Finance Bill (Fifth sitting)

Kirsty Blackman Excerpts

Committee Debate: 5th sitting: House of Commons
Tuesday 24th October 2017 Public Bill Committees

[Mel Stride]

If I may, I shall write to the hon. Gentleman on the specific questions that he has raised about the consultation on these measures.

Question put and agreed to.

Clause 43 accordingly ordered to stand part of the Bill.

Clause 44

Petroleum revenue tax: elections for oil fields to become non-taxable

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

[Kirsty Blackman (Aberdeen North) (SNP)]

It is welcome that the Government are looking to reduce the administrative burden in relation to elections for oilfields to become non-taxable. That is positive news. The Chancellor of the Exchequer has mentioned in two Budgets that there will be changes in the taxation system to make it easier for late-life assets to be transferred. I have heard noises from the Chancellor in recent times that he may not introduce that in the autumn statement this year, and I will just make this pitch to the Minister. This issue is incredibly important. The oil and gas industry is not asking at this moment for significant changes, but for the change in relation to the transfer of late-life assets. I would very much appreciate it if, in the context of reducing the administrative burden and making things easier for companies dealing with the very mature field in the North sea, the Minister would hear my case on that and make the case to the Chancellor.

[Anneliese Dodds]

I must admit to being slightly confused about the purported impact of this change. Some of the inputs from stakeholder bodies seem to imply that there will be some kind of Revenue impact as a result of the changes in relation to procedures for elections for oilfields to become non-taxable. For example, Oil & Gas UK has welcomed the change, saying that the move will reduce the headline rate of tax paid on UK oil and gas production. In contrast, Friends of the Earth has expressed disappointment at the tax cut. As I understand it, petroleum revenue tax was permanently zero-rated in 2016, and the Government’s assessment of the measure’s impact on the Exchequer is that it will be negligible. Therefore, can the Minister enlighten us on why some people appear to view the measure as potentially having an Exchequer impact, but the Government do not appear to have that view?

--- Later in debate ---

Digital reporting and record-keeping for income tax etc

[Kirsty Blackman]

I beg to move amendment 37, in clause 60, page 71, line 16, leave out ‘paragraph 2’ and insert ‘paragraphs 1A and 2.

1A (1) The provisions of this Schedule shall not apply to a person specified in paragraph 1(1) except in accordance with the provisions of this paragraph.

(2) No person shall be subject to the provisions of this Schedule unless they fall within a class of persons specified in regulations made under sub-paragraph (3).

(3) The Commissioners may by regulations specify a class of persons to whom this Schedule applies provided that the relevant conditions in sub-paragraphs (4) to (9) are met.

(4) The condition in this sub-paragraph is that the first regulations may not be made until after the Commissioners have undertaken an assessment of the impact of the implementation of the provisions of this Schedule on—

(a) small businesses that have limited technological connectedness,

(b) businesses in rural areas, and

(c) businesses that are likely to have been affected by the closure of HMRC offices.

(5) The condition in this sub-paragraph is that the first regulations may not apply to more than 25 per cent of persons to whom paragraph 1(1) applies.

(6) The condition in this sub-paragraph is that the Commissioners have prepared an assessment of the likely effects of making regulations in the form of a draft which has been laid before the House of Commons by the Treasury.

(7) The condition in this sub-paragraph is that the House of Commons has resolved that regulations should be made in the form of a draft laid in accordance with sub-paragraph (6).

(8) The condition in this sub-paragraph is that the second regulations may not be made—

(a) until at least twelve months have elapsed since the making of the first regulations,

(b) unless, taken together with the first regulations, they apply to no more than 90 per cent of persons to whom paragraph 1(1) applies.

(9) The condition in this sub-paragraph is that the third set of regulations may not be made until at least twelve months have passed since the making of the second regulations.’

This amendment would provide for a staged implementation of the provisions for making tax digital in relation to income tax, with review of impact on specific groups and provision for each new stage to be subject to approval by resolution of the House of Commons.

[The Chair]

With this it will be convenient to discuss the following:

Amendment 7, in clause 60, page 75, line 7, at end insert—

‘(1A) Regulations under sub-paragraph (1) must in particular require a person or partnership to record service charges separately from other income.’

This amendment imposes a duty on HMRC to require separate records to be kept of service charges.

Amendment 8, in clause 60, page 75, line 7, at end insert—

‘(1B) Regulations under sub-paragraph (1) must in particular require a person or partnership to maintain separate records in respect of each employee and in respect of any prescribed time period of service charges received and to make those records available in a prescribed manner.

(1C) In sub-paragraph (1B), “prescribed” means prescribed by regulations.’

This amendment imposes a duty on HMRC to require separate records of service charges to be kept in respect of each employee and in respect of prescribed period to be made available in a prescribed manner.

Amendment 39, in clause 60, page 75, line 7, at end insert—

‘(1B) Regulations under sub-paragraph (1) must in particular require a person or partnership to maintain separate records in respect of each employee and in respect of any prescribed time period of service charges received and to make those records available to those employees.

(1C) in sub-paragraph (1B), “prescribed” means prescribed by regulations.’

This amendment imposes a duty on HMRC to require separate records of service charges kept in respect of each employee and in respect of prescribed period to be made available to those employees.

Amendment 33, in clause 60, page 78, line 19, after ‘day’, insert

‘no earlier than 1 January 2022’.

This amendment provides that the provisions for digital reporting in Clause 60 may not be brought into force before 2022.

Amendment 40, in clause 60, page 78, line 20, at end insert—

‘(4A) No regulations may be made under subsection (4) until after 90 days after the Chancellor of the Exchequer has laid a report before the House of Commons which sets out—

(a) the steps which HMRC has undertaken to establish that suitable software is available;

(b) the results of the testing by HMRC and others of that software; and

(c) the reasons why mandatory use of the software is in the interest of HMRC and taxpayers.’

This amendment would require the Chancellor of the Exchequer to report on software suitability and testing before giving effect to the provisions of Clause 60.

Clause 60 stand part.

Amendment 34, in clause 61, page 78, line 34, after ‘day’, insert

‘no earlier than 1 January 2022’.

This amendment provides that the provisions for digital reporting in Schedule 14 and Clause 61 may not be brought into force before 2022.

Clause 61 stand part.

That schedule 14 be the Fourteenth schedule to the Bill.

Amendment 35, in clause 62, page 79, line 12, at end insert—

‘(5A) No regulations may be made under sub-paragraph (5) on a day prior to 1 January 2022.’

This amendment provides that the provisions for digital reporting in Clause 62 may not be brought into force before 2022.

Amendment 38, in clause 62, page 79, line 12, at end insert—

‘(5A) But no regulations may be made by the Commissioners unless the conditions in sub-paragraphs (5B) to (5D) are met.

(5B) The condition in this sub-paragraph is that the first regulations may not be made until after the Commissioners have undertaken an assessment of the impact of the implementation of the provisions of those regulations on—

(a) small businesses that have limited technological connectedness,

(b) businesses in rural areas, and

(c) businesses that are likely to have been affected by the closure of HMRC offices.

(5C) The condition in this sub-paragraph is that the Commissioners have prepared an assessment of the likely effects of making regulations in the form of a draft which has been laid before the House of Commons by the Treasury.

(5D) The condition in this sub-paragraph is that the House of Commons has resolved that regulations should be made in the form of a draft laid in accordance with sub-paragraph (5C).’

This amendment would provide for implementation of the provisions for making tax digital in relation to VAT to take place only following a review of impact on specific groups and provision for regulations to be subject to approval by resolution of the House of Commons.

Amendment 36, in clause 62, page 79, line 19, at end insert—

‘(6A) Regulations under sub-paragraph (5) may not impose mandatory requirements for businesses to generate quarterly updates.’

This amendment provides that any system for quarterly updates to be generated must not be mandatory.

Amendment 10, in clause 62, page 80, line 13, at end insert—

‘(12) Before making regulations under sub-paragraph (5) and in any case within three months of the passing of the Finance (No. 2) Act 2017, the Commissioners shall lay before the House of Commons an assessment on the effects on compliance with the requirements of those regulations by small businesses of the United Kingdom’s withdrawal from the European Union.’

This amendment requires HMRC to publish an assessment of the effects on electronic VAT records requirements for small business of the UK’s withdrawal from the EU.

Clause 62 stand part.

[Kirsty Blackman]

The Scottish National party has previously raised concerns about the moves to digital reporting. It is not that we do not support the principle of moving towards digital reporting. We have been clear that we think this could be a positive move. The concerns that we have raised previously have been about the timing of the moves and the way in which smaller companies were expected to move to digital reporting first. The Minister, to his credit, has changed the proposed plans and come up with a much more sensible direction and timeline for moving to digital reporting than the Government previously suggested.

Our amendment highlights specific concerns about the move to digital reporting, which, despite the Government’s changes and moves, we still feel have not been adequately answered. The amendment deals with the impact on specific groups that we feel might be negatively affected by the move to digital reporting.

The first group is small businesses that have limited technology for connectedness. There are small businesses that do not make that much use of the internet. There are some coming through that are wholly internet-based, and for which it is very important; but some are still starting that are not technologically advanced and do not use the internet much. We are concerned about the impact on them of having to report digitally online, in view of their access to technology. The businesses in question are not only in rural areas; they may just be run by someone who does not make huge use of the internet.

The second group is businesses in rural areas. In those areas in particular, even though commitments have been given by the Scottish and UK Governments about improving access to digital connectivity, at the moment not everyone has a fast enough internet connection to enable them to access the relevant services. If it is mandatory for businesses to use online digital reporting, that will be a problem for those without access to adequate technology—particularly in rural areas. Areas in England are affected, as well as those in more remote parts of Scotland. I understand that there have been Government commitments to get people on to digital systems, but we are not quite there yet.

[Ruth George (High Peak) (Lab)]

Does the hon. Lady agree that, in areas such as the remoter parts of Scotland, as in areas of my constituency, broadband access can be intermittent? The Government have excluded from the provision those who are completely digitally excluded. However, there are areas with patchy broadband—people have it on some days but not others—and there could be a problem for people who do not fall in the group that the Government have excluded.

[Kirsty Blackman]

I agree. In Kingswells in my constituency, which is a large suburb of Scotland’s third city, there are significant issues about access to fast broadband. There is access to slow broadband, and it is sometimes intermittent, for reasons to do with historical infrastructure. Broadband companies were put on the grid to begin with and they now find it more difficult to upgrade the historical technology. I appreciate the point that the hon. Lady has made; it is important to note that for some people intermittent access can be as difficult as no access.

The third category of businesses we have chosen is those likely to be affected by the closure of HMRC offices. I have needed to do tax returns online only since I became an MP. The problem with some of the questions is that yes or no are the options but my answer has been “maybe” or “kind of”. Despite the fact that the online form was fairly clear, I needed to phone someone to get some advice on whether to tick yes or no. If businesses lack advice and information from HMRC about the correct option to choose in some cases, it will be more difficult for them to fill out the forms.

It is important that businesses should be given the advice, information and support they need to fill in the forms correctly online. I am sure that no businesses will be trying to make errors; they will be looking for advice. My concern, particularly regarding HMRC offices, is the lack of access to advice that people might have.

[Mel Stride]

The important point is that, for many years, people have not simply been walking into or getting an appointment at their local HMRC office. The fact that we are drawing offices together into 13 beefed-up regional centres is particularly important in the context of telephone advice, which the hon. Lady is alluding to and which will still very much be available for exactly the circumstances she describes.

[Kirsty Blackman]

I appreciate the Minister’s point. In an earlier sitting, he mentioned the positive timelines when people phone HMRC for advice; apparently the phone is answered very quickly. I get that he says the statistics show that, but people are walking into my surgeries and into my constituency office saying that they have tried for hours to phone HMRC and have really struggled to get through. Despite him saying that the statistics show one thing, the lived experience of my constituents is very different. That is why I have these concerns, and even if one person or a handful of people cannot get through on the phone and fill in their form on time because they are not able to answer the question, it is a concern. I implore the Minister to continue working on call times and to ensure that, when people phone, they get through as quickly as possible and that the calls are answered, and that the advice provided is correct so that people can make the correct choice, particularly with online forms.

Labour Members have tabled a number of amendments to the clause. We were clear in the SNP manifesto that we supported a phased move to digital reporting, so what the Minister has proposed is now much more in line with what we were thinking. I ask that Labour Members, in speaking to the amendments, explain why they chose 2022, and I will make a call after that on whether we think supporting them is relevant. One Labour amendment suggests that we should not move towards digital reporting, which would be a concern for us because our manifesto commitment was positive about digital reporting. I look forward to hearing the comments from the Opposition and the Minister.

[Stella Creasy (Walthamstow) (Lab/Co-op)]

As ever, I am eager to serve under your chairmanship, Mr Howarth. I come to the Committee with a series of amendments on what digital reporting might offer us to resolve some of the challenges faced by employers and employees in our country. There are two issues in particular, which I will come to in turn, because as ever with the Finance Bill, they are technical.

First, I will deal with the treatment of the lowest-paid staff in our country—Office for National Statistics data show that, of all low-paid people, waiters and hospitality staff get paid the least—and what we can do to help them with their incomes. Secondly, I will look at how digitisation could help us to address compliance, which is one of the biggest issues for small businesses. To prefigure the Minister’s comments, I know he will say that that is for another Bill, but given how important it is for the systems to work together, I think this is an issue for this Bill. I hope he will bear with me.

I turn first to amendments 7 and 8—amendments 8 and 39 are identical—which concern the treatment of waiters and hospitality staff. Many Members may be familiar with campaigns on the treatment of tips, service charges and gratuities and with evidence showing that some employers were using those to top up people’s wages and to avoid paying the national minimum wage. Members might therefore be relieved that legislation was brought in to prevent that, but it has become clear that many employers still use tips, service charges and gratuities to avoid paying their staff properly. The amendments go to the heart of how we can address that.

In particular, Members might not be aware that people are supposed to pay tax and national insurance on their tips. If an employee is paid their tips through a tronc, where their employer collects the money usually using an online system, which is what we are debating today, the employer is supposed not only to pool the tips and share them out—after all, I think we would all recognise that as well as the person who serves a meal, the people who work in the kitchen deserve recognition of their work—but to check that the employee has paid national insurance and tax.

--- Later in debate ---

[Mel Stride]

The hon. Lady overlooks the fact that it is often possible for those who wish to complain to do so anonymously through their trade union or other representatives. That is what happens in many cases. HMRC does not have to rely on a specific complaint to conduct an investigation. It may have suspicions of its own for a variety of reasons. I do not think that we are in a position where people are unable to come forward, as she suggests.

The hon. Member for Aberdeen North has tabled two amendments that seek to review the impact of MTD on specific groups. I recognise her concerns, but the Government have been clear from the outset that businesses that are unable to go digital will not be required to do so.

If you will indulge me, Mr Howarth, it is worth looking at some of the detail of the Bill at this point. The hon. Lady has raised a very important point about potential digital exclusion. Clause 60 covers exemptions, as I am sure she is aware. New sub-paragraph (4) of paragraph 14 of schedule A1 states:

“The digital exclusion condition is met”—

for those who would not be required to put in their returns digitally—

“in relation to a person or partner if…for any reason (including age, disability or location)”—

the hon. Lady rightly raised rural localities—

“it is not reasonably practicable”—

that is not the same as completely impossible—

“for the person or partner to use electronic communications or to keep electronic records”.

I think that is a well-crafted clause to catch the kind of circumstances about which the hon. Lady and I are concerned.

[Kirsty Blackman]

The concern raised by the hon. Member for High Peak was about intermittency. The issue is not about people who do not have access to the internet at all, but those who have only intermittent access. The clause may not be lenient enough for them to make a case for not having digital access. Does the Minister have a view on that?

[Mel Stride]

I thank the hon. Lady for her further point. I guess it comes down to interpretation. It seems to me that if it is not reasonably practical for a person or company to use electronic communications, the reliability of the service—another way of describing the point she raised—would be an important part of the judgment that would be made.

The clause continues with “Further exemptions”. Proposed new paragraph 15(1) states:

“The Commissioners may by regulations make provision for further exemptions.”

New paragraph 15(1) states:

“The exemptions for which provision may be made include exemptions based on income or other financial criteria.”

There is therefore a recognition in the Bill that not only do we need to get it right for the current circumstances, but we need the flexibility to be ready for any circumstances that might present themselves and which we have not considered at this stage. Those would need to be addressed further down the line.

For those who can go digital but require additional assistance, HMRC will continue to provide a diverse range of digital support, including webinars, helplines and YouTube videos, to help them meet the requirements of making tax digital.

The hon. Member for Aberdeen North also seeks to provide for a phased implementation period, with the commencement of each new stage requiring approval by the House. We have already revised the implementation to start with businesses that report quarterly, and stakeholders are operating on the basis of the new timeline. We are phasing in the implementation by piloting the changes and by starting with mandation only for VAT and those above the VAT threshold. The secondary legislation required to lay out the detailed operation of MTD will be laid before the House in due course, offering Members a further opportunity to scrutinise our plans and consider our proposals.

The hon. Member for Walthamstow has tabled an amendment to require HMRC to publish an assessment of the effect of our exit from the European Union on MTD for VAT for small businesses. HMRC wants to give businesses plenty of time to adapt to MTD and is allowing for a full year of piloting the changes before mandation applies and before the UK leaves the European Union. If businesses wish to begin keeping their records digitally before we leave the EU, they will be able to do so.

The hon. Lady raised specific issues in respect of VAT and the 13th directive. The Government do not consider there to be an MTD issue here. MTD is about how records are kept and reported, rather than the nature of the VAT regime itself. The regulations will be consistent with the requirements of the 13th VAT directive, but if she has specific concerns, HMRC will be happy to look into them.