Oral Answers to Questions

Debate between Lucy Rigby and Mark Garnier

Tuesday 27th January 2026 Commons Chamber

[Mr Speaker]

I call the shadow Minister.

[Mark Garnier (Wyre Forest) (Con)]

The Chancellor has been very proud that the FTSE 100 has passed through the 10,000-point barrier, citing that as an endorsement of her policies. Does she not realise that that still leaves FTSE 100 on lower valuations than comparable markets and that, in any event, over 80% of the earnings of the FTSE 100 are generated outside the UK? Is it not clear that the FTSE 100 performance is despite this Government’s policies, not because of them?

[Lucy Rigby]

I could not disagree more with the shadow Minister. He is constantly talking this country down. The package of reforms that this Government are making to our capital markets are strengthening those markets, and they are beginning to bear fruit.

Finance (No. 2) Bill (First sitting)

Debate between Lucy Rigby and Mark Garnier

Committee stage
Tuesday 27th January 2026 Public Bill Committees

[The Economic Secretary to the Treasury (Lucy Rigby)]

I am very pleased to be opening the first debate in this Finance Bill Committee. Clause 11 sets the charge for corporation tax for the financial year commencing in April 2027 and sets the main rate at 25%. Clause 12 sets the small profits rate at 19% for the same period.

The Government are committed to a stable and predictable tax system for businesses, and we are supporting businesses by creating the economic stability and fiscal sustainability needed for future growth. That is why we are delivering on our commitment, set out in the 2024 corporate tax road map, to cap corporation tax at 25% for the duration of this Parliament. The changes made by clauses 11 and 12 will establish the right of the Government to charge corporation tax for the financial year beginning in April 2027.

[Mark Garnier (Wyre Forest) (Con)]

Thank you for your guidance, Sir Roger. I am very grateful that you are in the Chair, because although I have been doing this for 15 years, as you know, and this is about my fifth Finance Bill, I do not have a clue how any of it works.

[Mark Garnier]

It is of course standard practice—as with income tax—for the Government to legislate the charge for corporation tax every year. These rate levels have remained unchanged since Labour came into office. As my hon. Friend the Member for Grantham and Bourne (Gareth Davies) pointed out last year, Labour promised to cap the corporation tax rate at 25% for the whole of this Parliament. That has not been done in legislation, although we have had an indication from the Minister that that is still the Government’s intention.

I will make just one small political point. The Government did promise that they would not increase taxes on working people, but we have seen national insurance contributions increase—that was obviously in a different Bill. None the less, the more the Minister can say about capping corporation tax at 25%, the more confident businesses and our economy will be that something will not be slipped in during the next three and a half years before the general election. We have no other objection to this measure.

[Lucy Rigby]

I am grateful to the hon. Member for Wyre Forest for his comments and for highlighting the fact that we have kept our manifesto commitment on tax. This is part of that: we are capping corporation tax at 25% in line with our corporate tax road map.

Question put and agreed to.

Clause 11 accordingly ordered to stand part of the Bill.

Clause 12 ordered to stand part of the Bill.

Clause 13

Enterprise management incentives: thresholds and period for exercise

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[Lucy Rigby]

Clauses 17 and 18 will bring employee car ownership schemes into the benefit-in-kind regime from 2030, with transitional arrangements until 2032. Clause 19 will ensure that the introduction of new emissions standards does not lead to a sharp increase in benefit-in-kind tax for plug-in hybrid electric vehicles.

On clauses 17 and 18, the costing, published alongside the Budget, accounts for a behavioural response whereby a significant number of taxpayers switch towards alternative vehicles or move away from using company cars altogether. That has been updated since the 2024 autumn Budget, taking into account further evidence on the impacts of the measure provided by the sector.

Private use of a company car is a valuable benefit, and it is right that the appropriate tax be paid on it. This measure will ensure fairness to other taxpayers, reduce distortions in the tax system and reinforce the emissions-based company car tax regime, which incentivises the take-up of zero emission vehicles. To support the automotive industry and provide employers with more time to adjust to the changes, the Government have delayed implementation of the measure to 6 April 2030 and have introduced transitional rules.

On clause 19, new emissions standards being introduced in the UK reflect the higher real-world emissions of PHEVs. It is important that a car’s official emissions figures reflect real-world emissions, but that can lead to tax increases where tax is linked to emissions levels. The Government recognise that although it is right that higher-emitting vehicles pay more tax, lower-emission company cars such as plug-in hybrid vehicles continue to play an important role in supporting our transition towards zero emission vehicles and the decarbonisation of transport. The changes made by the clause will introduce a temporary benefit-in-kind tax easement for employers providing, and employees being provided with, PHEVs as company cars. I commend clauses 17 to 19 to the Committee.

[Mark Garnier]

I thank the Minister for her comments, but we are concerned about the unintended consequences of the three clauses.

We are concerned about how clause 17 will affect automotive industry jobs and vehicle sales. Approximately 76,000 workers use ECOS, across 1,900 medium-sized and large businesses. Those workers have utilised ECOS for essential, affordable and reliable personal transport. We believe that the clause risks making ECOS vehicles unaffordable for the workers who currently use them. In fact, using the scheme arrangements and paying tax from 2030 to 2032 onwards means that such workers face, in effect, a pay cut. That is especially unfair because those people who most use the schemes rely on a vehicle for their job much more than those in most other industries. There is a risk of further knock-on effects on the automotive industry if workers abandon ECOS completely.

The chief executive of the Society of Motor Manufacturers and Traders, Mike Hawes, who is one of the leading voices in the automotive industry, has expressed strong disapproval of the Government proposal to change ECOS. That is because 100,000 cars are provided through the schemes each and every year, which alone amounts to 5% of the new-car market in the UK. The SMMT predicts that changing the schemes will endanger 5,000 manufacturing jobs in the UK; it claims that that will bring about a loss of half a billion pounds a year due to fewer sales, lost VAT and lost vehicle excise duty receipts. That more than outweighs the £275 million in revenue that the Treasury predicts it will take within the first year of the tax changes taking effect.

We do not feel that clause 18 adequately protects the automotive industry and its workers. Under current ECOS arrangements, employers can sell a vehicle to an employee below market value, at a discounted price. For many employers, that has acted as an additional benefit to form a competitive employee recruitment package and has helped to improve staff retention. These criteria effectively stipulate that vehicles must be sold on the same terms as in the open market. Although exempt employers will not pay benefit-in-kind tax, they will inevitably have to pay a higher price for the vehicle itself. The SMMT estimates that that could become unaffordable for its members’ staff and automotive workers. The knock-on effects outlined in the discussion of clause 17 will remain. Fewer employees will be attracted to purchasing a vehicle. That will lead to fewer employers purchasing vehicles from car manufacturers, and the risk to manufacturing jobs and lost revenue will therefore still apply.

Clause 19 aims temporarily to ease the benefit-in-kind tax treatment for plug-in hybrid electric vehicles. We understand the intention behind this legislative change. We want people to take up low-emission electric vehicles, and the taxation system is an effective tool to encourage that. We are also conscious that stricter emission tests will be implemented over time. That could push plug-in hybrid emission vehicles into higher emission bands, and more tax will therefore be paid on them in the future. The knock-on effects on electric car manufacturers and the environment could be stark.

Clause 19 is part of the same package that endangers jobs in the automotive manufacturing industry, which will lead to a loss of about £500 million in VAT and vehicle excise duty receipts. Automotive News has reported on the progress of electrified vehicle registrations: it says that in October 2025 PHEV registrations rose by 27.2%, and that electrified vehicles represented the majority of new car registrations, at 50.8%. The SMMT says that in 2025 the new car market reached 2 million units for the first time since 2019. It predicts that the removal of ECOS could undo the progress that electrified vehicles, including PHEVs, have achieved by denying workers affordable access to new and increasingly zero emission vehicles.

CBVC Vehicle Management has said that these measures continue to make PHEVs look attractive in the short term, but the chief executive, Mike Manners, has advised people considering a PHEV to look at the benefit-in-kind tax implications and avoid their lease running into the tax year 2028-29. The benefit-in-kind easement is temporary until 6 April 2028.

Anthony Cox of RSM UK says that manufacturers do not expect that the reforms will push people into using electric cars. He states that employees of manufacturers and retailers could instead seek out older or less clean cars to purchase, outside any employer or employee management arrangements.

The point is that there are unintended consequences to the clauses. Although we will not oppose them, we want the Minister to take into account the fact that the Government may not get what they want out of them.

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[Lucy Rigby]

Clauses 20 to 23 relate to other employment income. Clause 20 will simplify the rules on common workplace health and equipment costs, reducing administrative burdens for employers and giving greater clarity to the tax treatment of these costs. It will exempt reimbursements for accommodations, supplies or services used in performing employment duties, such as homeworking equipment; it will extend the existing exemptions for eye tests and corrective appliances to cover reimbursements; and it will introduce a new exemption for both the direct provision and the reimbursement of flu vaccinations. Uptake will depend on employer practice, but these changes will make the rules simpler and fairer for those affected. The Exchequer impact is negligible, but this change will allow employers to support staff without having to handle the sourcing and provision of minor items themselves. This will reduce time and resource costs.

Clause 21 relates to homeworking expenses. It will remove the process by which employees can claim an income tax deduction from HMRC if they have incurred additional household costs when required to work from home. The changes introduced by the clause aim to address concerns around non-compliance and to ensure fairness across the tax system.

Clause 22 will introduce changes that confirm the income tax treatment of payments made by zero-hour or similar limited-hour workers for a cancelled, moved or curtailed shift. This measure will put the tax treatment of such a shift beyond doubt. These tax changes will have an impact only on a small subset of workers, as the vast majority of such payments are taxable under existing legislation. The measure confirms that payments received in the event that a shift is altered at short notice are taxable in all scenarios, including in relation to agency workers and workers employed under umbrella companies.

Clause 23 puts beyond doubt the answer to whether earnings for duties not performed should be treated as UK earnings or overseas earnings for non-UK residents. The clause will establish a general principle to determine the tax treatment of earnings that relate to duties that have not been performed. It will also make a consequential amendment to foreign employment relief, commonly known as overseas workday relief, to ensure that this clarification also applies to UK residents who claim it. I commend clauses 20 to 23 to the Committee.

[Mark Garnier]

Clause 20 will introduce specific exemptions for minor expenses incurred by an employee on behalf of their employer. The Opposition particularly welcome subsections (3) to (6). As the Institute of Chartered Accountants in England and Wales says, it is a positive step that focuses on prevention rather than cures. It is also about the trade-off between tax relief and reduced future healthcare spending.

As the Association of Taxation Technicians has asked, will the Minister consider whether the covid-19 vaccination could be included in this provision? The Government’s explanatory notes state that corresponding changes to NICs for influenza vaccines and homeworking equipment will be made through separate regulations. Will the Minister provide more detail on when we can expect those regulations to be introduced?

On clause 21, the Government’s policy paper suggests that there will be no direct impact on business. However, there may be an indirect impact, as employers feel pressured to change their policies on reimbursement. As the Chartered Institute of Taxation points out:

“This creates an uneven situation in which two employees with identical working arrangements and costs are treated differently for tax purposes solely on the basis of their employer’s reimbursement policy.”

It also seems to follow our party’s scepticism about solely remote working. During the passage of the Employment Rights Act 2025, the Government said repeatedly that the right to work from home boosts productivity. Clause 21 seems to go against that by making it more difficult to work from home. It also seems to be a further attack on private sector employees, despite the fact that in 2024 HMRC spent £82 million on remote working devices for its workers, while the Home Office spent £53 million. Is this another example of the Government hitting the private sector while protecting the public sector?

Clauses 22 and 23 confirm that payments received in Great Britain for cancelled, moved or curtailed shifts are subject to income tax. In the explanatory notes, the Government state that this would also allow for

“the introduction of regulations to ensure that payments are also subject to National Insurance contributions”.

We think it would help to provide fairness in the tax system to support the clarity that the clause provides, so can the Minister confirm when the Government will seek to introduce those specific changes?

More generally, I want to make a point that my hon. Friend the Member for Mid Buckinghamshire (Greg Smith) made on the Employment Rights Bill Committee. While the clause provides fairness in the system between employees, the Government are still providing little support for businesses if they have to cancel, move or curtail shifts in circumstances that are unexpected or out of their control. Will the Minister commit to working with her colleagues in the Department for Business and Trade to assess how they can better support businesses when such situations arise?

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[Lucy Rigby]

Clause 24 will make changes to ensure that recruitment agencies are responsible for accounting for pay-as-you-earn on payments made to workers that are supplied via umbrella companies. Many umbrella companies operate diligently and support their employees, but a significant number are used to facilitate non-compliance, including tax avoidance and fraud. Clause 24 is intended to encourage increased due diligence among businesses that choose to use umbrella companies to engage workers. It will do so by introducing joint and several liability for the PAYE taxes that umbrella companies are required to remit to HMRC.

Government amendments 5 to 8 will ensure that the legislation works as intended by making a small technical change. This will ensure that HMRC is able to recover underpayments of tax from businesses that are within scope of the new rules because they purport to be umbrella companies, in the same manner that underpayments will be recovered from the other businesses that are within scope of the new rules. Amendment 5 will ensure that HMRC is able to keep taxpayers informed about its investigations concerning sums to which they are jointly and severally liable. That will help taxpayers to take action to mitigate their exposure to unpaid liabilities.

I commend clause 24, together with Government amendments 5 to 8, to the Committee.

[Mark Garnier]

Back in 2023, the Conservative Government opened a consultation on how to tackle non-compliance in the umbrella company market, because there was evidence of widespread non-compliance that deprived workers of their employment rights, distorted competition in the labour market and led to a significant tax loss to the Exchequer. In the 2024 autumn Budget, the Chancellor announced that she would follow up the consultation, hence this clause.

The Government state in their explanatory notes that the clause seeks

“to drive behavioural change among businesses that use umbrella companies in the supply of workers by giving them a financial stake in the compliance of the umbrella companies that they use.”

I think there is broad agreement about the need for this measure in tackling tax non-compliance in the umbrella company market. However, the Chartered Institute of Taxation has raised two particular issues, and I would be grateful for the Minister’s comments on them.

First, there seems to be an absence of safeguards. Currently, HMRC can transfer liability to the agency regardless of its circumstances. When an agency has done all it can to ensure the integrity of the supply chain, but has been the victim of fraud by the umbrella company, we think there should be safeguards in place to prevent the transfer of debts.

Secondly, there is some concern that the definition of “purported umbrella company” is too wide. The clause defines such a company so as to include any entity supplying an individual with services where that individual has a material interest in the entity. That means that, for instance, personal service company arrangements could fall within the definition. Is it the Government’s intention to include personal service company arrangements within the definition of a purported umbrella company? I should declare an interest: I have a personal service company. Can the Minister expand on what discussions on the clause have taken place with industry organisations such as the Freelancer and Contractor Services Association, which provides accreditation for many umbrella companies?

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[Lucy Rigby]

Clauses 25 to 27 provide for the Government to create a settlement opportunity in line with their response to the independent review of the loan charge, and to encourage those who have not yet settled with HMRC to come forward and do so.

Clause 25 sets out some of the main features of the scheme, including how the new settlement amount will be calculated. Clause 26 will ensure that inheritance tax is not charged as part of any settlement where it relates to disguised remuneration arrangements in scope of the loan charge. Clause 27 makes supplementary provision for the settlement scheme to ensure that it can operate as intended.

In some places, the Government have gone further than the review recommended. In addition to removing late payment interest and inheritance tax, and allowing for generous tax deductions to represent amounts assumed to have been paid to promoters, the Government will also write off the first £5,000 of each individual’s liability. Because of these changes, around 30% of people within scope of the review could see their liabilities removed entirely, while most other individuals will see their liabilities reduced by at least half.

Turning to Government amendments 9 to 11, HMRC is aware of a number of promoters who have made use of their own disguised remuneration schemes and would be within scope of the settlement opportunity. I am very clear that it would be wrong for those individuals to be able to access the generous settlement terms on offer rather than paying every penny that they owe. Clause 25 makes provision for the exclusion of tax avoidance promoters from the settlement opportunity. Amendments 9 and 10 tighten those provisions to ensure that HMRC is able to prevent the controlling minds behind promoter companies from inappropriately accessing the settlement opportunity, in line with the Government’s announcements at the Budget. Amendments 9 to 11 also clarify that where an employer still exists, it can enter into a settlement on behalf of its employees who used disguised remuneration schemes.

New clauses 25 and 26, which would require HMRC to publish a report on the operation and scope of the loan charge settlement opportunity and a report on the treatment of disguised remuneration arrangements falling outside the scope of the loan charge, are unnecessary. The Government published a comprehensive response to the review, setting out our position, at the Budget. That outlined the decisions the Government made to help draw this matter to a close for those impacted, and explained why the scope of the review had been set as it had. It explained that the settlement opportunity will apply to disguised remuneration use between December 2010 and April 2019, because that is the period to which the loan charge applies. While people who used tax avoidance schemes outside that period will not be able to access the scheme, HMRC will work sensitively and pragmatically to help people to resolve their cases, including by taking account of people’s means and offering generous payment terms where appropriate.

I am sure that everyone will be aware that the loan charge is already subject to significant parliamentary scrutiny. HMRC officials and Treasury Ministers routinely provide updates on their work to the Treasury Committee and the Public Accounts Committee, and the Treasury Committee asked the HMRC permanent secretary about this topic just last month. I therefore urge the hon. Member for Maidenhead not to move his new clauses, and commend clauses 25 to 27, and Government amendments 9 to 11, to the Committee.

[Mark Garnier]

The Conservatives welcome the independent review and the thrust of clause 25. If we were to have a criticism, it would be to do with fairness, on which we had concerns shared with us by the Low Incomes Tax Reform Group. A key objective of the McCann review, which the Minister referred to and which was set up by the Government, was to ensure fairness for all taxpayers. However, by not extending the more generous settlement opportunity to those who have already fully settled and/or paid the loan charge, the provision arguably does not achieve fairness for all taxpayers. It will effectively put those who chose not to comply with their tax obligations in a better position than those who did. That could create perverse incentives, harm future tax compliance and damage trust in the tax system. Could the Minister provide a little more detail as to why the Government have excluded those who have already settled their claims?

Finance (No. 2) Bill (Second sitting)

Debate between Lucy Rigby and Mark Garnier

Committee stage
Tuesday 27th January 2026 Public Bill Committees

[The Economic Secretary to the Treasury (Lucy Rigby)]

Turning to the non-Government amendments, new clause 28 asks His Majesty’s Revenue and Customs to assess the potential benefits of establishing a digital application process for taxpayers seeking to pay capital gains tax by instalments following disposals to employee ownership trusts. The facility to pay CGT in instalments is a long-standing feature of the tax code and is well understood by both taxpayers and HMRC. The process for applying to pay by instalments is clearly set out within HMRC guidance and applications are dealt with swiftly once they have been received by HMRC. My officials have met representatives from the employee ownership sector to provide bespoke guidance on how these instalment payment provisions apply to disposals to EOTs. That engagement continues. I therefore ask the hon. Member for Maidenhead to withdraw new clause 28. In any event, it should be rejected.

New clause 29 asks the Chancellor to lay a report before the House within the next 12 months assessing the impact on small and medium-sized enterprises of the changes made under clause 35. The Government monitor the impact of all changes made to existing tax reliefs. However, publishing a report on the change introduced by clause 35 within the next 12 months would not be reasonable as the first full tax year of these changes is the tax year 2026-27, so HMRC will not have complete information to assess their impact. New clause 29 should therefore be rejected.

In addition to rejecting new clauses 28 and 29, I commend clause 35 to the Committee.

[Mark Garnier (Wyre Forest) (Con)]

Clause 35 introduces a 50% chargeable gain on shares sold by a company to an EOT. That will have a direct effect on trustees’ ability to benefit company employees. The 2014 Conservative Government introduced 100% capital gains tax relief to incentivise companies to transition to EOT models. EOTs have benefited employees by rewarding and motivating them—for example, by distributing annual tax-free bonuses of up to £3,600 a year to each employee. These tax changes would hurt employees most of all.

The Office for Budget Responsibility’s “Economic and fiscal outlook” from November 2025 forecasted that this will raise just £900 million a year on average from 2027 to 2028. However, the OBR also gave this measure a “very high” uncertainty ranking. The OBR highlighted the fact that these tax changes could have a behavioural effect: company owners would instead hold on to their shares for longer before realising gains. That means that company owners will slow the flow of shares they sell to trustees, so trustees will receive far fewer shares and, as a result, less value will be passed on to employees.

It is worth mentioning the commentary from other organisations. The Financial Times reported that tax advisers have warned against this measure and are concerned that entrepreneurs would have to cover the tax bill before they receive the proceeds of the sale. Chris Etherington of RSM UK is concerned that these changes will slow the pace of change to EOTs. The Centre for the Analysis of Taxation stated that this was a “good reform” and supports withdrawing relief entirely. This is not very popular, and there is a high uncertainty of it even raising any revenue.

[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.

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[Lucy Rigby]

Clauses 36 to 38 make changes to the CGT anti-avoidance provisions that apply to company share exchanges and reconstructions, or the reconstruction rules, as they are known. Clause 36 revises the collective investment scheme reconstruction anti-avoidance rule to align with modern provisions with a similar purpose. Clause 37 revises the share exchanges and company reconstruction anti-avoidance rule to align with modern provisions with a similar purpose, too. Clause 38 does exactly the same. The changes made by these clauses, which take effect from Budget day, modernise the anti-avoidance rule so that it focuses directly on arrangements where the purpose, or one of the purposes, is the avoidance of tax.

The amendments introduced by the clauses will allow HMRC to address situations where arrangements have been added to otherwise commercial transactions that reduce or eliminate, rather than just defer, a tax charge, allowing them to be more effectively challenged. The rule has been updated so that it affects only the shareholders who benefit directly from the avoidance. Where HMRC agrees that there is no avoidance and the reorganisation is carried out within 60 days of the Budget announcement or if HMRC’s decision is later, the current legislation will apply. For those reasons I commend clauses 36 to 38 to the Committee.

[Mark Garnier]

On clause 36, we support tougher measures to tackle tax avoidance and close the tax gap. Under the previous Government, the tax gap of the total theoretical tax liabilities fell from 7.5% in 2005-06 to 5.3% in 2023-24. But it is crucial that legislation is not so broad to the extent that people entering into arrangements for legitimate commercial reasons face the brunt of HMRC’s enforcement powers. The scale of genuine tax avoidance as a proportion of the total tax gap is important to note.

According to HMRC, in 2023-24, avoidance behaviour as a share of the tax gap was just 1%. It was also 1% in the 2022-23 tax year and was 2% in 2021-22, 2020-21 and in 2019-20. Avoidance ranked lowest among the behaviours that contributed to the tax gap. Contrast that with 31% due to failure to take reasonable care, 15% due to error and 12% due to legal interpretation. What those behaviours have in common is they involve genuine mistakes being made, so pursuing the route set out in clauses 36 and 37 risks hurting those who enter arrangements for solely commercial purposes who may have simply made honest mistakes.

With regard to clause 37, we support tougher measures to tackle tax avoidance to close the tax gap. The methods of deferring tax for general company reconstructions and share exchanges are identical to each other’s and to that for collective investment schemes. The key difference between clauses 36 and 37 is the business practice to which the anti-avoidance measures apply when arrangements are made to avoid tax liability. Clause 36 applies to CISs, and clause 37 applies to share exchanges and company reconstructions, so the argument pertaining to the general principle and practicality of the Government’s new anti-avoidance measures also applies to those clauses.

With regard to clause 38, we support tougher measures to tackle tax avoidance to close the tax gap. The clause seeks to change the no gain/no loss rules if HMRC suspects that a transfer of business has taken place to secure a tax advantage. Those rules have been instrumental in the process of transferring a business. They are especially useful for arrangements between complex structures. No gain/no loss rules can ensure fluidity throughout the transfer process, and they stave off cash-flow issues during the process itself.

While we support tackling tax avoidance, we must also recognise the role that no gain/no loss rules play during delicate business practice. We understand that there are already safeguards in place from HMRC, such as the general anti-abuse rule. Nevertheless, we must also ensure that no business that utilises no gain/no loss for legitimate commercial purposes is penalised or hung out to dry through denied relief claims.

[Lucy Rigby]

I welcome the support that was expressed, on the whole, by the shadow Economic Secretary to the Treasury. I suspect that that support is born from a recognition that we really do need to make the changes. Recent court decisions have shown that the rules as they stand, which date back to the ’70s, do not work as intended, especially when the avoidance carried out is a smaller part of a larger commercial reconstruction.

The main effect of the rules will be to discourage the minority—and it is very much a minority—who would otherwise seek to avoid tax. It is about protecting our tax base from abuse for the benefit of the majority of taxpayers who apply the rules correctly. For those reasons, I truly believe that the clauses strengthen the protection against avoidance and will catch tax avoiders.

Question put and agreed to.

Clause 36 accordingly ordered to stand part of the Bill.

Clauses 37 and 38 ordered to stand part of the Bill.

Clause 39

Incorporation relief: requirement to claim

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

[Lucy Rigby]

Clause 39 makes a change to incorporation relief for CGT, requiring taxpayers to make a claim for relief and, as a result, improving the data available to HMRC to undertake analysis and compliance activity. Specifically, the change will mean that taxpayers need to make a claim for incorporation relief on their self-assessment return. That will apply to transfers of a business on or after 6 April 2026, and it will allow HMRC to monitor the relief and tackle avoidance more effectively, protecting revenue and helping to close the tax gap, with an additional £225 million expected to be collected over the scorecard period.

[Mark Garnier]

Clause 39 requires taxpayers to claim incorporation relief or pay CGT up front. It is key that sole traders and other eligible people understand the changes the clause makes. What concerns us is whether enough awareness has been made to affected people, and that is crucial as claiming incorporation relief has always been a passive process because it happens automatically. Soon, people who have been accustomed to this passiveness must acutely manage their relief claims. We do not want anybody who has been conducting legitimate business to suddenly be hit with an unexpected tax bill. Landlords, for example, are a common entity who claim incorporation relief. They do so by transferring their rental property portfolio into a limited company. Should a landlord undertake that process and then find themselves receiving an unexpected tax bill, that could add significant pressure on their investments, which in this case involve houses occupied by tenants.

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[Lucy Rigby]

Clauses 40 and 41 make various changes to the capital gains rules that apply to disposals of UK land and property by non-UK resident persons.

Turning first to clause 40, the changes that are being made have been in effect since Budget day and ensure that, for the purposes of the non-resident capital gains legislation, each cell in a cell company is looked at individually for the purposes of the property richness rules. That will prevent the use and ongoing exploitation of such entities to avoid the non-resident capital gains rules and will protect the tax base.

Clause 41 makes changes to the rules for non-resident capital gains in respect of double taxation treaties and the requirement to claim double taxation relief, and it also clarifies some unclear terminology. The effect of the changes made by clause 41 is that investors are not required to make or deliver a return in order to claim relief in respect of a particular disposal. In fact, the clause reduces administrative burdens by clarifying when non-resident companies and individuals have to notify HMRC of a disposal. I therefore commend these clauses to the Committee.

[Mark Garnier]

Clause 40 tackles the use by UK non-residents of protected cell companies to avoid paying non-resident capital gains tax. We agree that corporate structures should not be exploited to shelter people from paying their fair share of tax. However, we must consider the practicalities of how an audit of one cell may affect other cells and the PCC itself.

PCCs have their benefits. For example, the ringfencing of assets and liabilities can ensure that any issue with one cell does not spread to others. In that sense, PCCs can be more robust and durable. Audits, of course, are absolutely necessary to ensure compliance and legality. However, they can also prove costly and stressful for a company owner who is simultaneously running a business. Cells do not have full autonomy; much of that resides in the core of the PCC.

Different cells may behave differently from each other or have differing risk appetites—therein lies the risk. A situation where one cell is investigated by HMRC, and the audit process proves frustrating because that cell’s conduct is aggressive or inappropriate, risks tarnishing the entire PCC in the assumption that the other cells behave similarly. Subsequent audits could then become more aggressive and difficult. As I said, we support measures that tackle any exploitation of the corporate structure to avoid paying tax. The Government must ensure that the implementation of clause 40 protects innocent parties that may be affected.

Clause 41 focuses on non-UK residents, individuals and companies in collective investment vehicles who sell UK land or property connected to CIVs under double taxation treaties. Under the clause, non-UK residents in CIVs will no longer be required to register for corporation tax or claim capital gains tax relief if the double taxation treaties fully cover the gains they have made. The Government’s rationale for that is to streamline paperwork and reduce redundant filing—hurrah! I cannot begin to explain my happiness about trying to reduce red tape. It is fantastic to get rid of it where we can. Our tax code is 22,000 pages long and has 10 million words. Anything that makes that easier is hugely welcome.

[Lucy Rigby]

I welcome the “hurrah” from the shadow Minister. On his latter point about double taxation treaties, as he will know, many of the agreements were negotiated before the introduction of the non-resident capital gains regime. As treaties come up for renegotiation, as they do, or as we negotiate new treaties, we will seek to include a provision in the capital gains article to allow the UK to exercise our domestic taxing provisions in full.

On the shadow Minister’s point about cell companies and the extent to which they are used to avoid tax, there is anecdotal evidence that such structures have been created to help individuals avoid paying tax on gains made through the disposal of UK land and property, and the changes to the rules seek to cure that.

Question put and agreed to.

Clause 40 accordingly ordered to stand part of the Bill.

Clause 41 ordered to stand part of the Bill.

Clause 42

Abolition of notional tax credit on distributions received by non-UK residents

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

Oral Answers to Questions

Debate between Lucy Rigby and Mark Garnier

Tuesday 4th November 2025 Commons Chamber

[Mr Speaker]

I call the shadow Minister.

[Mark Garnier (Wyre Forest) (Con)]

In this month of blaming everyone else for every woe that befalls the Government and using it as an excuse to bust manifesto pledges left, right and centre, it seems that the Government are claiming credit for more banking hubs, but we all know that the rolling out of banking hubs is a purely commercial decision by the banks. It is the banks that are choosing to do this, to serve their customers. Is it now the Government’s policy to blame everyone else for their own incompetences, and to claim credit for everyone else’s good ideas?

[Lucy Rigby]

Where it is appropriate to do so—indeed, it is very often appropriate to do so—we will blame the Conservative party for the state of the country, and it is appropriate to do so here. On the criteria that Link uses for banking hubs, I will remind the hon. Gentleman that, in relation to the access to cash regime, that was designed and passed by the previous Government.