Finance Bill

Nigel Huddleston Excerpts

2nd reading
Wednesday 13th December 2023 Commons Chamber

[The Financial Secretary to the Treasury (Nigel Huddleston)]

I beg to move, That the Bill be now read a Second time.

Before I start the debate, I should declare, to avoid any potential conflict or perception of conflict, that, with reference to my previously published entry in the Register of Members’ Financial Interests and my ministerial interests, I have recused myself from making ministerial decisions on issues relating to pillar two, which will be dealt with more than ably by the Exchequer Secretary to the Treasury, my hon. Friend the Member for Grantham and Stamford (Gareth Davies).

My right hon. Friend the Chancellor of the Exchequer delivered an autumn statement with a clear intention to strengthen the economy now and for the future. The Government proposed to do that by putting money back in people’s pockets and cutting taxes. The Finance Bill that we are debating today does just that. First, it supports British businesses by allowing them to invest for less, which will encourage innovation and enhance productivity. Secondly, its measures will improve and simplify our tax system, which will ensure that it is fit for purpose.

The Bill covers 36 different measures in total, some of which are more complex than others. Madam Deputy Speaker, you will be pleased—or perhaps displeased—to know that I do not intend to cover every one in detail in this opening speech. I would like to focus on some of the key themes and measures.

I will first detail the Bill’s measures to support British business. The Government understand the simple truth that a strong private sector drives economic growth. That growth in turn serves the public good by allowing the Government to invest in public services. Perhaps most importantly, it allows the Government to support the most vulnerable. That understanding has shaped our approach. That is why we are lowering business taxes: because it will incentivise investment and boost private sector growth.

The Bill’s first measure to achieve that will make full expensing permanent, allowing businesses to invest for less. As a result, the UK’s plant and machinery capital allowances will increase. It is effectively a tax cut to companies of over £10 billion a year—the most generous of any major economy. The benefits to the economy of the policy—just this measure alone—are that it will drive 0.1% GDP growth over the next five years, increasing to almost 0.2% in the long run, and it will unlock an additional £3 billion of investment per year. That is only one of many Government policies backing British businesses.

The Government also recognise the important role of research and development in driving both innovation and economic growth as well as the benefits it can bring to society as a whole. Therefore, we will merge two Government programmes: the research and development expenditure credit scheme and the small or medium enterprises scheme. That will have two key impacts: it will simplify the system and provide greater support for UK firms to drive innovation. Those changes will apply from April 2024 onwards.

The support does not stop there. The Government will also introduce greater support for loss-making R&D-intensive SMEs. We will also lower the R&D intensity threshold required to access that to 30%. That will help about 5,000 extra SMEs, and they will receive £27 per £100 of qualifying R&D invested. Let us be in no doubt that this is a major boost for innovators across the UK. These measures significantly increase support to R&D firms to about £280 million a year by 2028-29, and overall they will ensure the success of UK plc.

I will now outline the next measure to back British businesses. The Government will extend the sunset clause for two more programmes: the enterprise investment scheme and the venture capital trust scheme. Both will be extended to 6 April 2035. That will support young companies to raise capital for successful growth.

The Government applaud our world-leading creative sector—after all, it grew 1.5 times faster than GDP between 2010 and 2019. In response, a new measure to back British business will go even further through reforming tax reliefs to refundable expenditure credits for the film, TV and video games industries.

[Andy Carter (Warrington South) (Con)]

I am pleased to hear the Minster outline support that the Government are giving to the creative industries, which secures thousands of jobs around the UK, and particularly in the north-west of England, where we have seen a huge creative hub develop. Does he agree that it is not just about jobs, though? It is also about soft power, which the creative industries ensure goes right around the world, with great British TV and film. Does he also agree that we want to see that continue?

[Nigel Huddleston]

Yes. My hon. Friend makes an important point. The jobs and economic activity are hugely important, but we are known throughout the world for excelling in the creative sectors—we always have, and we always will. We can all be proud of the incredible creative talent in the UK. He is also right to highlight how it is spread right across the UK.

[Barbara Keeley (Worsley and Eccles South) (Lab)]

The Minister is talking about creative industries, and the hon. Member for Warrington South (Andy Carter) talked about soft power, but I wonder whether the Minister will get on to the changes to other cultural tax reliefs included in the Bill. Among other proposed changes, the Bill will remove European economic area expenditure from qualifying costs for orchestral tax relief from next April. That will result in a significant long-term cut for orchestras that tour Europe frequently. Does he not see that orchestra tax relief—an important cultural tax relief—is working as it is and should not be amended to the detriment of those orchestras, which should be supported?

[Nigel Huddleston]

The hon. Lady makes an important point about the success of our creative industries, and particularly the music industry and orchestras. She will be well aware, though, that we are not in the European Union any more, so some of the EEA measures no longer apply. Instead, we have to be World Trade Organisation-compliant. That bring some challenges, but we are certainly there to support the industry across a whole range of measures. I have already mentioned some of them, but we are doing even more with targeted measures to support the sector, because we want to boost investment in three other areas: animated film, animated TV and children’s TV programmes. As a result, those will be eligible for a 5% uplift to a 39% credit rate.

[Barbara Keeley]

The Association of British Orchestras has warned that, for some orchestras, the proposed changes to orchestral tax relief risk making European touring financially unviable. Given the financial and administrative burdens that the Government have already forced on orchestras through their botched Brexit deal, it seems ludicrous to create more difficulties for orchestras that are touring, especially as orchestra tax relief is working fine as it is. Does the Minister not accept—I know that he has had evidence on this—that the changes are unnecessary and damaging to orchestras?

[Nigel Huddleston]

As I outlined, I think the hon. Lady is hoping for measures to turn back the clock to when we were in the EU. We are not in the EU any more, and therefore the world is a different place. However, we are always keen to support and engage with the creative industries, and orchestras in particular. When I was at the Department for Digital, Culture, Media and Sport, we raised those issues again and again—actually, with considerable success—to enable orchestras and tourers to get across Europe, often by doing individual deals with individual countries, which we sometimes have to do now that we are no longer in the European Union.

I will now outline measures to support our employment-boosting agenda. The path to achieve this is clear: we must remove both barriers to work and incentives not to work. Perhaps most of all, though, we must ensure that hard work is rewarded. That is why our spring Budget announcements were so important. Let us take the abolition of the lifetime allowance. The Office for Budget Responsibility estimates that that will retain 15,000 workers annually and the Bill completes that change by removing the lifetime allowance from the statute book completely.

I now turn to the measures to simplify our tax system. Complex and inefficient taxes are one of the biggest restrictions on businesses. They often come at a high cost in terms of both time and capital. It is the Government’s duty to deliver a modern, simpler tax system and the measures in the Bill will help to do just that. Making full expensing permanent is a huge simplification for larger firms, but we are going further by expanding the cash basis for over 4 million smaller growing traders. This will simplify the process to calculate their profits and pay income tax. We have also listened closely to feedback from businesses and, as a result of that consultation, some of the main restrictions on using the cash basis will be removed. The simpler cash basis will be the default method for calculating profit, and businesses will therefore start on the simpler regime as standard. We will also be taking forward other technical small measures. Those will include improving the data that His Majesty’s Revenue and Customs collects from its customers. These measures will result in a trusted modern tax administration system.

We must also build a tax system that is fair and works for everyone. We cannot understate the role of tax in supporting our public services. Taxes pay for them directly and, through attracting investment, indirectly. We must all fairly play our part. The Bill will make promoting tax avoidance a crime in circumstances where persons continue to promote a scheme after the receipt of a stop notice. It will also enable HMRC to act more quickly to tackle promoters of tax avoidance by introducing a new power for HMRC to bring disqualification action against the directors of companies involved in promoting tax avoidance. We will also reduce the scope for tax fraud in the construction industry by amending the construction industry scheme. The amendment will add VAT to the gross payment status test. This means two things: that compliance will now be checked as part of this process, and that HMRC powers to remove gross payment status will be enhanced.

Of course, it is only fair that we also guard against over-collection of tax. The Bill addresses a concern here, too. It will do so by enabling HMRC to reduce the off-payroll working PAYE liability of a deemed employer who is responsible for ensuring that PAYE is calculated and sent to HMRC correctly. This will apply where that engagement is incorrectly treated as self-employed for tax purposes.

It also remains important that we are in lockstep with our international partners during such unprecedented times. In spring, we legislated to implement OECD pillar two in the UK, building on the historic agreement built by the Prime Minister, to a two-pillar solution to the tax challenges of a globalised digital economy. In the Bill, we are making technical amendments to the main pillar two rules identified from stakeholder consultation. That is to ensure that the UK remains consistent with the latest internationally agreed guidance.

The Bill builds on the autumn statement that focused on the long-term growth of the UK economy and sound economic policy. What a contrast to Labour’s fantasy economics, including £28 billion per year of additional spending without any idea where that money will come from—although we all know at heart that it will be taxpayers or through more debt, which is, of course, just deferred taxation. In contrast, this Finance Bill backs British businesses, rewards hard work, and supports a modern and simpler tax system. In doing so, it delivers on the Government’s commitments to prioritise economic growth, encourage business investment, nurture innovation and simplify our tax system to combat tax avoidance. For those reasons, I commend the Bill to the House.

[Madam Deputy Speaker (Dame Rosie Winterton)]

I call the shadow Minister.

Finance Bill

Nigel Huddleston Excerpts

Committee of the whole House
Wednesday 10th January 2024 Commons Chamber

[The Financial Secretary to the Treasury (Nigel Huddleston)]

This Government’s aim is to grow the economy for the good of everyone by removing barriers to private sector investment and delivering a tax system that is supportive of business. At the spring Budget 2023, the Chancellor set out his approach for a highly competitive tax regime. By announcing a package of generous tax incentives, combined with a rate of corporation tax that remains the lowest in the G7, this Government have ensured that the UK continues to be one of the best places in the world for businesses to grow and invest.

The Bill marks our next step in making the UK one of the most competitive tax systems among major economies by enhancing the support that the corporation tax system provides to businesses that drive growth by making long-term investments. It meets the Government’s commitment to introduce permanent full expensing, as announced at the autumn statement, solidifying our international competitiveness and creating the certainty that businesses have told us they need in order to confidently invest. The Bill will also drive UK business innovation by merging the existing research and development expenditure credit scheme with the small and medium enterprise scheme. Merging those schemes will simplify and improve the system for supporting cutting-edge research and development.

Turning first to clause 1, at spring Budget 2023, the Government introduced two new temporary first-year capital allowances for qualifying expenditure on plant or machinery. The first was a 100% first-year allowance for so-called main rate expenditure, known as full expensing, which allows companies to write off the full cost of plant and machinery in the year that the cost is incurred. The second was a 50% first-year allowance for expenditure on special-rate assets such as lighting systems, thermal insulation and long-life assets, allowing companies to write off half the cost of an asset in the year that it is incurred, with the remaining balance written down at 6% in every year afterwards.

The Chancellor was clear that his long-term ambition was to make those new reliefs permanent once the fiscal and economic conditions allowed, and at the autumn statement he confirmed that he was able to do just that. Clause 1 delivers that ambition, making both full expensing and the 50% first-year allowance permanent by removing the end date of 31 March 2026. That means that companies will be able to permanently benefit from full expensing. It solidifies our position as joint top of the rankings of OECD countries with regard to plant and machinery capital allowances, and means we are the only major economy with permanent full expensing.

The change will give companies the certainty they need to make long-term investments, and responds to calls from the CBI, Make UK, Energy UK and 200 other business groups and leaders, and from companies including BT Openreach, Siemens and Bosch, which have said that making the policy permanent would be the single most transformational thing the Government could do for business investment and growth. According to the Office for Budget Responsibility, it will generate almost £3 billion of additional business investment each year and £14 billion over the course of the next five years. The forecast is that GDP will be 0.1% higher by the end of the forecast period and slightly below 0.2% higher in the long term as a result.

[Richard Fuller (North East Bedfordshire) (Con)]

I applaud the Government’s initiative to make full expensing permanent, but of course we know there will be a general election within the next 12 months. Has my hon. Friend heard from the Opposition whether, if they were to be in Government, they would maintain it?

[Nigel Huddleston]

My hon. Friend is incredibly knowledgeable about this area through some of his previous business and ministerial experience, and that is a question I am intrigued to hear answered by the Opposition shortly. I believe it is vitally important, because the whole point is to give businesses the confidence to invest in the long term, and certainty is key to the investment decisions being made.

[Richard Fuller]

Further to that point, does my hon. Friend not think, as I do, that it is an aspect of a responsible Opposition to be clear, right now as we are debating this in this House, what they would do were they to be in Government?

[Nigel Huddleston]

I think my hon. Friend is kicking off what is likely to be a long debate over the course of the next year, but an important one for our constituents and businesses. The economy will play a pivotal part in discussions this year. It is very clear what we are doing: we are implementing vital changes, asked for by business and in response to business, to provide that business certainty and an environment in which they and therefore our constituents can thrive. I do not think any of us want to put that at risk. However, without the clarification and confidence from the Opposition about what they might do, these issues will be raised and the uncertainty can persist. We on the Government side of the House are committed to this, and my hon. Friend is right to make that clear.

[Nigel Mills (Amber Valley) (Con)]

I think the Minister just read out that the assessment is that this measure will create £3 billion additional investment per year. Is that right? If I remember the Green Book correctly from the autumn statement, the annual cost of this measure was £11 billion, which I think equates to £55 billion of extra capital expenditure. Is he saying that £52 billion of that £55 billion is just bringing forward investment that would have happened later, and £3 billion is new, or have I somehow got my numbers wrong and this will generate a load of investment that would not otherwise have happened?

[Nigel Huddleston]

My hon. Friend is right to point out the timing element with both full expensing and R&D; I will come on to R&D in a moment, because I think that is the £55 billion figure he mentions, but these measures, particularly the full expensing, will of course have a long-term impact over a long period of time. The cost is up-fronted, but the benefit is over a long period, and anyone who has worked in business understands that. He is right to point out the anomaly, and it is a very important point because a lot of people probably would not understand it, but the fact that the OBR has highlighted the incremental impact on the economy overall shows that there is a clear and transparent net benefit. The timing of the impact changes, but we are talking about additional investment right away, because we will be giving businesses the confidence to be able to make those decisions and invest immediately.

[Matt Rodda (Reading East) (Lab)]

I appreciate the Minister’s comments so far. Can he confirm how many times policy has changed in this important area since 2019? While he is making some further points today, it seems that Government policy has changed quite erratically, and that in itself is difficult for businesses to respond to when they are looking for certainty in planning for the long-term.

[Nigel Huddleston]

I agree that certainty for business is pivotal, but with both full expensing and R&D the Government, the Chancellor and others have been indicating the direction of travel for some time and therefore giving increased certainty. As I have said, it was mentioned a while ago that we intended to pursue the policy of full expensing when the economic circumstances allowed, and now they do. R&D, which I will come to in a minute, has been discussed for quite a long time and is the result of extensive co-operation with industry.

It is also the reality, though, that Government policy needs to change in response to the nature of a changing economy and to things such as digital, the cloud and so on. When it comes to other investments, we need to make sure that new and emerging policy areas are covered as well. We have seen today, as we saw in the autumn statement, a very clear direction of travel from the Conservative side of the Chamber, which is about incentivising businesses and cutting taxes. Permanent full expensing also simplifies the capital allowances regime overall, as companies can claim the full cost in year one, reducing the need to claim writing-down allowances year on year.

Turning to clause 2 and schedule 1, the Government have also announced the closure of the R&D tax relief review launched in 2021—the point I was just making to the hon. Member for Reading East (Matt Rodda)—alongside a set of changes to simplify and improve the system. Clause 2 makes changes to merge the current R&D expenditure credit and SME schemes for expenditure in accounting periods beginning on or after 1 April 2024, simplifying the system and providing greater support for UK companies to drive innovation.

The merged scheme will have an above-the-line mechanism similar to the R&D expenditure credit, with a rate of 20%. That will make the benefit more visible and easier for companies to factor into their investment decisions. Additionally, small and medium enterprise lossmakers will now be able to carry forward their losses rather than having to surrender them, which will give a total benefit of up to £45 per £100 of R&D expenditure.

There will also be a reduction in the rate at which the merged scheme credit is taxed for lossmakers, from 25% to 19%. That is worth around £120 million per annum to non-intensive lossmakers and will increase the up-front cash benefit for lossmakers. Subcontracting rules in the merged scheme will allow the company taking the decision to do R&D to claim relief on contracted-out R&D. That approach is based on the current SME scheme, which was identified as the best option in the consultation we delivered, and has been refined further following engagement with industry last summer.

Subsidy rules will also be removed, allowing SMEs to claim relief for work for which they receive a grant of a subsidy. This represents an increase in generosity for SMEs as well as being a major tax simplification.

The Government are also legislating for enhanced support for loss-making R&D-intensive SMEs. That was announced at spring Budget 2023 and will benefit 23,000 SMEs a year by providing further support to the most R&D-intensive SMEs while merging the current schemes. The Government are promoting the conditions for enterprise to succeed. Companies claiming the existing SME tax relief will be eligible for a higher payable credit rate of 14.5% if they meet the definition for R&D intensity.

At the summer statement, the Government announced several improvements being made to that enhanced support. The R&D intensity threshold is being lowered to 30% from 40% from April 2024, meaning that around 5,000 more companies will benefit from the support. A one-year grace period is being introduced, providing greater certainty by ensuring that companies that dip under the 30% threshold will continue receiving relief for one year. The same subcontracting rules as the merged scheme will apply to this enhanced support, further helping to simplify the system with one set of rules that both SMEs and larger companies will follow.

Overall, R&D reliefs will support an estimated £55 billion of business R&D expenditure in 2028-29—a 25% increase from £44 billion in 2021-22. Expenditure on R&D reliefs is forecast to increase in every year of the scorecard period. We will also restrict nominations and assignments for R&D relief payment. That measure ensures that genuine businesses get the payment for their R&D claim directly, rather than receiving it through an agent, and is designed to benefit genuine claimants and reduce non-compliance.

Subject to limited exceptions, no R&D tax credit payments will be made to nominee bank accounts, and any R&D tax credit payments must be paid directly to the company that claims for the R&D, so claimants will now receive their payments directly, giving them more control. That will ensure that the person claiming the relief has better oversight of the claim and receives the money into their account quicker. Claimants will also be clearer on exactly how much money is being charged by their agents, rather than just receiving a net amount after fees have been deducted. That builds on previously announced measures and policy changes to help to ensure greater company control over R&D claims.

The Government are committed to making the UK the best place in the world to do business. Full expensing and R&D tax relief support businesses to grow and invest, which will boost productivity and economic growth. That remains the key way to raise everybody’s living standards and to fund high-quality public services throughout the UK. I commend clauses 1 and 2 and schedule 1 to the Committee.

[James Murray (Ealing North) (Lab/Co-op)]

Let me start by briefly considering the context in which we are debating clauses 1 and 2. As we know, the Bill follows the Chancellor’s statement on 22 November last year, in which he claimed that he was delivering an “autumn statement for growth”. As the Committee may remember, the Office for Budget Responsibility confirmed on the same day that growth forecasts had been cut by more than half for the coming year, cut again for the year after that, and cut yet again for the year after that. Independent analysts confirmed that, even after all the changes the Government had announced, personal taxes would still rise. In fact, personal taxes are now set to rise by £1,200 per household by 2028-29, with the tax burden on track to be the highest since the second world war. Despite people across the country paying so much in tax, public services are collapsing, the NHS is on its knees, and more and more families are struggling to make ends meet.

That was the context in which we considered the Bill on Second Reading just before Christmas: 13 years of Conservative economic failure had left people across Britain worse off. The only thing to have changed since then is that we now face 14 years of Conservative economic failure. It may be a new year, but those in the governing party face the same cold truth: nothing they can say or do now can repair the damage that they have done to our economy.

People in businesses across Britain deserve so much better. As a foundation of better management of the economy, our country needs and deserves stability, certainty and a long-term plan. It is for that reason that, although we welcome the fact that clause 1 makes full expensing permanent, which we have long called for, it simply cannot make up for the years of uncertainty that businesses have faced. Businesses need stability and predictability to help them plan for growth, and their long-term planning has been held back because the Government have been chopping and changing business taxes and reliefs year after year, with no evidence of anything resembling a long-term strategy.

--- Later in debate ---

[Nigel Mills]

It is a pleasure to speak in this debate. I want to direct my remarks to clause 1, on permanent full expensing for the purchase of plant and machinery, which I discussed during the autumn statement and on Second Reading.

This is actually quite a radical and expensive policy. We have, probably for longer than all our lifetimes, given companies relief for capital expenditure using capital allowances. That was originally quite a generous 25% in the first year—I suspect that most plant and machinery had a longer life than that when the rules were produced. We have chosen to do that for all these years, rather than just letting a business deduct its own accounting calculation of depreciation, because we did not want the manipulation of tax deductions by businesses doing their tax returns. We chose to do it this way.

The tool that Governments of all colours for decades have had when the economy hits trouble is to give first-year allowances and various enhancements. I remember a 40% first-year allowance and a 50% first-year allowance. We have had full expensing up to £1 million, as the shadow Minister referred to. That has been the way of incentivising investment in a period of economic recovery for probably as long back as there has been a toolkit.

Now we have landed on permanent full expensing, so businesses get full relief on plant and machinery spend in the first year. What are the Government expecting to happen differently here? Are we expecting capital investment by businesses of more than £1 million a year that otherwise would not be economically viable and would never have happened? Are we expecting investment to be brought forward and to take place earlier than it otherwise would have? That would be entirely welcome and would probably modernise businesses, protect jobs and give them a chance to grow in a way that they perhaps would not have had, which is not a bad policy aim at all. Or are we just giving business an earlier tax relief than they otherwise would have had, whereby they bank that and are happy but it does not change behaviour?

It is hard to get behind the numbers on this measure in the Green Book. As I said earlier, the estimate at the end of the five-year period, and probably the first full year that making this permanent will make a difference, is a tax cost of £10.9 billion just for this measure. If we run the numbers, bearing in mind that businesses will already have had 25% tax relief on that same expenditure in that year, that means we expect a £55 billion higher claim to get tax relief in that financial year than otherwise would have happened. However, the Minister said that only £3 billion of that is estimated by the OBR to be additional investment that would not otherwise have taken place at some point. It suggests that we have a lot of investment being brought forward with a lot of more generous tax relief that would have happened anyway. Will the Minister explain what the Government are aiming to achieve and what is being forecast? Is the OBR being unduly cautious? That would enable us to understand how we judge whether the measure has been successful.

Are we expecting to see whole loads of investment in plant and machinery that never would have been viable before, or are we expecting to see it brought forward? If what we are getting is brought forward, at some time the cost should start to taper down, because this is not a new tax relief that businesses would not have already had; it is just an acceleration of tax relief and businesses will pay more tax in all subsequent years, because they are not getting the relief they used to get. The measure could cost £11 billion in the first year and gradually that would level down and in the fullness of time there would be no more annual cost, in effect. Can the Minister clarify that?

It is not immediately clear how the Government plan to assess whether the measure has worked or is working. I assume that from electronic corporate tax returns we can track down to the pound the amount of investment claimed for full expense relief every year. We could have a report within six months of the end of a calendar year on how much of these 100% allowances has been claimed and compare that with the total amount claimed for capital allowances in whichever preceding years we like. We could see whether full expensing was driving behaviour change. Will the Minister talk us through what he expects to happen and how he will assess whether this has been an effective way of boosting productivity and increasing investment for £11 billion a year? It is probably one of the most sizeable line entries we have seen in a Finance Bill in my 14 years here. Normally we expect the big number to be a tax cut for individuals, and this measure is significant.

As we are making this measure a permanent feature of our tax system, it shines a light on what we are trying to get from our corporation tax system. There will not be any kind of compliance saving. The Minister made a brave attempt at saying there might, but effectively all that will change is that the number that a business currently puts in its additions to its writing down allowance pool will now be put in the 100% first-year claim box. It is the same number in a different box; that is the only compliance change we have here. It throws into question some previous policy decisions we have made, because for a business to get full benefit from this, it needs to be paying enough tax to use the full relief in that first year.

If a business cannot use the full relief, the incentives are not as powerful as they would otherwise be, because then the option is effectively to carry that excess deduction forward, but we introduced rules a few years ago that are strict on how many losses a business can use in a year. If we really think that giving people the earliest possible cash tax benefit for capital investment drives investment, we should probably take away that restriction on using losses, so that businesses can get the benefit as early as possible and not have it spread over a number of years going forward. Will the Minister explain whether the Government will look at that and make sure we are not accidentally undoing some of the benefit we are seeking to get?

My second question is: what do we do with the legacy writing down allowance pool that relates to plant and machinery expenditure for God knows how many past years? On a reducing balance basis of 25%, it takes many, many years to get full tax relief for expenditure, so every business will have a large pot of money that it has not yet had tax benefit for. Are we expecting them to run that down at 25% reducing balance a year and still be doing so in 23 years’ time, by which point no one will have any idea what on earth that balance ever was? Or should we say, “That is a bit of a nonsense. Why do we not just let you take the whole balance at 20% a year over the next five years and finish that problem off, because we do not need to be focusing on that?”? We could find any number we like there, but it would draw a line under that past expenditure in a way that genuinely simplifies things.

We then have the question of, “What do we do with capital expenditure on items that are not plant and machinery?” The tax relief we give on structures and buildings is not generous, but if we are trying to drive an increase in productivity and large businesses to invest in new gigafactories to build batteries for electric cars or for electricity storage or whatever, do we not want to incentivise them to build the factory building as well, rather than either giving them no relief or giving it over a long time? If we are spending £11 billion a year to encourage investment in plant and machinery, should we not spend a little money on trying to encourage other things that are key for industrial investment to take place, by being a bit more generous on buildings and structures? Has the Minister any thoughts on that?

The Government did a capital allowances review only a year or two ago, which did not look at permanent full expensing as one of the options, but it would be interesting to see whether they have had any further thoughts on that. We are now asking every business to go through and track every item of capital that they spend and treat it differently in their tax return from how they treat it in their accounting records. Then we have all manner of different laws depending on whether it is a long-life asset, a short-life asset, a car or an environmentally friendly car—I could go on. For the amount now at stake, and given that we have given full relief for plant and machinery, which is the biggest amount, do we really need all that cost and complexity? Or should we just say for all those other items, “You can just have your accounting calculation”? Okay, businesses might take it a bit quicker than we would like, but in actual fact the cost of that is not all that material in the grand scheme of things.

We could move to a system where the only adjustment someone has to make to their tax return is to claim a very generous tax relief on plant and machinery, and they would not have to touch anything else. That would be a more coherent corporation tax regime, now that we have spent all this money incentivising plant and machinery. It would then genuinely be a compliance saving for a business in that situation.

I support the measure and truly hope that it works, but, as a significant amount is being spent, it would be helpful to understand what we are trying to achieve and how we will know whether we have been successful. I hope that the Government will move on to think about how we can slightly recast our tax system so that it makes sense, having made this radical and generous change.

[Nigel Huddleston]

I thank hon. Members for their contributions. I will take a few moments to respond to quite a few questions raised during the debate. First, I reassure hon. Members that further guidance will be provided on these schemes. Of course, we do not want all the schemes just to exist; we want them to be used so that they have a real-world impact. More information will therefore be coming out about a variety of areas over a period of time.

I gently remind the hon. Member for Ealing North (James Murray), who yet again took the opportunity to talk the UK economy down—the Opposition always do—that every single Labour Government have ended with unemployment higher than what they inherited from the Conservatives. I think the public are well aware of that pattern.

I turn to the many questions raised. I thank my hon. Friends the Members for Amber Valley (Nigel Mills) and for Erewash (Maggie Throup), and indeed Opposition Members for their contributions. On timing, the Government have been clear since the merged scheme consultation was published in January last year that the intended implementation date for the scheme is April 2024. Importantly, in response to that consultation and in recognition of comments, the merged scheme will apply to accounting periods starting on or after 1 April 2024 rather than to expenditure incurred from that date. Again, we will provide further guidance on that.

--- Later in debate ---

[Debbie Abrahams (Oldham East and Saddleworth) (Lab)]

Following on from the comments of the hon. Member for Amber Valley (Nigel Mills) about the impact of the schemes and given the Federation of Small Businesses’ request for some publication about the impact of these tax reliefs on R&D levels, will the Minister also publish a report on their impact on different regions and subregions?

[Nigel Huddleston]

All taxes are kept under review, as are their impacts, so some of the calls for further analysis are not necessary because we do that as a matter of course. It is important to stress that many external studies have found that when full expensing has been introduced in other countries, it has been very effective in supporting investment. Of course, the OBR forecasts predict a boost of £3 billion each year. The analysis of the impact of the super-deduction is already taking place, but companies have 12 months from the end of their accounting period to amend their tax returns, so HMRC will not have complete data on the impact of the super-deduction until 2024. However, we will provide further analysis in due course.

My hon. Friend the Member for Erewash mentioned a whole range of real-world impacts from these measures and the previous measures, including the super-deduction, as well as, importantly, the annual investment allowance of £1 million, which affects the 99% of smaller businesses that can effectively benefit from full expensing. In the autumn statement, we announced full expensing for larger businesses: the top 1%, who conduct about 80% of full investment.

I am aware of time, but will cover a couple of other key points that were raised. My hon. Friend the Member for Erewash raised subcontracting. Again, we engaged extensively with stakeholders on this issue over the summer, and the Government have developed an approach that will allow the person taking the decision to do R&D to claim that relief. That was the preferred result of the consultation. However, an exception will apply in the important area that she mentioned of companies doing R&D—such as in a clinical trial—in the UK for another company that is ineligible for relief because, for example, it is an overseas customer. That is to make sure that the impact is there for everyone to benefit from. The hon. Member for Ealing North also mentioned partnerships; a corporate partner is eligible for full expensing, but an unincorporated partner is not. Again, the annual investment allowance of £1 million covers the investment needs of almost all unincorporated partnerships.

The hon. Member keeps harping on about taxes rising. I strongly advise him to look at his December payslip and compare it to the one he will get shortly. Maybe he will have the decency to come to me and tell me whether his tax is lower or higher. Each fiscal event needs to be taken separately. At the last one, the autumn statement, we cut taxes—national insurance is down 2p. [Interruption.] If the hon. Member does not believe me, I pose this challenge to him: if his payslip shows that his taxes are lower, perhaps he will do me the courtesy of coming to me and apologising, or give the difference to a charity, to put his money where his mouth is.

We do not believe that new clause 1 is necessary because the information has already been published in the tax impact and information notes alongside each change, which give a clear explanation of the policy objectives, along with details of the implementation costs for both HMRC and businesses. Therefore, the new clause is not necessary. I urge the House to reject it, and I commend clauses 1 and 2 and schedule 1 to the Committee.

Question put and agreed to.

Clause 1 accordingly ordered to stand part of the Bill.

Clause 2 ordered to stand part of the Bill.

Schedule 1 agreed to.

New Clause 1

Review of reliefs for research and development

“(1) The Chancellor of the Exchequer must, within three months of this Act being passed, publish a review of the implementation costs of the measures in section 2 incurred by—

(a) HMRC, and

(b) businesses.

(2) The review under subsection (1) must include details of the implementation costs of all measures related to credit or relief for research and development that have been introduced since December 2019.”—(James Murray)

Brought up and read the First time.

Question put, That the clause be read a Second time.

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[The First Deputy Chairman of Ways and Means (Dame Rosie Winterton)]

With this it will be convenient to discuss clause 27 stand part.

[Nigel Huddleston]

I will take clause 27 first. The changes that it makes clarify how VAT and excise legislation should be interpreted in the light of changes made by the Retained EU (Revocation and Reform) Act 2023, which came into effect on 1 January. The Act ends the supremacy and special status afforded to retained EU law in the UK. As we made clear when it was introduced, the Government are taking a bespoke approach to UK VAT and excise law. In line with the 2023 Act, clause 27 confirms that, for VAT and excise, it will no longer be possible for any part of any UK Act of Parliament or domestic subordinate legislation to be quashed or disapplied on the basis that it is incompatible with EU law. In other words, it will no longer be possible for businesses to rely on EU law where it is in conflict with domestic law. The measure also provides that UK VAT and excise law continues to be interpreted as Parliament intended, drawing on rights and principles that currently apply in interpreting UK law.

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[Nigel Huddleston]

I think some hon. Members may have tried to expand the debate strictly beyond the scope of the measures we are debating; for understandable reasons, I will stick strictly to the clauses.

My right hon. Friend the Member for Hemel Hempstead (Sir Mike Penning) made some important points about ensuring that we take full advantage of the benefits of leaving the European Union. Of course, we have already made progress in that area by removing, replacing and improving retained EU law, including revoking all direct EU regulations in relation to customs duty, introducing a UK tariff and domestic customs regime, introducing VAT relief for women’s period products and for the installation of energy-saving materials, and so on. On the points he made regarding potential future changes to VAT, we of course always keep tax under review. He will forgive me for not making tax policy at the Dispatch Box this evening, tempted as I am; that is the purpose of key fiscal events. I will absolutely commit to meeting my right hon. Friend, as I am always willing to listen and hear comments.

Comments were made about encouraging the use of greener fuels. The Government encourage the use of renewable fuels through the renewable transport fuel obligation, which incentivises the use of low-carbon fuels and reduces emissions from fuels supplied for use in transport and non-road mobile machinery. On the point about the Court of Justice, the European Union (Withdrawal) Act 2018 provides that Court of Justice of the European Union judgments issued since the end of the implementation period are not binding on UK courts. On the point about codifying everything, trying to codify all interpretative effects into black and white UK law would of course be a huge endeavour and would require a complete review of all that legislation, taking many years and still leaving significant tax revenue at risk.

Question put and agreed to.

Clause 25 accordingly ordered to stand part of the Bill.

Clause 27 ordered to stand part of the Bill.

The Deputy Speaker resumed the Chair.

Bill (Clauses 1 and 2, schedule 1, clause 21, schedule 12, clauses 25, 27 and 31 to 34, and schedule 13) reported, without amendment, and ordered to lie on the Table.

Finance Bill

Nigel Huddleston Excerpts

Report stage
Monday 5th February 2024 Commons Chamber

[The Financial Secretary to the Treasury (Nigel Huddleston)]

I beg to move, That the clause be read a Second time.

[Mr Deputy Speaker (Sir Roger Gale)]

With this it will be convenient to discuss the following:

New clause 1—Review of effectiveness of section 31 measures in preventing fraud involving taxpayers’ money—

“(1) The Chancellor of the Exchequer must, within three months of this Act being passed, conduct a review of the effectiveness of the provisions of section 31 in preventing fraud involving taxpayers’ money.

(2) The review must evaluate the effectiveness of the provisions of section 31 in preventing fraud involving taxpayers’ money through comparison with the effectiveness of—

(a) other measures that seek to prevent fraud involving taxpayers’ money, and

(b) the approach taken in other countries.”

This new clause would require the Chancellor to review the effectiveness of measures in this Act to prevent fraud involving taxpayers’ money, and to compare them with other measures that seek to prevent fraud involving taxpayers’ money and the approach taken in other countries.

New clause 2—Review of reliefs for research and development—

“(1) The Chancellor of the Exchequer must, within three months of this Act being passed, publish a review of the implementation costs of the measures in section 2 incurred by—

(a) HMRC, and

(b) businesses.

(2) The review under subsection (1) must include details of the implementation costs of all measures related to credit or relief for research and development that have been introduced since December 2019.”

This new clause would require the Chancellor to publish a review setting out the total implementation costs of all changes to research and development reliefs in the current Parliament.

New clause 3—Review of measures to tackle evasion and avoidance—

“(1) The Chancellor of the Exchequer must, within three months of this Act being passed, publish a review of the measures in sections 31 to 33 to tackle evasion and avoidance.

(2) The review under subsection (1) must include details of—

(a) the average sentence handed down in each of the last five years for the offences listed in section 31;

(b) the range of sentences handed down in each of the last five years for the offences listed in section 31;

(c) the number of stop notices issued in each of the last five years to which the measures in section 33 would apply; an

(d) the estimated impact on revenue collected in each of the next five financial years resulting from the introduction of the measures in sections 31 to 33.”

This new clause would require the Chancellor to publish details of the sentences given and stop notices issued in each of the last five years to tackle evasion and avoidance, as well as the revenue expected to be generated from the measures to tackle evasion and avoidance in this Act in each of the next five years.

New clause 4—Review of public health, inequality and poverty effects of Act—

“(1) The Chancellor of the Exchequer must review the public health, inequality and poverty effects of the provisions of this Act and lay a report of that review before the House of Commons within six months of the passing of this Act.

(2) The review must consider—

((a) the effects of the provisions of this Act on the levels of relative and absolute poverty across the UK including devolved nations and regions,

((b) the effects of the provisions of this Act on socioeconomic inequalities, and on population groups with protected characteristics as defined by the 2010 Equality Act, across the UK including devolved nations and regions,

((c) the effects of the provisions of this Act on life expectancy and healthy life expectancy across the UK including devolved nations and regions, and

(d) the implications for the public finances of the public health and NHS effects of the provisions of this Act.”

New clause 6—Assessment of the impact of permanent full expensing—

“(1) The Chancellor of the Exchequer must, within six months of this Act being passed, publish an assessment of the impact of the measures in clause 1 of this Act on—

(a) business investment, and

(b) economic growth.

(2) The review under subsection (1) must—

((a) assess the impact of full expensing being made permanent, and

(b) consider what other policies would support the effectiveness of the measures in clause 1 of this Act.”

This new clause would require the Chancellor to publish an assessment of the impact on investment and growth of the measures in this Act to make full expensing permanent, and to consider what other policies could support the effectiveness of permanent full expensing.

New clause 7—Review of multipliers used to calculate higher rates of air passenger duty—

“(1) The Chancellor of the Exchequer must, at the next fiscal event, publish a review of the multipliers used to calculate higher rates of air passenger duty for each destination band.

(2) This review must propose options for introducing a multiplier to link the higher rate and the reduced rate within the domestic band.

(3) The Chancellor must, at the next fiscal event, make clear what changes, if any, he will implement as a result of this review.”

This new clause would require the Chancellor to publish a review of the multipliers used to calculate the higher rates of air passenger duty, and to propose options for introducing a multiplier to link the higher rate and the reduced rate within the domestic band.

Government amendments 1 to 6.

[Nigel Huddleston]

The Government’s aim is to grow the economy for the good of everyone, and our tax system is a key part of that. For households, higher taxes mean less financial freedom and less choice in how they spend their money. For businesses, they can mean less growth and investment, and that means fewer jobs for workers. That is why we need to grow our economy to create jobs and give ourselves the financial headroom to reduce taxes and remove the barriers to private sector investment. We must have a tax system that is supportive of business.

At spring Budget 2023, the Chancellor set out his approach for a highly competitive business tax regime. By announcing generous tax incentives combined with a rate of corporation tax that remains the lowest in the G7, the Government ensured that the UK is one of the best places in the world for businesses to grow and invest, but we should not be satisfied with simply being one of the best. This Bill therefore marks our next step in making the UK the best place in the world to do business.

We are taking huge, ambitious steps to make that a reality in the autumn statement and in the Bill. For example, no other major economy has made full expensing permanent. That is a major step in encouraging more investment by giving a huge tax relief to those who invest. Alongside that, we have introduced a generous new regime for research and development carried out by companies. We are now going further to encourage even more investment by introducing new clause 5, which will exempt receipts from new electricity generating projects from the electricity generator levy.

I will address each amendment in turn, looking first at the details of new clause 5. The electricity generator levy was introduced following the energy crisis to ensure that energy companies with extraordinary returns contribute more towards vital public services and support for households. However, we must balance that against ensuring that the UK remains a brilliant place to invest in renewables. The new clause makes changes to the EGL that will exempt receipts from new electricity generating projects from the levy. It will ensure that all generators in scope of the levy will benefit from the exemption if they choose to proceed with investments in new generation capacity and make a substantive decision to go ahead with a project on or after 22 November 2023—the date of the autumn statement. That will help support continued investment in the UK’s renewable generation capacity by removing new investments from the tax and providing businesses with the confidence to make such new investments.

I turn to Government amendments 1 to 3. To ensure that the research and development tax relief clauses in the Bill work as intended, the Government are proposing technical amendments to the R&D clauses. The Bill introduces a new enhanced support for R&D-intensive small and medium-sized enterprises, such as those in our vital life sciences sector. From April 2024, the R&D intensity threshold will be reduced from 40% to 30%.

Amendments 1 and 2 make changes to ensure that R&D-intensive companies get the relief as intended. Amendment 1 removes two situations where a company would appear less R&D-intensive than it actually is. These issues were raised with us by an industry stakeholder, for which I am grateful. To avoid abuse and to protect the scheme for genuinely R&D-intensive companies, the ratio is worked out at a group level. Currently in the legislation, companies within groups that charge each other for services could have costs double counted and therefore reduce their R&D intensity. The amendment will fix that. The Government do not want to exclude companies from relief because of legitimate commercial arrangements that do not affect the underlying true R&D intensity of the business.

On top of providing more support for R&D-intensive companies, the Bill will simplify and improve our R&D reliefs by merging the R&D SMEs scheme with the R&D expenditure credit. To ensure that those clauses work as intended, the Government propose technical amendments to the R&D clauses. Companies and accountants wanted the merged scheme to be implemented on an accountancy period basis as that makes claims simpler and delays the merged scheme for the majority of current R&D expenditure credit claimants. It therefore gives them a bit more time to prepare.

The new rules for contracted-out R&D will ensure that the company making the decision to do the R&D and bearing the risk is the one that gets the relief. However, that means that, as currently drafted, there could be temporary situations when two companies are in a contractual relationship and one moves into the new R&D tax credit system ahead of the other. For a limited period of time, that could result in situations where both parties could claim on the same R&D or neither could claim, as was raised by stakeholders. Amendment 3 ensures that the legislation works as intended. For temporary double claims, the R&D credit will go to the claimant in the old system until both have started new accounting periods. To avoid a temporary gap where no company can claim, the legislation will be amended to ensure that subcontractors can claim where their customer is still in the old system.

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[Mr Deputy Speaker (Sir Roger Gale)]

I call the Minister.

[Nigel Huddleston]

Thank you, Mr Deputy Speaker. May I join you, Mr Speaker and the whole House in wishing His Majesty a speedy recovery following the announcement this evening?

I wish to thank right hon. and hon. Members for contributing to this debate. I shall respond to as many of the points as I can, and also talk to the amendments that have been moved. On new clause 1, I agree that we must prevent fraud and ensure that all taxpayers pay their fair share. To help achieve that, the new maximum sentences for the most egregious examples of tax fraud, the new criminal offence on the promoters of tax avoidance, and enhanced director disqualification powers will come into force on Royal Assent of this Bill. That will all help.

At 4.8% of total liabilities, the UK’s tax gap is at the joint lowest rate ever recorded and has remained low and stable. The UK’s tax gap compares favourably with that of our international partners. HMRC has already published performance updates that provide information on its compliance performance every quarter, so we believe that this new clause is not necessary.

New clause 2 is pretty much the same as the new clause 1 rejected in Committee of the whole House. As I have said previously, we believe that the provision is unnecessary, as the information has been published in the tax information and impact notes alongside each policy change. That gives a clear explanation of the policy objective together with details of the implementation costs for both HMRC and businesses.

New clause 3 would require the Government to publish details of sentences given and stop notices issued to tackle evasion and avoidance in the past five years, as well as revenue expected to be generated by measures in this Bill to tackle evasion and avoidance in each of the next five years. However, HMRC publishes information on the number of custodial sentences received for tax compliance offences and the average sentence length in its annual reports and accounts. The 2023-24 annual report and accounts will be published this summer, providing a full overview of HMRC’s performance. The Government also publish a list of tax avoidance schemes subject to a stop notice on gov.uk, with the most recent report published on 7 December. HMRC has issued more than 20 stop notices since issuing the first one in 2022. The Government also published revenue estimates for the next five years of the clauses in this Bill in the tax information and impact notes. Therefore, as the information requested by new clause 3 is publicly available in routine HMRC publications, the publication requested by new clause 3 is unnecessary.

New clause 4 would require the Government to report on the likely impact of the measures in the Bill on public health, inequality and poverty—matters that concern us all and that we discussed in Committee. Existing mechanisms already effectively monitor and assess Government policies in those areas, rendering the amendment redundant. Departments such as the Department of Health and Social Care and its arm’s length bodies diligently evaluate policies to enhance health up and down the country. Through the Office for Health Improvement and Disparities and the National Institute for Health and Care Research, they address health inequalities and provide robust evidence for policy development. Various Government units, such as the Cabinet Office equality hub, contribute to levelling-up opportunities and ensuring fairness. The Government Equalities Office, the Race Disparity Unit, the Disability Unit and the Social Mobility Commission all focus on different equality dimensions to guide and support inclusive policy development across the country. We therefore do not believe that new clause 4 is necessary.

On new clause 6, I agree that it is important to regularly review and evaluate policy, and to be transparent, which my right hon. Friend the Member for Wokingham (John Redwood) also highlighted. His Majesty’s Revenue and Customs has published a tax information and impact note setting out the impact of the measure, including the economic impact, and the Office for Budget Responsibility has already conducted and published extensive analysis on the investment and growth impact of full expensing. That is available in its “Economic and fiscal outlook—November 2023”, which therefore negates the need to publish a separate assessment in six months’ time. The impact of permanent full expensing will be monitored through information collected from tax returns, and through regular communication with businesses and representative bodies.

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[Jim Shannon]

The Minister knows that I am particularly fond of him, but if he has heard my request before, let us now have action.

[Nigel Huddleston]

We always try to act; I cannot do everything, though. I note the hon. Gentleman’s comments. In a similar vein, my hon. Friend the Member for Totnes (Anthony Mangnall) raised the importance more broadly of the tourism, hospitality and leisure sector, and of the creative sector. He is absolutely right. Measures in the Bill and elsewhere will support all those sectors. Of course, business rates relief is vital to the tourism, retail, hospitality and leisure sector. My right hon. Friend the Member for Wokingham made a range of comments, some outside of my direct remit. I assure him that I will raise his points, which ranged from bonds to public sector efficiency—a vital area—with colleagues in the Department.

I was somewhat entertained by the comments of the Labour spokesman, the hon. Member for Ealing North, who was effectively asking me to commit to Conservative party policies as enthusiastically as he does, which is quite a turn up for the books. Of course, we welcome Labour’s support for the policies that we have announced, but there is clear blue water between the Labour party and the Conservative party in terms of principles about the size and scale of Government and the level of taxation. We have seen Labour’s flip-flopping over the £28 billion. I am not sure what the policy is today. It was rather rich of him to ask for commitments from me, given the flip-flopping that is so prevalent in every area of Labour policy.

At one point, the Labour party was supportive of Brexit. Now I do not know. Are Labour Members against it? Were they supportive of the right hon. Member for Islington North (Jeremy Corbyn) being Prime Minister, or do they not want him in the party? Are they in favour of nationalisation, or against it? Are they in favour of private sector involvement in the NHS, or against it? In a whole host of policy areas, we have seen persistent, perennial flip-flopping from the Opposition. I literally have goldfish whose commitments I would trust more than those from the Labour Front Bench. On those points, we will have to respectfully agree to disagree.

As I said, new clause 5 and the six amendments that the Government have tabled will help to ensure that the changes in the Bill apply as intended, and deliver a vital policy to protect renewable investment. They will make the tax environment more easily understood by business and protect vital tax revenue used to fund our public services. I therefore urge that they be added to the Bill. The six new clauses tabled by the Opposition seek to get the Government to publish data and information that is already being published through other sources, as I have outlined. I therefore urge the House to reject them.

Question put and agreed to.

New clause 5 accordingly read a Second time, and added to the Bill.

New Clause 6

Assessment of the impact of permanent full expensing

“(1) The Chancellor of the Exchequer must, within six months of this Act being passed, publish an assessment of the impact of the measures in clause 1 of this Act on—

(a) business investment, and

(b) economic growth.

(2) The review under subsection (1) must—

(a) assess the impact of full expensing being made permanent, and

(b) consider what other policies would support the effectiveness of the measures in clause 1 of this Act.”—(James Murray.)

This new clause would require the Chancellor to publish an assessment of the impact on investment and growth of the measures in this Act to make full expensing permanent, and to consider what other policies could support the effectiveness of permanent full expensing.

Brought up, and read the First time.

Question put, That the clause be read a Second time.

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[Nigel Huddleston]

I beg to move, That the Bill be now read the Third time.

This Government are backing British business, supporting employment, and creating a simpler and fairer tax system. My right hon. Friend the Chancellor delivered an autumn statement with the clear intention of strengthening the economy, now and for the future. This Finance Bill, which Members of the House have had the opportunity to scrutinise and debate over the past few months, does exactly that. It takes forward important tax measures to help businesses invest for less; encourages innovation and supports our creative industries by elevating rates and simplifying credits; and improves and simplifies our tax system to ensure it remains fit for purpose.

Mr Deputy Speaker, allow me to remind Members of the Bill’s key aims. Our first aim is to support British industry, so that we can solidify our position as world leaders in key sectors. Making full expensing permanent allows UK businesses to invest for less. We have moved to make the UK’s plant and machinery capital allowances the most generous of any major economy. Permanent full expensing has been called the single most transformational thing we could do for investment, and it was welcomed by more than 200 companies and trade associations.

The Bill also merges two significant Government schemes: the SME scheme and the R&D expenditure scheme. In doing that, we are meeting our aim of simplifying the system while providing greater support to British businesses, so that they can spend less time on administration and more time on innovation. The Bill also introduces greater support for loss-making R&D-intensive SMEs and lowers the intensity threshold required to access that support to 30%, helping around 5,000 extra SMEs. To further support investment in renewable energy, we have introduced a new assets exemption for the electricity generator levy, a measure that will continue to drive growth in both our renewables sector and the wider economy. We also continue to support our world-leading creative industries with tax measures that reform the film, TV and video game tax reliefs, turning them into refundable expenditure credits that are easier for business.

Our second aim is to support employment. We must remove barriers to work and incentives to not work, and most of all, must ensure that hard work and expertise are rewarded. That is why the Bill makes changes to encourage people to stay in work and use their expertise for longer. The Bill will complete the abolition of the lifetime allowance, amending pension tax rules so that employees with valuable, hard-earned expertise are no longer encouraged to reduce their hours or retire early. The Office for Budget Responsibility estimates that this will retain 15,000 workers annually, keeping many high-skilled employees and experienced individuals in our labour market while ensuring that they receive their rightful benefits for working.

Our third aim is to create a simpler, fairer and more modern tax system—an aim that the Bill also supports. Making full expensing permanent is a huge simplification for larger firms, but we are a nation of millions of small businesses. In the Bill, we are expanding the cash basis—a simplified way for over 4 million smaller and growing traders to calculate their profits and pay their income tax. While we remain focused on reducing the tax burden, we cannot overstate the role of tax in supporting public services, so we must all do our part. Everyone must pay their fair share, which is why the Bill introduces a new criminal offence for those who promote tax avoidance schemes and continue to promote them after receiving a stop notice. Alongside this, His Majesty’s Revenue and Customs will for the first time be able to bring disqualification action against the directors of companies involved in promoting tax avoidance, including those who control or exercise influence over a company. These are vital steps in ensuring that the system is fair for all, and that those who try to undermine it face the consequences.

I thank right hon. and hon. Members from across the House for their helpful and insightful contributions to the debate on the Bill. I also thank the many stakeholders who have provided their views on the issues raised, the Treasury, HMRC officials and House Clerks who have helped the Bill to get to this point. This Bill backs British business, rewards hard work, nurtures innovation, and supports our leading industries while solidifying long-term economic growth. For those reasons, I commend it to the House.