow that to continue. The structures and buildings allowance rate increase will also aid investment in new shops, factories and agricultural buildings, which will help to stimulate capital investment across the nation. As ever, we are committed to levelling up across the United Kingdom.
As has been pointed out, covid-19 is not the only crisis that we face. The Government have committed to reducing the United Kingdom’s carbon emissions to net zero by 2050. The Bill is another step towards that target. Not only does it pave the way for the forthcoming plastic packaging tax, but it removes the vehicle excise duty expensive car supplement for zero-emissions vehicles and ensures that, now we have left the European Union, a carbon price will remain in place. Those measures will help to ensure that our post-covid-19 economy is greener than before.
At the end of 10 hours of debate in the last two days, for which I thank all my colleagues and the Opposition Front-Bench team, we understand that the world during the passage of the Bill has changed. Its impact on this House, our daily lives and our economic outlook has radically altered. To some extent, we have made changes on the fly to shore up and support our public services and our response to the pandemic. As a result, the Bill is a firm foundation—indeed, firmer than it was originally framed—on which we can rebuild our economy and protect our public finances as we recover from this devastating virus. The Bill supports businesses, the vulnerable and our key workers, and I commend it to the House.
Alison Thewliss
Like everybody, I acknowledge these extraordinary times. The world has changed since the Budget was announced in March. All the certainties that we used to rely upon are gone, and things that we thought that the Government would never do, never say or never spend money on are suddenly things that are no barrier whatever. That goes some way to show that the Government can do a lot more when they want to, and that should give us some hope that they may go back on things they have said before.
I wish to take this opportunity to thank everybody who has contributed to debates on the Bill. I thank the Clerks and the Bill team, who have been so incredibly helpful; I thank you, Madam Deputy Speaker, for your sage advice; and I thank my hon. Friend the Member for Aberdeen South (Stephen Flynn), whose first Finance Bill this is and who has done a fantastic job representing both his constituents and the party.
I also thank our researchers, Scott Taylor and Jonathan Kiehlmann, who have supported us so well throughout this process—with all the amendments that we tabled and having to learn about everybody else’s amendments, it has been a huge challenge to keep up but they have risen to it admirably—and Mhairi Love in my office, who has also done an incredible job while studying for her exams and completing a dissertation. She has provided support to me throughout all that and I thank her for it. I thank the people on Twitter who think I talk too quickly. I swear that I am making an effort to slow down; this is just how I speak.
I repeat the call for evidence that I made at the start of the Bill’s progress. A Finance Bill Committee should be able to take evidence. Other Bill Committees in this House have the practice—for example, the Domestic Abuse Bill Committee for England and Wales took evidence from experts. It seems absolutely ludicrous that Finance Bills, which affect so many different aspects of everybody’s lives, do not take evidence from experts at the start and instead rely on getting written evidence and us scrutinising that written evidence, rather than being able to ask questions about the Government’s policies and find the best way through. I also reiterate that some kind of standing committee on the Budget is very much required to keep an eye on what the Government are doing and how effective their policies and proposals are.
Many questions remain at the end of this Budget process, and I suppose the first of those is whether we will be back here for another Budget in the autumn. Issues such as the loan charge and IR35 are not going away, as much as the Government would like them to. We cannot predict the course of the coronavirus, but we do know that the UK Government’s handling of it has been far from impressive. As I said yesterday, I fear a return to mass unemployment. The Treasury has the toughest of decisions to make, but it ought to put wellbeing and people first, because if we do not have that, we will not have much else to go with afterwards.
Jesse Norman
The hon. Lady has raised the loan charge; we did not really get a sense of it yesterday, but is the SNP in favour of the loan charge as a substantive matter or against it?
Alison Thewliss
We believe that there are still many questions to be answered on the loan charge, not least the revelations in the press during the week over the FOI request that have raised more questions. We want to see further probing on the issue and further support for those people who have ended up losing not only their livelihoods but their homes—and some have lost their lives. It is no light-hearted matter to be considered in such a flippant way.
If the Financial Secretary to the Treasury wants to prevent scarring in the economy, he must encourage his colleague the Chancellor to be bolder next week. He must keep the job retention scheme and the self-employment support scheme going, and he must fill the gaps in those schemes when he makes his announcement next week, because too many people have lost out and too many sectors are not yet back to full strength. When that change comes—when people have to pay more of the wage costs themselves—we will see more and more employers doing what many employers have done this week and simply deciding to hand back the keys, fire their staff and wind up their companies. And the unemployment figures will soar.