Finance Bill

Mark Field Excerpts

Wednesday 2nd July 2014 Commons Chamber

[Mr Gauke]

I am grateful to my hon. Friend for another example of Labour opposing yet another measure that this Government have taken to try to reduce the deficit. At least Labour Members did not make another spending pledge on this occasion, but we will, of course, continue to monitor their remarks very closely because they frequently do make spending pledges. [Interruption.] Perhaps the presence of the shadow Chief Secretary, the hon. Member for Nottingham East (Chris Leslie), has instilled some uncharacteristic discipline in Labour Front Benchers.

Let me turn to the question of why some circuses are excluded and some points of definition. With the exception of the named exclusions, other types of performing arts can benefit, provided that those giving the performance can demonstrate that they are wholly or mainly playing a role and that each performance is live and that the presentation of live performance is the main object, or one of the main objects, of the theatre production company’s activities. The Government believe that using that definition, which considers the nature of the performance, is more appropriate than listing types of performing arts. In cases where further clarity may be required, companies should seek professional advice or contact HMRC. On the subject of HMRC, I was asked about its resources. The House may be pleased to know that a specialist unit has been provided to assist businesses with making claims under this relief.

The definition of “touring” has been raised and whether more should be done in terms of relating it to geographical location. A production can qualify as “touring” if there is an intention to perform at six or more separate premises or to present 14 performances in two or more premises. The hon. Member for Bishop Auckland (Helen Goodman) is right to say that we considered alternative definitions of “touring,” including the use of geographical restrictions, but we believe that our definition provides a simple and effective way to support the range of types and sizes of tours that take place. That is why we have gone with that definition.

On the question whether this will cause a significant administrative burden for charities or not-for-profit theatre companies, minimising complexity and ensuring straightforward compliance was one of the central considerations in designing the relief. That is why we are basing it on the film tax relief model, which is also used successfully for other creative industry tax reliefs. We have worked closely with industry in determining the design of the relief, to ensure that it works for the industry, particularly the not-for-profit sector. Officials continue to engage with industry, including by attending events to help and advise in the run-up to companies starting to make claims in September. Ultimately, detailed guidance will be published on the HMRC website to ensure that companies and charities get the support they need.

[Mark Field (Cities of London and Westminster) (Con)]

Is it the Treasury’s intention, for the sake of simplicity and certainty, to ensure that the definition of “touring” is a nationwide one? In central London, which has a lot of theatres, it would be very easy to suggest that performing in only two or three theatres would not be a tour.

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Order. It is not good for Members just to walk in and intervene, in fairness to those who have been here throughout. I know that the hon. Gentleman has a great interest in this issue, but may I ask Members to please not just walk in and intervene? I am sure, however, that the Exchequer Secretary would like to take the question on board, because it is such a good intervention.

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[Chris Leslie]

I am sure those investment fund managers have absolutely no interest in the abolition of SDRT in any way! I thought the hon. Gentleman was once a Liberal Democrat. Before the general election, the Liberal Democrats used to pretend they were in favour of standing up for the vast majority of people, against the vested interests in society who tend to look after their best interests, yet here he is again, voting for tax cuts for investment fund managers. This is a specific element of the Bill that we opposed. We tried to persuade the Government to drop that measure, but we were unsuccessful.

[Mark Field]

I feel I must stand up for investment fund managers, not least because their business brings significant amounts of money to the UK. I reiterate the sensible words of the hon. Member for Redcar (Ian Swales): ultimately it is all of us who are investors in such funds who will reap the benefits of ensuring that this business comes to these shores, rather than to many other globally competitive financial centres.

[Chris Leslie]

The hon. Gentleman represents very many of those investment fund managers. He is doing the job he was sent to do, but this is a matter of priorities, and I have to say that the Opposition just disagree. The Treasury has finite resources at its disposal, and at a time of pressures, cuts, and rises in tax—through VAT and in other ways—that hit the least well-off in society, I just disagree with Ministers and Members on the Government Benches that this should have been the priority.

There were other specific areas where we tried to persuade the Government to improve the Bill, such as the proposal to give shares to employees in exchange for employment rights. We believe that undermines what should be a healthy approach to employee share ownership, because it gives the sense that something is being taken away, and that there is a disadvantage. That point was voiced not just by Opposition Members, but by some Government Members. Again, however, we could not persuade the Government on that.

So many tax loopholes need to be addressed, and the Finance Bill should have been the opportunity to tackle some of them, not least the notorious quoted eurobond exemption, which is costing taxpayers hundreds of millions of pounds. Ministers ought to have had the courage to take on that issue. Some of the Bill’s proposals for pensions flexibility are sensible, but big questions remain about the advice we will be able to give retirees to make sure that they get the guidance they need, at that most crucial point in their financial lives, to make the right choice, if they are not purchasing an annuity. Ministers have not lived up to the challenge of ensuring that that guidance and advice is possible. In the debate, I heard that that guidance may currently equate to 15 minutes of face-to-face advice—perhaps I should say face-to-faces advice, because the Minister with responsibility for pensions is now saying, “We will give you some guidance, but it might be as part of a group of people.” The Government have to improve the legislation in this area.

The Bill contains a proposal for a married couples allowance. The Chief Secretary to the Treasury and, I suspect, the Chancellor personally disagree with it, but in a coalition they have to throw a bit of meat to the Back Benchers. The allowance discriminates between forms of partnership and does not help many married couples at all, as we see when we look at the total number who will benefit. If we have tax cuts to give, they should be given to as many people as possible.

Of course, we also tried to improve the specifics and dissuade the Government from continuing their tax cut for millionaires—the reduction from 50p to 45p in tax on earnings of more than £150,000. Again, that is a sign of their priorities: they stand up for those who already have significant wealth in society, but do not respond to the needs and requirements of the least well-off.

We tried our best to improve the Bill, but it missed a number of opportunities. Significant reforms should have been in it, but are conspicuous by their absence. Why did the Treasury not put the cost of living concerns front and centre in this legislation? I am not just talking about making sure that energy companies stop ripping off households up and down the country, or about passing on wholesale price reductions to ordinary households; the Bill should have contained, for example, steps towards a 10p starting rate of tax. There are a number of ways in which cost of living issues should have been far higher up in this legislation.

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[Mark Field]

I am glad that I am looking more youthful and Conservative this afternoon, Mr Deputy Speaker.

This is a very good Bill containing much that I agree with. The Minister has rightly pointed out that it does some important things, particularly on something close to my heart—the theatre industry in my constituency—but also on technology, which is one of the big growth areas for the future prosperity of this country.

I want to talk about an ongoing concern of mine. The Minister will be aware of what I am about to say. Barely a fortnight ago, Her Majesty’s Revenue and Customs began writing to some 5.5 million taxpayers to confess that it had got things wrong. Errors in the pay-as-you-earn calculation had led the taxman to charge some 2 million fellow citizens too much tax and a further 3.5 million Britons had been assessed too leniently. That latter group now faces the prospect of several years of repayments. All this is in spite of expensive IT and personnel reforms that were meant to improve the system’s accuracy.

That news came at a time when the House was scrutinising this Finance Bill, which proposes bestowing ever more powers upon that organisation—in my view, an unjust reward for yet another year of error-strewn performance. Meanwhile, a consultation is now under way as to whether HMRC should be given direct access to UK citizens’ bank accounts so that it can claim from source any tax that it believes it is owed. I share the view of many people on the Government Benches who are concerned that this coalition Government are overseeing the transfer of very considerable powers to the state. I fear that a precedent will be set for a future Labour Government, which we all hope will not come any time soon. However, such a Government might well be minded to expand further the taxman’s remit.

Will the Minister reconsider the new accelerated payments regime that is proposed in the Bill—other Members have spoken on that in the past couple of days—about which I raised my own concerns at Second Reading? It is vital that the Treasury considers carefully the impact of granting such powers to an organisation that, I am afraid, has proven itself time and again to have incorrectly calculated tax on a grand scale.

[Mr Gauke]

Since 1944, there has been an end-of-year reconciliation under the PAYE system, because not all the information necessary to calculate the PAYE amount is available to HMRC during the year. To some extent, the PAYE amount is a provisional one, which is corrected at the end of the year. Notifying people at the end of the year quickly is not the system failing; that is how the PAYE system operates. It is not errors; that is the system.

[Mark Field]

I do appreciate that, but the Minister will also appreciate that trust in many institutions, whether Government, banks or this House, has been at an all-time low in recent decades. If we are going to pass on more powers to such institutions we—

[Mrs Mary Glindon (North Tyneside) (Lab)]

Will the hon. Gentleman give way?

[Mark Field]

If the hon. Lady will excuse me, I will make some progress, as there are other Members who want to speak.

We are now looking at drawing tax avoidance measures so widely. It has been common practice for investors to err on the side of caution and sign up, as the Minister knows, to the HMRC’s own disclosure of tax avoidance schemes—DOTAS—register. Currently, if the UK tax authorities wish to challenge the legitimacy of a DOTAS-registered scheme in court, the taxpayer is permitted to hold on to the disputed tax while the case is being resolved. The Government believe that that incentivises scheme promoters to sit back and delay resolution, so they propose extending the accelerated payments measure to existing DOTAS-registered schemes. That will mean that disputed tax is paid up front to the HMRC, and will be returned if a scheme is subsequently found to be legitimate.

I quite understand why the Minister has felt tempted to explore that route. There is, I understand, a desperate need for money to shore up the public finances, which are still far less rosy than any of us would wish, with a recovery that remains somewhat fragile. There is also, understandably and justifiably, a consciousness of the need to deal more quickly with the tens of thousands of outstanding mass-marketed avoidance cases that are currently clogging up the courts.

However, there is also a vital issue of principle at stake. The Government have been celebrating and espousing their reverence for the eight-centuries-old principles set out in Magna Carta. It was that charter that established the supremacy of the law by dictating that no Englishman could be punished without first going through the proper legal process. That set in train a constitutional revolution that has seen billions across the globe having their rights expanded and protected against an all-powerful state.

Yet at the same time, our Government are now overseeing the creation of a law that will permit HMRC to confiscate a citizen’s property before the courts have established who is legitimately entitled to it. The DOTAS register was a good idea. It was designed to promote openness and transparency in investors’ relations with the HMRC. It is now, in effect, introducing retrospective legislation, with DOTAS declaration being used as a stick with which to beat legitimate investors—those who had never planned on having the liquid assets to meet disputed liabilities.

No doubt the Government—any Government—feel they can railroad those proposals through on a wave of popular demand for new measures to tackle tax avoidance, but although I agree that we have to clamp down on illegitimate tax avoidance, I worry about the potentially very wide-ranging consequences, including the fundamental undermining of the Government’s overarching aim to make Britain a place that is open for business. I support many of the underlying measures in the Bill that are focused on that aim, but this measure expands a profoundly anti-Conservative notion of retrospective legislation. The Minister and I have both been shadow Ministers; we know the number of Finance Bills proposed by the erstwhile Labour Administration in the latter half of the last decade that we expressed concern about because they contained precisely this type of anti-avoidance legislation with retrospective elements. We have to recognise that considerable hardship is imposed on many of those who are affected by such provisions.

I addressed these issues in an article in The Daily Telegraph several months ago. I was and continue to be inundated with letters and e-mails from ordinary people across the country who are utterly dismayed that a Conservative-led Government would initiate such a change in law. Let me highlight some of their comments, so that the Minister is fully aware of the impact of the proposal. One correspondent advised me:

“If this goes through, HMRC will be able to demand immediate and upfront payment of the money it says I owe as a result of their changing the law retrospectively—but without me even being able to present any arguments to the tax courts in my defence. If this were to happen I would need to lose my home in order to pay the bill. It is a monstrous injustice.”

Another correspondent wrote:

“If one was to listen to the Government, it could easily be believed that users of the structures declared under the DOTAS are malicious, super rich individuals, out to escape payment of their ‘fair share’, in contrast to ‘honest taxpayers’. I have been an employee of a company that provided a remuneration structure duly registered under the DOTAS.

In the aftermath of the most severe economic crisis in generations, the IT industry, in which I work, got hit very hard. I have been subjected to rate cut after rate cut since 2009, and for me, nominal income is only going in one direction: down. Yet, if I listen to”

the Government,

“it sounds like complying with an ‘accelerated payment’ will be but a well-deserved inconvenience, forcing me maybe to sell one of my numerous yachts or…homes. I am shocked and appalled at the cynical discourse that consists of creating this false image. I personally feel deeply insulted…. I am not a rich person by any stretch of the imagination; my partner and I rent a one bedroom apartment, and we live modestly.”

What is slightly depressing is that this sort of scrutiny has not really happened. I well understand why the Labour Opposition feel they do not want to stand up for those individuals affected by the accelerated payments regime. I ask the Minister once again in the implementation of the Bill to consider an exception in the case of existing DOTAS-registered schemes whose promoters have taken all reasonable measures to enable a dispute to be brought before the statutory appeals tribunal. I think there should also be a right to appeal against an accelerated payment on the ground that the money is not due, or that a follower notice or accelerated payment notice is not applicable.

Although the Government say the legislation is not retrospective, as it does not change an underlying tax liability, it will in fact apply with retrospective effect over the past 10 years to anyone who currently has an open appeal or inquiry. In my view, if the provision is to come into effect, it should be applied only in cases involving tax planning carried out after Royal Assent to this Finance Bill.

I am sorry if I sound a little churlish. The Minister is well aware, because we have discussed this privately as well as on the Floor of the House, that I think there is much that is good in the Bill, but it is right that these things are properly scrutinised and that scrutiny is ongoing. We are putting into place certain measures that I think set a potentially dangerous precedent and run counter to a principle that should be close to all our hearts: that the British tax system and the British economy should be open for business and open to the opportunities that we all want our constituents to benefit from as we move into a strong economic recovery in the years ahead.