Finance (No. 2) Bill (First sitting)

Debate between Joshua Reynolds and Lucy Rigby

Committee stage
Tuesday 27th January 2026 Public Bill Committees

[Mr Joshua Reynolds (Maidenhead) (LD)]

It is a pleasure to serve under your chairmanship, Sir Roger, on what is not only my first Finance Bill Committee, but my first Bill Committee—a nice, simple one to start me off. The Liberal Democrats welcome the changes made by clause 13. We need to support our British start-ups and British start-up culture to grow and develop.

We would of course like the Government to go further than clause 13 in what they promise. We need to ensure that we have a British start-up culture where start-ups do not, after five or 10 years, head off to the United States, taking that capital and leaving the UK with a brain drain. I have only one question to the Minister: how can we go further to ensure that once we have implemented the Bill, we will be in a position to say that fantastic UK companies will not head overseas, taking that capital and culture with them?

[Lucy Rigby]

The hon. Member for North West Norfolk made a series of important points. I come back to the fact that the Government have opened a call for evidence on tax in this area. The Committee will come to the enterprise investment scheme and venture capital trusts scheme, which the call for evidence also covers. Importantly, the call for evidence covers the changes we have made to the enterprise management incentives scheme. All of those changes, as well as the clauses we are about to discuss, are important to the Government’s objective of making sure that the UK is the best place in the world to start and grow a business, and I encourage any views to be fed into that call for evidence.

The hon. Member referred to an important report from TheCityUK and PwC; I attended its launch yesterday. I am pleased to tell him that the Government’s objectives on the growth of financial services very much align with that report. Our objectives and the report have much in common, but most importantly, we share the sense of urgency and ambition that it outlines.

The hon. Member for Maidenhead referred to his desire to see more companies remain in the UK. That is imperative, and it is behind the Government’s reforms to a series of tax incentives in this area. We believe that the UK is already the best place in the world to start a company, and we have to make sure that it continues to be, but it must also be the best place to scale and to list a company. That is why the reforms are so important—so that companies stay.

Amendment 37 agreed to.

Amendment made: 38, in clause 13, page 7, line 38, for “(7)” substitute “(8)”.—(Lucy Rigby.)

This amendment is consequential on the addition of a new subsection by Amendment 37.

Clause 13, as amended, ordered to stand part of the Bill.

Clause 14

Enterprise investment scheme: increase in amounts and asset requirements

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

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[Mr Reynolds]

Clause 21 will increase unfairness. Those required to work from home are currently divided into two groups: one group who receive reimbursement for costs without incurring income tax but are not reimbursed by their employer, and another group who take that via a taxation route. This measure will exacerbate that split and create a greater divide between the two. Where two employees hold exactly the same position or role, but in different companies, one may receive the payment and the other may not. The figures suggest that about 300,000 people will be affected by this measure. Can the Minister comment on how we can be in a position whereby two employees in the same job, but with different employers, are treated differently for tax purposes?

[Lucy Rigby]

The shadow Minister, the hon. Member for Wyre Forest, and my hon. Friend the Member for Burnley referred to vaccinations and asked about the extent to which covid vaccinations might be part of the scheme. We are limiting relief to flu vaccinations because employers have consistently highlighted them as a common relief in relation to which reimbursement would be helpful. Flu vaccinations are low in cost, seasonal and widely offered by employers as part of routine health support to employees. By contrast, other vaccinations vary significantly in cost and frequency. Importantly, however, many of them can be accessed free through the NHS.

As you might expect, Sir Roger, I completely reject the shadow Minister’s assertion that any of these measures is an attack on private sector workers. Not at all—far from it.

It is important to be clear that clause 21 will not impact employers’ existing ability to reimburse employees for costs relating to home working, where eligible, without deducting income tax and national insurance contributions.

The question of national insurance was raised in relation to clause 22 on payments for cancelled shifts. These payments will be subject to national insurance. My hon. Friend the Member for Burnley was entirely right to refer to the Employment Rights Act and its significance. I think I am right in saying that a question was also raised about the taxable nature of payments for cancelled shifts. I can confirm that payments received for short-notice shift cancellations or changes are regarded as earnings. They are paid in lieu of the payment that workers would have received had they completed the shift, and as such they are taxable in all relevant scenarios, irrespective of the arrangement or the employment structure.

Question put and agreed to.

Clause 20 accordingly ordered to stand part of the Bill.

Clauses 21 to 23 ordered to stand part of the Bill.

Clause 24

Umbrella companies

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[Mr Reynolds]

The hon. Gentleman is completely correct. The place we are in now is that someone who settled and came to an agreement with HMRC is excluded from the opportunity laid out in the Bill. That means that when something like this happens again—and we all know that it will—those individuals will not want to come to an agreement with HMRC. They will know that if they hold off, a better solution and a better agreement will come through.

The report required by new clause 25 would outline a range of things, including whether the loan charge settlement opportunity is available to individuals who have settled, which is really important and something that we need to ensure; whether the settlement opportunity applies to individuals with disguised remuneration outside the loan charge years; and the extent of the impact of differential treatment between those two groups and those who are eligible. The extent of the impact is the most important thing, because for those individuals it will be severe. The report would also include an assessment of whether extending more favourable settlement terms to excluded groups would improve fairness and consistency with HMRC overall.

[Lucy Rigby]

The purpose of the review, as I think is well known, was to bring the matter to a close for those who had not yet settled and paid their loan charge liability to HMRC. That by its very nature meant focusing on open cases and outstanding liabilities. The Liberal Democrat spokesman, the hon. Member for Maidenhead, referred to something like this happening again. I think we would all agree that we hope it does not. However, we would probably also agree that it is crucial that any resolution to this issue is fair to the wider tax-paying population that has never avoided tax.

The Government believe that this settlement opportunity is the most pragmatic solution to draw a line under the issue for as many individuals with outstanding liabilities as possible. The settlement opportunity being provided is substantially more generous than any opportunity HMRC has previously offered and will substantially reduce the outstanding liabilities of people who have yet to settle with HMRC, particularly those with the lowest liabilities. Most individuals, as I said, could see reductions of at least 50% in their outstanding loan charge liabilities. We estimate that 30% of individuals could have their liabilities written off entirely.

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[Mr Reynolds]

We can look into whether to support new clause 3 in a few weeks’ time. There seems to be very little in the new clause that we as Liberal Democrats would not support. Let us face it: we need to review the impact of the 2027 expiry date. We do not believe that the allowance should expire in 2027; it needs to be extended significantly further, so we would certainly consider supporting a review of whether 2027 is the right place.

That is my question for the Minister, really: why are we saying that the expiry date will be in 2027? Will we all be sitting here excitedly after the next Budget, looking at a 2028 expiry date, and so on for 2029 and 2030?

[Lucy Rigby]

On new clause 3, I think I have been as full as I can. The Government annually review the rates and thresholds of taxes and reliefs to ensure that they are appropriate and reflect the current state of the economy. We therefore do not need the review that is suggested in new clause 3.

On the broader points made by the shadow Minister, the hon. Member for North West Norfolk, we are, as I say, fully committed to supporting our automotive sector. On the suggestion that we might look further ahead, the Chancellor makes decisions on tax policy at fiscal events in the context of the public finances. My hon. Friend the Member for Banbury is right that support for infrastructure in this area is critical; indeed, that is the wider policy of the Government. On the suggestion from the hon. Member for Maidenhead that we might go beyond one year, we need to balance support for the industry with the impact on the public finances.

In our debate on clause 30, we have had “stop-start”, “accelerate”, “full throttle” and “red light”. I now encourage the Committee to greenlight the clause.

Question put and agreed to.

Clause 30 accordingly ordered to stand part of the Bill.

Finance (No. 2) Bill (Second sitting)

Debate between Joshua Reynolds and Lucy Rigby

Committee stage
Tuesday 27th January 2026 Public Bill Committees

[Mr Joshua Reynolds (Maidenhead) (LD)]

New clause 28 in my name would require HMRC to assess the potential benefits of establishing a digital application process for taxpayers to pay capital gains tax by instalments in respect of disposal to employee ownership trusts. The digital application process would make it far easier for taxpayers to apply to pay capital gains tax by instalments, reducing delays and administrative burden. The Government aim to make tax digital—this digital application process would be a small way to help to get there. It would help to ensure that the new relief works in practice, not just in theory, smoothing the implementation process and ensuring that taxpayers know where they stand. The digital process could help improve speed, accuracy and the consistent handling of instalment applications. Including this requirement in the Bill would promote modernisation and better taxpayer services and would signal that HMRC should consider practical delivery as well as policy. I hope the Minister will support it.

New clause 29, also tabled in my name, would require the Chancellor to lay a report before the House on the impact of clause 35 on small and medium-sized enterprises. It is fairly simple. It would explain whether clause 35 is achieving the policy goal by tracking the number of employee-ownership trust transactions compared to previous years. Not until we are in the process will we actually know what the impact will be. By tracking the numbers, we can see whether the policy the Government are undertaking has been a success. I hope the Minister will support it.

[Lucy Rigby]

To the comments from the shadow Minister, the hon. Member for Wyre Forest, it is important to bear in mind that on the changes we are making to EOTs, even post these changes, the relief that will be on offer remains more generous than for many other options and deeds, such as business asset disposal relief. Of course, the fiscal climate is relevant to the changes we are making. He referred to the point at which the last Government introduced this relief, but as I said, the cost of the relief as a whole is projected to rise to £2 billion by 2029-30 without the action that we are taking. As I said, the fiscal climate is extremely relevant when looking at £2 billion of relief.

Importantly, the Employee Ownership Association has stated that the changes we are making are not such as to alter the fundamental strength and purpose of the employee ownership trust model, while also recognising that the previous level of relief, or the level of relief as it stands, was hard to sustain when set against the rapidly escalating fiscal cost. On the comments made by the Liberal Democrat spokesman, the hon. Member for Maidenhead, I set out the reasons why we reject new clauses 28 and 29. I maintain the position of rejecting those and maintaining clause 35 as it stands.

Question put and agreed to.

Clause 35 accordingly ordered to stand part of the Bill.

Clause 36

Anti-avoidance: collective investment scheme reconstructions

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

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[Mr Reynolds]

This is a small administrative change but a significant one. I share concerns about awareness on this topic and how the public will know that this has changed. For individuals who have been doing this for a significant period of time, the change will be quite significant for them. I would like to know how the Government will communicate that change to the public—what advice will be put forward, and how people will be made aware of it—rather than them being expected to know that the Government have made changes. I am pretty sure the public have not read all the pages of the Bill and understood them precisely—even though I know we all have. We would all like to how the public will be made aware of this.

[Lucy Rigby]

While it is important to be clear about the fact that the additional data is being collected, the details required from taxpayers are brief, and that goes to the question of the additional burden or, indeed, lack thereof. They are brief details of the type of business, the tax calculations for the assets disposed of, and the value of the shares received for the business. The information HMRC requests will be used in analysis and compliance activity, which will tackle abuse of this relief for the benefit of the majority of taxpayers who apply the rules correctly.

The point on awareness was fairly raised. I can confirm that new guidance will be provided alongside the self-assessment return.

Question put and agreed to.

Clause 39 accordingly ordered to stand part of the Bill.

Clause 40

Non-residents: cell companies

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

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[Mr Reynolds]

As the Minister has outlined, clause 53 extends the purpose test from one category to all 12 categories. What guidance will HMRC provide for charity trustees to determine where the line is to be drawn between a legitimate investment strategy and those that are seen as having an ulterior purpose, because anti-avoidance should not penalise prudent charitable investment strategies?

Can the Minister also confirm exactly which charity sector bodies were consulted on these provisions and how they responded to that consultation, because many charity trustees are volunteers and this seems to place a significantly larger burden on those charity trustee volunteers to determine where to draw the line? It would be interesting to see what the consultation came back with as to where they would see that line and how they would attribute it.

[Lucy Rigby]

In answer to the comments of the Liberal Democrat spokesperson, the hon. Member for Maidenhead, as in relation to the previous clauses, I can confirm that HMRC will be coming forward with guidance that will make clear the exact scope of the changes and what needs to happen on behalf of charities in order to ensure compliance. The compliance changes apply equally to all charities regardless of size.

I come back to the statement that I recognise I have made repeatedly: these changes, along with those in the previous clause, are designed to protect the integrity of charitable tax reliefs. Although some smaller charities may need to review processes, the measures are proportionate and targeted at preventing abuse—not burdening charities, which in the main do incredibly good work.

The shadow Minister, the hon. Member for North West Norfolk, questioned whether some specific wording had been considered as part of the Bill. I am afraid I cannot confirm that now, and will have to get back to him in writing.

Question put and agreed to.

Clause 53 accordingly ordered to stand part of the Bill.

Clause 54

Tainted charity donations: replacement of purpose test with outcome test

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

Finance (No. 2) Bill

Debate between Joshua Reynolds and Lucy Rigby

Committee of the whole House
Tuesday 13th January 2026 Commons Chamber

[Lucy Rigby]

We take all impacts on the hospitality sector and the pub sector extremely seriously, and this Government are proud to be backing British pubs across the piece.

The changes we are making will help to ensure that, as a country, we live within our means, that we balance the books and that we properly fund the public services we all rely on. On Second Reading, concerns were raised about the impact of alcohol duty on the hospitality sector and British pubs. We have made it clear, as I just have, that we are steadfast supporters of British pubs and the wider hospitality sector, including through the introduction of the new pro-growth licensing policy framework that was announced at the Budget.

[Mr Joshua Reynolds (Maidenhead) (LD)]

The Minister just said that the Government are pro-pubs, but any pub she speaks to in my constituency will tell her that this Government are not pro-pubs. The amount of profit left at the end of a pint for a pub is minuscule, and it is so far from reality to say that the Government are pro-pubs. How does she respond to all the pubs across the country that are crying out for change?

[Lucy Rigby]

I was talking about our new pro-growth licensing policy framework, which was announced in the Budget. If the hon. Member is referring specifically to business rates, as I think he might be, we have made it clear that we are continuing to talk to the sector about any support beyond the existing £4.3 billion support package that the Chancellor announced in the Budget.

Oral Answers to Questions

Debate between Joshua Reynolds and Lucy Rigby

Thursday 4th September 2025 Commons Chamber

[The Solicitor General]

I have heard from Crown Prosecution Service prosecutors about the deplorable actions that the smugglers take in not only facilitating very young children being aboard the boats, but even sedating them to ensure they are compliant during the crossing. My hon. Friend is right that the dangers faced by people, particularly children, when they cross the channel are extremely grave. This Government are absolutely determined to break the business model of the people smugglers, so protecting our borders and stopping lives, including young lives, being put in such danger.

[Mr Joshua Reynolds (Maidenhead) (LD)]

Will the Solicitor General commit to working across Cabinet to publish the number of people smuggling cases that have collapsed before trial over the past five years, and the reasons why they have collapsed?

[The Solicitor General]

I think this is important to look at, and I want to highlight that the CPS is taking considerable action to prosecute these offences. We have given the CPS extra funding to increase its capacity to work on Border Security Command cases, and the money will allow the CPS to recruit additional staff in the areas at the frontline of combating organised immigration crime.