Taxation (Post-transition Period) Bill

Nigel Evans Excerpts

2nd reading & 2nd reading: House of Commons
Wednesday 9th December 2020 Commons Chamber

[Stephen Flynn (Aberdeen South) (SNP)]

On a point of order, Mr Deputy Speaker, can you clarify whether Members in the Chamber should be socially distancing by staying on the seats that have ticks on them?

[Mr Deputy Speaker (Mr Nigel Evans)]

Yes, that is what the ticks are there for. I hope that all Members will abide by them so that we can have safe social distancing. Thank you very much.

[Jesse Norman]

In addition, the Bill amends current legislation for excise duty to be charged when certain goods, such as alcohol and tobacco, are moved from Great Britain to Northern Ireland. The changes are necessary to ensure that there is a fully functioning VAT and excise regime in place in relation to Northern Ireland at the end of the transition period.

In line with the protocol, Northern Ireland will maintain alignment with existing EU excise rules. That means a change to excise duty is required when goods are moved to Northern Ireland from Great Britain, but the Government are adopting an approach using flexibilities and EU rules that minimises changes for excise goods moving between Great Britain and Northern Ireland.

A small number of other taxation measures also need to be in place before the end of the transition period. The Bill introduces a new system for collecting VAT on cross-border goods. That includes moving VAT collection on certain imported goods away from the border and involving operators of online marketplaces in the collection of VAT at the point of sale.

In addition, measures in the Bill will remove the VAT relief on imported low-value items so that VAT will be due on all consignments, irrespective of their value. The relief has been the subject of long-standing abuse and removing it will build on Government efforts to level the playing field for UK businesses still further by protecting high streets from VAT-free imports. Together, the changes will improve the effectiveness of VAT collection on imported goods, tackle non-compliance and protect the flow of goods at the border.

[Jesse Norman]

I thank my hon. Friend for his question, and I will take that under review. We have put in place a set of measures designed to tidy up the position that particularly arises in relation to the Northern Ireland protocol, as he will be aware, and the end of the transition period, and that has meant a change to low-value consignment relief and the changes I have described. I am grateful to him for his contribution and suggestion.

The Bill also includes provision for an increase in the rate of duty on aviation gasoline, which will apply across the UK. Otherwise known as avgas, the fuel is a form of leaded petrol predominantly used in leisure flying. The change made by clause 6 of the Bill will increase the avgas rate by half of a penny to 38.2p a litre from 1 January next year. By way of explanation, the Northern Ireland protocol requires that Northern Ireland continues to comply with the EU’s energy taxation directive following the end of the transition period. It sets a minimum level of duty in euros on unleaded petrol used for propulsion. After some careful consideration, the Government have chosen to apply the change to the whole of the UK to ensure consistency between Great Britain and Northern Ireland, avoid burdens on business and reduce compliance risks for HMRC.

The Bill also includes a clause to ensure HMRC has access to the same or similar tools to prevent insurance premium tax evasion as it does at present, regardless of whether an insurer is based in an EU member state. Overseas insurers are liable to pay insurance premium tax when they supply general insurance for UK-located risks. Occasionally, overseas insurers do not pay the insurance premium tax they owe, so it is important that HMRC has access to tools that deter and tackle that form of evasion. Up to now, it has been using EU provisions to prevent evasion by insurers based in EU member states.

Separately, HMRC can issue liability notices in cases involving insurers based in any country outside the EU with which the UK does not have a mutual assistance agreement. Given that the EU provisions expire at the end of the transition period, this clause will enable HMRC to issue liability notices in evasion cases involving insurers based in any country with which the UK does not have a mutual assistance agreement, including EU member states.

Finally, the Bill introduces new powers that will enable HMRC to raise tax charges under the controlled foreign companies legislation for the period from 1 January 2013 to 31 December 2018. This is a technical provision that will deal efficiently with the legacy state aid decision relating to the period before the UK left the European Union.

This Bill will give people and businesses throughout the UK certainty about the arrangements that will apply from 1 January next year. It will play a part in further safeguarding the unity and integrity of this country, both in the months ahead and long into the future. I commend the Bill to the House.

[Mr Deputy Speaker (Mr Nigel Evans)]

Before I call Anneliese Dodds, let me say that the wind-ups will begin at 5 o’clock at the latest, and that 13 Members wish to speak and are all here. We therefore know that there will definitely be 13 Members speaking, so colleagues should really be thinking about speeches lasting for six minutes. Even if I do not put the clock on, it would be really useful if everybody shows at least some discipline on that, so that everybody can get a fair crack of the whip.

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[Alison Thewliss]

I have almost finished, so I want to make a little progress, but I will try to bring the hon. Lady in later.

I am curious about what assessment the Government have made of the chilling effect of these changes. It is also very interesting that the customs duties will benefit the Irish Exchequer and be to the detriment of our people who wish to export. I note that paragraph 12 of schedule 1 will amend the Isle of Man Act 1979, and that part 6 of new schedule 9ZB to the Value Added Tax Act 1994, which is inserted by schedule 2, also relates to the Isle of Man, so I would be grateful if the Government told us what communication they have had with the Manx authorities on the proposals. Obviously those proposals have come out overnight, so I do not know what discussions have been had, but it would be very interesting to find out.

Scotland has not been offered the deal that Northern Ireland has been offered. The Financial Secretary to the Treasury spoke about the benefits of the EU single market that people in Northern Ireland will enjoy. Lucky them. Scotland is the only part of this supposed Union of equals not to get any of what we asked for, and we will see our own industries disadvantaged. To add insult to our very evident injury, Baroness Davidson and the then Scottish Secretary, the right hon. Member for Dumfriesshire, Clydesdale and Tweeddale (David Mundell), threatened to resign if Northern Ireland was given different treatment. Just a couple of years ago, they said:

“Having fought just four years ago to keep our country together, the integrity of our United Kingdom remains the single most important issue for us in these negotiations.

Any deal that delivers a differentiated settlement for Northern Ireland beyond the differences that already exist on an all Ireland basis (eg agriculture), or can be brought under the provisions of the Belfast Agreement, would undermine the integrity of our UK internal market and this United Kingdom…We could not support any deal that…leads to Northern Ireland having a different relationship with the EU than the rest of the UK, beyond what currently exists.”

Well, that is exactly what we have. It is exactly what the Bill is and what it does, yet those two Members are still about. The Scottish Conservatives really do have more faces than the town clock.

To move on to the Chancellor of the Duchy of Lancaster, he has an absolute brass neck to describe the situation in Northern Ireland as the “best of both worlds”. He said on ITV that Northern Ireland would have

“access to the European single market, because there is no infrastructure on the island of Ireland, and at the same time unfettered access to the rest of the UK market.”

“The best of both worlds”—in Scotland, we have heard that before. The Better Together campaign told us that the only risk of losing our place in the EU was if Scotland voted for independence. Where are we now?

The United Kingdom Internal Market Bill farce undermines yet further the integrity of this crumbling Union, and today’s Bill takes another sledgehammer to the support structures that this Government believe are stronger than they are. The people of Scotland—those who voted no as well as those who voted yes, and those who were unable to vote six years ago—have been watching what has been going on. They do not want a UK Government who drag Scotland out of the EU—they voted very clearly, by 62%, to remain—they do not want a UK Government who threaten to break international law and spoil our standing in the world, and they do not want a UK Government to force Scotland into an insular and poorer future. People want their chance to have their say. The 15 polls in a row that now back independence show clearly to me and everybody else that the people of Scotland believe that things have changed. As Winnie Ewing said:

“Stop the world, Scotland wants to get on.”

[Mr Deputy Speaker (Mr Nigel Evans)]

Members should be aiming to speak for not much longer than four minutes, if we are to get everybody in. I call Sir John Redwood.

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[Mr Toby Perkins (Chesterfield) (Lab)]

It is a great pleasure to follow the right hon. Member for Wokingham (John Redwood). Unusually, I found myself agreeing with much of what he said about the time we have to debate this Bill. The points made by my right hon. Friend the Member for Wolverhampton South East (Mr McFadden) in the previous debate were absolutely on the mark.

As someone who voted in the referendum to remain but who represents a seat that voted leave, I have to say that when I hear speeches such as the right hon. Gentleman’s, and many others that we are going to hear, I fear that much of what I have long feared about the whole Brexit process is coming to pass, which is that Brexit will be an orphan child and when we have left the EU and come to our final arrangement, it will be impossible to find anyone, perhaps with the exception of the Prime Minister, who says, “This is the Brexit I was campaigning for.”

Brexit operated in so many different people’s minds as a different entity. Even now, with a Brexit-backing Prime Minister, an overwhelming Tory majority, any Tories who showed a whiff of regard for our future relationship with Europe banished from the party and all rebellion quashed, the fundamental contradictions of Brexit remain unresolved. I have no way of knowing whether there will be a deal, but I can be certain that when that deal is signed many who argued earnestly that we should leave the EU will claim, “This was not the Brexit I was campaigning for.”

Let me turn to the measures in the Bill. I confess that during the referendum our campaign to back remain in Chesterfield hardly touched on the position of Northern Ireland. We did speak a bit about the Union in the context of Scotland, but Northern Ireland was barely mentioned, yet much of the Bill relates to the provisions relating to Northern Ireland that have become central to the issues that remain. The Labour party is, as I am, resolutely behind the Union and entirely committed to the Belfast agreement, and we recognise the many contradictions that persist.

I have to say to colleagues from the Democratic Unionist party and others that they should not think that these Northern Ireland issues concern very many of my constituents in Chesterfield. I know from many conversations that took place during the general elections on doorsteps in Chesterfield in 2019, when I was trying to raise the issues associated with Northern Ireland, that if the cost of getting a Brexit deal that enables our country to trade freely and regain control of immigration happened to be a united Ireland, many of my Brexit-voting constituents would accept that in a heartbeat. The people of Northern Ireland, whom, we should remember, in totality voted to remain, have been badly let down by many of the people they elected to represent them, either by those who sold their support to prop up the disastrous May Government and were then shocked to be sold down the river by the right hon. Member for Uxbridge and South Ruislip (Boris Johnson), or by those who, through their absence from this place, allowed the Brexit view to be heard as the dominant opinion of Northern Ireland.

The businesses of Northern Ireland are now starting to understand what that failure means for them. Right now it means that just weeks away from a change that will impact them more than any other on these islands, the promise that they will be able to enjoy frictionless trade has been exposed as wrong. It is irresponsible that when the Government themselves acknowledge that the administrative impacts on businesses affected by these changes will be significant, those businesses have so little time to plan, and no serious economic or fiscal impact assessments are contained within.

The last-minute nature of the Bill once again exposes the fact that the businesses of Great Britain, and particularly Northern Ireland, are left vulnerable by this incompetent Government’s pursuit of a promise that they cannot keep and should never have made. Although I wish the Prime Minister well tonight, the whole country needs him to remove the spectre of no deal from the nightmares we face as we look towards 2021. Once again, the Government are leaving businesses in the dark, jobs at risk and industries on the brink.

[Mr Deputy Speaker (Mr Nigel Evans)]

The next two speeches will be timed at four minutes, and then everyone else will have three minutes.

[Katherine Fletcher (South Ribble) (Con)]

I am going to break with tradition in this debate and actually talk about the Bill. A Bill that is described, in large sections, as primarily technical, administrative and procedural will not always excite the juices in Parliament, among the public or in the press but, although dry in sections, this Bill contains important measures, and I rise to support them.

Let me ground my comments in the experience of many people in the UK today. As someone who ran her own business prior to the election, I know that it is often the technical, administrative and procedural that can really shift the dial—for example, on the number of sales an individual can make or on market price points for a certain type of product—never mind the administrative and procedural processes that take too much valuable time from often hard-pressed smaller traders. Clarity is essential, welcome and timely. Once passed, the Bill will ensure that whatever happens in the ongoing trade negotiations with the EU, in an important subset of regulations there is clarity and fairness for businesses in the UK.

Measures in the Bill will change and improve our tax system and have been brought forward in separate legislation in advance of the proposed Finance Bill. They will ensure that the UK is prepared, whatever the outcome of the Prime Minister’s trip to Brussels later today. We are, and will continue to be, a proud sovereign trading nation. We are ensuring, and will continue to ensure, a smooth transition and continuity for trading businesses.

What do I mean? Let me be specific and turn to schedule 3, on amendments to the Value Added Tax Act 1994—essential bedtime reading for all, I am certain. In my previous business, I sold volumes of lower-value goods in online marketplaces and online channels to customers in the UK, the EU and many other locations overseas. For too long prior to the election I saw lower-value goods advertised by overseas sellers—my competitors— that were imported from abroad and undercut UK manufacturers and suppliers.

Currently, overseas sellers can avoid VAT, not charging it at the point of sale and not handing the revenue back to our Exchequer. That means that our country is losing twice: our fabulous businesses are losing sales to cheaper products from overseas sellers who do not have to charge VAT, which is unacceptable, while our Exchequer is also losing the revenue that such measures raise, which I remind the House funds the provision of the public services, such as the NHS and schools, that we rightly value so highly on the Government Benches. The Bill will remove that overseas-seller anomaly.

Specifically, the measures will mean that low-value consignment relief—LVCR—is removed from all non-UK sellers. All imported goods worth under £135, including under those worth under £15, will be subject to VAT at UK rates. Although currently legal, the existing situation amounts to tax avoidance by overseas sellers and has created distortions in UK marketplaces. It is this Conservative Government who are clamping down on it. To level the playing field, online marketplaces must now account for their VAT. This Government support our fabulous businessmen and women who trade from shops or—like me—online and will continue to do so.

Earlier, the hon. Member for Glasgow Central (Alison Thewliss) mentioned extra exporting barriers. As someone who has sat and put the labels on to goods going to EU, Ireland and international destinations, I know that for lower-value goods, any individual consignment worth under £270 gets a CN23 sticker with all the declarations on it, and then off it pops and there are no additional barriers between the EU and the US. No change that we will make today will put in place extra paperwork: what was done for the EU was always what happened anyway—it automatically comes off the printer. I am sure there are great British jewellers who can sell us wonderful earrings—

[Mr Deputy Speaker (Mr Nigel Evans)]

Sorry Katherine —that is four minutes.

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[Stephen Farry (North Down) (Alliance)]

I am pleased to be a Northern Ireland voice in this very important debate. Obviously, this is a different type of speech from the one I was envisaging making earlier this week, and I do welcome that progress—not least that we are, I hope, moving beyond part 5 of the United Kingdom Internal Market Bill and the potential notwithstanding clause in this legislation, although of course we do remain vigilant in that regard.

I would welcome confirmation from the Minister, not least given that we have had very little time to scrutinise the detail, that the current version of this Bill is entirely consistent with the Northern Ireland protocol. It is worth recalling why we have to do that and why there is such a protocol. It arises from the decision of the UK not to have a fresh customs union with the EU post Brexit. That prompts the question of where the line is going to be drawn on the map between the UK’s customs union and the EU. The protocol essentially sees a situation whereby Northern Ireland remains part of the single market for goods, but remains part of the UK’s customs territory. Crucially, however, the EU customs code is to be applied down the Irish sea; hence the nature of this Bill.

Just to correct something that was said earlier, the withdrawal agreement and the protocol, which were signed up to by this Prime Minister, had the starting point that all goods moving into Northern Ireland were potentially at risk. That was what was said in the protocol, and I do welcome the progress that has been made in trying to find a way through this and that that is not going to be the case in practice.

Some people may say that it was only the EU that was threatening a border in Ireland. Of course, the EU does have the right to protect the integrity of its single market and customs union, but I think we are being too complacent about the UK’s own obligations in that regard. If, in the event of no deal, the back gate was left open, so to speak, there would be a requirement under WTO rules for the UK to adopt the exact same posture that it has on the island of Ireland with the rest of the world. I am not sure that is a line that it would want to go down, particularly given the whole range of threats that are out there.

There are a range of issues still to be addressed regarding the wider context of the Bill—in particular, the achievement of a zero-tariff, zero-quota deal. Even with that, rules of origin will still be an issue. But if there is no free trade agreement, we are back to the issue of goods at risk. Although we have the prospect of the authorised economic operator model—we await more details of that—it is not going to cover everyone. For example, it is not going to cover small retailers and it may not cover the online issue. There is also the question of what happens if that measure is not renewed in a few years’ time, as well as the issue around necessary resources.

Looking the other way, I have already raised in my intervention on the Minister the issue of qualifying goods and how we can tackle avoidance.

[Mr Deputy Speaker (Mr Nigel Evans)]

I call Shaun Bailey; please resume your seat no later than 5 pm.

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[Kemi Badenoch]

As I have just said, I am not in a position to be talking about what is happening in the future. We have been negotiating in good faith and we have an agreement in principle. I do not believe that those clauses will be coming back, but as the right hon. Gentleman knows very well, the negotiations are still ongoing and we need to wait and see what the outcomes of those negotiations are. It would be quite wrong for me or him to pre-empt anything else that will be taking place, and we must not bind the hands of our negotiators. It is absolutely right that we all speak with one voice in this House.

The hon. Member for Glasgow Central (Alison Thewliss) mentioned GB and NI parcels and asked how consumers would know whether there was a customs charge. The movement of parcels into Northern Ireland is another important part of how the protocol will work in practice for people in Northern Ireland. That is why the UK Government will take forward a pragmatic approach, just as we have elsewhere, that draws on available flexibilities to implement the protocol without causing undue disruption. In terms of schedule 3, she gave the example of the earrings from Slovenia that she had ordered. It is worth stressing that schedule 3 deals with imports to the UK and not exports. It will ensure that UK customers see the amount of VAT that needs to be paid at the point of sale on goods below £135. For goods between Northern Ireland and GB, VAT is already charged on supplies sold by a GB business to an NI customer. When the Northern Ireland protocol comes into effect, Northern Ireland businesses or consumers purchasing goods from VAT-registered businesses will see no significant difference in costs from a VAT perspective.

 

Let me conclude by saying that tonight, this House has the opportunity to give businesses in Northern Ireland and throughout the rest of the UK certainty about the arrangements that will apply from 1 January next year, to strengthen the precious bonds of union that tie this country together, and to prepare this country for an even brighter future as an independent sovereign trading nation. For all those reasons, I urge all Members to support the Bill.

Question put and agreed to.

Bill accordingly read a Second time; to stand committed to a Committee of the whole House (Order, this day).

[Mr Deputy Speaker (Mr Nigel Evans)]

I will now suspend the sitting for a brief period in order for both Dispatch Boxes to be sanitised.