Finance Bill

Nigel Mills Excerpts

2nd reading
Wednesday 13th December 2023 Commons Chamber

[Nigel Mills (Amber Valley) (Con)]

It is a pleasure to speak in this debate. Let me start by declaring an interest in relation to clause 15, as I believe I am one of the Members who managed to discriminate against themselves via pension changes a decade ago and therefore will benefit from the tax changes in this Bill. I should therefore perhaps not touch on that any further.

Overall, there is nothing to oppose in the Bill. I will break the habits of this debate and try to speak about the Bill, rather than stuff that is not in it or might have been in it. I will try to address some of the clauses it contains. Clause 1 deals with the full expensing of expenditure on plant and machinery, a matter I raised in the debate on the autumn statement. I welcome the measure, which I hope will work to encourage greater capital investment across the UK economy.

However, we should not underestimate how fundamental a change in our tax system that measure is. We have built, over decades, a series of rules on how companies—and individuals too, but we are talking about companies for this purpose—get tax relief on the capital spend they make. A large amount of work has to go into tracking what is counted as revenue spend and what is counted as capital spend, but now there is no point in doing that work in respect of plant and machinery, because companies are going to get the same tax treatment either way round—so all that can go.

Then there are all manner of ways of getting that relief, be it through the main general pool for plant and machinery, the long-life asset pool or the short-life asset pool. We have different rules for cars, for environmentally-friendly assets and for environmentally-friendly cars. We should take a step back and ask, “Is it necessary to keep this whole complicated regime if, for the vast majority of spend, we are giving 100% tax relief in year 1 when that spend happens? Should we now look at striking away a load of that and just accept that we could have a very different regime?” Perhaps we should just accept the accounts depreciation for all the other assets that are not plant and machinery? I suspect that the loss to the Exchequer for accelerating tax relief on those things would be tiny, but it would take away a huge burden of having to follow a different set of rules.

We also ought to ask, “What do we mean for buildings?” We are now being generous for tax relief on plant and equipment, but not generous at all if a brand-new factory is built. Tax relief is given very slowly on that and even then not on the whole spend. Is that what we want? Or should we be trying to incentivise people to build brand new, modern, energy-efficient factories? We give very little tax relief for office buildings. We want more people to come back to work together in offices, so should we not be incentivising people to build brand-new offices in the right parts of the country, rather than giving no tax relief?

We end up driving an entire leasing industry, because a completely different tax treatment is given where assets are leased or rented, rather than bought outright in someone’s own name. Do we really intend that if someone finance-leases something, they get 100% relief up front? What happens with a hire purchase? All this stuff is so complicated. Having made this radical and expensive change, the Government should go away and think, “What is the future of tax relief for capital items in the UK? How do we incentivise the right form of spend?”

I wish to raise one other question for the Minister to think about. It is very likely that a lot of businesses will be unable to get full relief for this in the first year, because they just will not have enough profit to absorb all their capital spend being relieved in a year. The chances of a medium-sized business that buys a multi-million-pound printing press having multi-million-pound profits are low, so it will end up having a loss to carry forward. Such a business will get benefit in the fullness of time, but we will have restricted how much of its losses it can carry forward and use—if it is a business of a certain size, it can offset only up to £5 million. Do we really mean that now? Or do we mean that if a business has spent a load of capital and generated a big loss that is carrying forward, it should be able to relieve that as early as possible when it makes a profit? Do we need to revisit some of those restrictions we have introduced for sensible reasons in the past?

I urge the Minister to commission some work, now that he has made this big and expensive change, on what the whole regime should look like. Do we need all those hundreds of pages of rules and all the compliance effort that has to go in, for what will probably now be relatively small amounts of tax relief at stake in the grand scheme of things?

I wish to discuss a few other clauses. I wholeheartedly welcome the Bill’s anti-avoidance clauses. It is absolutely right to extend the punishments we give individuals who recklessly promote tax avoidance schemes that they ought to know do not work and in many cases do know do not work but carry on trying to sell. It is entirely reasonable to have the sanction of being able to disbar them from being a company director if they carry on doing that. There has been a lot of encouragement for the Government to go further on duties to prevent all manner of economic crimes, so I fully welcome these things.

In Committee, we could perhaps think about whether we are sure we have drafted that measure perfectly. A lot of tax advisers work through limited liability partnerships, but where someone is a member of a limited liability partnership that is promoting unacceptable tax avoidance, they will not be caught by these rules because they are not a director of a company that is doing it. Therefore, such a person will not be disbarred from remaining as the designated member of an LLP, because they are not a director of a company. Is that what we mean? Given that LLPs and their members have to be registered with Companies House, should we not broaden that sanction out to catch as many people as possible? Perhaps the Minister would think about whether we could make some extension to this, to ensure that we are catching everyone engaging in this industry, not just a small subset of it.

Clause 21 has further amendments on pillar two; at times, I think I am the only Back Bencher who supports pillar two. I will continue to support it but, as I said a year ago, the rules are fiendishly complicated. Anyone who tries to read clause 21 and the schedules that come with it will realise they contain an almost impenetrable set of rules for a relatively small number of situations, in relation to a simple principle about subsidiaries in tax havens that are paying less than 15% tax having their tax topped up to 15%, in order to discourage tax havens and the artificial movement of profit.

We have ended up with a hugely complicated shadow tax regime that every company with subsidiaries around the world will have to apply to every subsidiary they have. Even if they are in a respectable country with tax rates even higher than ours, they will have to work out whether they have accidentally managed to trip themselves below that rate. That cannot be what we intend, so can we try to find a way to filter out most of this work, so that we can catch the guilty but not make life miserable for the innocent?

With those few remarks, I welcome the Bill. The provisions are entirely sensible and I look forward to supporting them. I will have to vote against the SNP amendment, because I want the Bill to proceed today.