Pensions

Debate between Nigel Mills and David Gauke

Wednesday 19th July 2017 Commons Chamber

[Mr Gauke]

As a country we spend very large sums—something like £50 billion a year—on support for people with health and disability issues, and we will obviously continue to do that. That is the best way of supporting people who have health difficulties, rather than by having a lower state pension age, which would be unaffordable.

[Nigel Mills (Amber Valley) (Con)]

I thank the Secretary of State, although perhaps with not too much enthusiasm, for delaying my retirement by a year. I think I am in exactly the range of people whose retirement has just been delayed. What plans does he have to learn from the issues that arose from previous increases in the retirement age about communicating to people that this change will affect them?

[Mr Gauke]

First, I should say that the longer we can delay my hon. Friend’s retirement, the better that will be all round.

In terms of communicating with those affected, we are giving something like 20 years’ notice today, but as we legislate in due course, it will of course be necessary to communicate properly with those who are affected. [Interruption.] It will be done properly. It is proper that we communicate with those people, and we will do so.

Jobcentre Plus: Closures

Debate between Nigel Mills and David Gauke

Thursday 6th July 2017 Commons Chamber

[Mr Gauke]

It is the case that there are sites in Chesterfield and Mansfield, which are within half an hour by car from the site that the hon. Lady mentions. It is anticipated that at least 75% of the staff—probably more—can be redeployed to other sites and will not be in a position in which redundancy is relevant, and of course the DWP is seeking to ensure that that number can be maximised.

[Nigel Mills (Amber Valley) (Con)]

Does the Secretary of State agree on the importance of getting jobcentre staff to work outside jobcentres, in places such as food banks, to ensure that we are getting the right welfare claims in the right way?

[Mr Gauke]

There is an important outreach role that jobcentre staff can and will perform. It is simply not the case that all work is done within jobcentres themselves. Staff can provide outreach services in other sites as well, as indeed they will increasingly do.

Finance Bill

Debate between Nigel Mills and David Gauke

Tuesday 28th June 2016 Commons Chamber

[Nigel Mills (Amber Valley) (Con)]

I hope that the Minister will be willing to channel the leadership and enthusiasm that the UK showed in relation to the diverted profits tax, when we chose to go out alone and not wait for international agreements on base erosion and profit shifting. We introduced a whole new tax, with compliance burdens and penalties, and I suspect that that was a far bigger deal than requiring companies simply to disclose what they are already disclosing but in a slightly different format. I think that that was the right way to go.

[Mr Gauke]

My hon. Friend is right to mention the fact that we went ahead with the diverted profits tax, although doing so was clearly consistent with the direction of the base erosion and profit shifting process. That tax also brought in significant revenue to the UK, which has been very helpful.

If we want to achieve greater transparency, as I believe we all do, it is right that we focus on driving forward international efforts on public country-by-country reporting. In order to get full information on foreign multinational entities’ global activities, multilateral agreement will be required to enable countries to introduce comprehensive rules with the widest possible scope. This will allow for a comprehensive multilateral approach that applies consistently across UK and foreign multinational entities. We must get this right so that, when it is introduced into UK law, it is effective and enforceable. We will continue to support and drive this multilateral change forward following the result of the referendum, and I share the determination of the Members supporting this amendment not to move at the pace of the slowest.

Oral Answers to Questions

Debate between Nigel Mills and David Gauke

Tuesday 7th June 2016 Commons Chamber

[Mr Gauke]

I commend the hon. Gentleman’s ingenious ability to raise this issue. It is important that HMRC’s funds are spent efficiently, to ensure that they are spent on delivering the tax being collected that we want, rather than on buildings. The savings from buildings are being spent on collecting more tax.

[Nigel Mills (Amber Valley) (Con)]

The Minister will have seen the different approaches that the French and UK authorities have taken towards cases such as Google’s. What more can he do to ensure that Parliament and the public have faith that HMRC is getting good deals in such situations? For example, will the National Audit Office be allowed to review those most high-profile cases and give some assurance that a good deal was achieved?

[Mr Gauke]

rose—

Finance (No. 2) Bill

Debate between Nigel Mills and David Gauke

Monday 11th April 2016 Commons Chamber

[Mr Gauke]

Simplification does matter. One of the measures announced in the Budget—it is not in the Bill, for reasons that will become apparent—is the abolition of class 2 national insurance contributions. National insurance contributions are not covered in Finance Bills, but that is an example of a tax being removed—a tax that created a considerable administrative burden for both taxpayers and Her Majesty’s Revenue and Customs.

The Bill also puts the Office of Tax Simplification on a statutory footing. In the last Parliament, the OTS made approximately 400 recommendations, almost half of which have been implemented. The OTS is being strengthened; it has a new chair, Angela Knight, who is already performing a valuable role in leading the debate, and its resources have been increased. I am sure my hon. Friend will follow the OTS’s progress closely, scrutinise its performance and decide whether it is proposing measures that take us in the direction of which he approves.

[Nigel Mills (Amber Valley) (Con)]

Would my hon. Friend welcome the OTS looking at some more fundamental tax simplification measures such as wholesale reform of individual taxation, rather than focusing on small, individual parts of taxes, as a way of moving us to a much simpler tax system more quickly?

[Mr Gauke]

My hon. Friend makes an important point. There is considerable value in the OTS looking at specific areas, but I think there is a case for it looking at broader matters. Indeed, in its reviews—of small business taxation, for example—it is addressing some of those bigger questions.

HMRC and Google (Settlement)

Debate between Nigel Mills and David Gauke

Monday 25th January 2016 Commons Chamber

[Nigel Mills (Amber Valley) (Con)]

When the Minister makes large businesses publish their tax strategy, will he also make them publish their tax returns so that we can all see how much tax they are declaring and how they got from their cash profit to that tax bill? That would improve transparency and confidence in the system.

[Mr Gauke]

The United Kingdom’s position on taxpayer confidentiality is hardly unique. Indeed, it is the mainstream approach. Knowing what a company’s tax liability might be depends on a detailed understanding of the whereabouts of its assets and activities, and not all of that information would necessarily be apparent from a straight tax return. As I have said, there is greater transparency now because companies have to set out their strategies, which has never been the case before.

Finance (No. 2) Bill

Debate between Nigel Mills and David Gauke

Wednesday 25th March 2015 Commons Chamber

[Mr Gauke]

The hon. Gentleman may be interested to hear, or he may already be aware, that the Office of Tax Simplification has looked at what constitutes complexity within the tax system. One conclusion that it reached was that the number of pages in the tax code is not a particularly good barometer of complexity. For example, the rewriting of the tax code that occurred over many years lengthened it, but the intention was to make it simpler to understand.

I would make this challenge to the hon. Gentleman: which elements of the Bill would he not want? For example, there are 40 or so pages on oil and gas tax reform, which I believe all parties recognise is a necessary response to the current circumstances, but that will lengthen the tax code. A number of pages are being added to the tax code because of the diverted profits tax, but all parties recognise the need for such a tax to deal with artificially contrived arrangements. I appreciate his point and the spirit in which he makes it and I share the desire for greater tax simplification, but there are some challenges in that for a Government who also want to deal with avoidance and ensure that we have a competitive tax system for the oil and gas sector.

[Nigel Mills (Amber Valley) (Con)]

I do not wish to revisit old debates about simplification, but does my hon. Friend have a view about the future strategy on anti-abuse rules? I believe that when Graham Aaronson examined the general anti-abuse rule, he thought that after about five years we would be able to start to do away with individual anti-avoidance rules and rely on the GAAR. We could therefore remove some of the more complicated provisions and the loopholes that go with them. Does my hon. Friend think that could work, or does he think it should be ruled out and that we must have both the general and specific rules?

[Mr Gauke]

My hon. Friend does not want to revisit old debates, but I tempted to give a response that I suspect I have given him before. The general anti-abuse rule is a big step forward, and it was absolutely right that this Government introduced it. Other Governments had considered it but felt that it was not the right thing to do. However, it is there to complement the existing measures, and we will want to see how the GAAR works over time rather than rush to judgment. I do not believe that a future Conservative Government would want to risk opening up new loopholes because of uncertainty about exactly how the GAAR applies. It is of course an anti-abuse rule and sets a reasonably high bar for behaviour covered by it, and I suspect my hon. Friend agrees that that is right because of its broad nature. We will have to wait and see before I make any commitment to repealing various targeted anti-avoidance rules.

Taxation of Pensions Bill

Debate between Nigel Mills and David Gauke

Wednesday 29th October 2014 Commons Chamber

[Mr Gauke]

We of course engage closely with the ABI and other bodies involved in this area. Indeed, the work in this Bill and in the Pension Schemes Bill is a result of close engagement with the ABI. The Government are determined to ensure that we have a regulatory system that protects our constituents from the unscrupulous. This is principally an issue for the FCA, but we are determined to ensure that it has the powers that it needs. Much in the Pension Schemes Bill relates to that.

[Nigel Mills (Amber Valley) (Con)]

May I remind the Minister that one reason for bringing forward these freedoms was to try to tackle the mis-selling that already goes on, whereby people are effectively forced by the law to buy annuities, which in many cases are totally unsuitable for them? That has led to real cases of detriment. The mis-selling issues under these freedoms are not new; they have been around for a long time.

[Mr Gauke]

My hon. Friend makes an important point. I do not think that anyone would be particularly attracted to the argument that the way to address mis-selling was to force people into a narrow range of products that ultimately did not meet their needs.

Oral Answers to Questions

Debate between Nigel Mills and David Gauke

Tuesday 10th September 2013 Commons Chamber

[Nigel Mills (Amber Valley) (Con)]

12. What recent progress he has made on his plans to tackle tax avoidance.

[The Exchequer Secretary to the Treasury (Mr David Gauke)]

The Government continue to make strong progress on tackling tax avoidance. Following on from our announcement at Budget 2013, we have introduced the UK’s first general anti-abuse rule, which will act as a significant deterrent to abusive avoidance. We have completed our consultations on avoidance using partnership rules and the use of offshore intermediaries, and we have just launched a consultation on new information requirements and penalties for the promoters of tax avoidance schemes.

[Mr Speaker]

I would like to wish the hon. Member for Amber Valley (Nigel Mills) good luck for his forthcoming wedding. I trust all will go as smoothly as his question.

[Nigel Mills]

Thank you, Mr Speaker.

I welcome the measures that the Minister has announced. My constituents want to see everyone paying the tax they owe on their income. Does the Minister think that any measures are required to make sure that trade unions do that as well?

[Mr Gauke]

First, I add to the words of Mr Speaker and, perhaps, wish good luck to my hon. Friend’s future wife. He draws attention to a story that we have seen in the last few days: allegations of tax avoidance against Unite and against Labour. Maybe the links between the two are closer than we realised.

Extra-statutory Concession A19

Debate between Nigel Mills and David Gauke

Tuesday 4th December 2012 Westminster Hall

[The Exchequer Secretary to the Treasury (Mr David Gauke)]

It is a great pleasure to serve under your chairmanship again, Mr Streeter, and I congratulate my hon. Friend the Member for Amber Valley (Nigel Mills) on securing the debate. Once again, he is bringing to the attention of the House his knowledge and expertise of the tax system and representing his constituents so well on a number of matters. He does so today with regard to the extra-statutory concession A19, and the debate has been helpful. I am grateful for the opportunity to respond, and I hope to be able to address his questions.

Before doing so, it is worth recognising that HMRC has made considerable progress in modernising the PAYE system and bringing the legacy issues for PAYE customers up to date. The national insurance and PAYE computer system—NPS—became operational in early 2010, enabling HRMC to bring all taxpayer records on to a single national database held under unique references. For the first time, HMRC has been able to bring together all sources of income for a customer under one reference. Although I know that there were considerable problems with the implementation of NPS, now that it is fully automated, it is a very cost-effective process that enables HMRC to reconcile nearly 60 million PAYE tax records very quickly.

In October 2010, HMRC’s late chief executive, Dame Lesley Strathie, made a commitment to the Public Accounts Committee, in response to an NAO recommendation, that HMRC would bring PAYE up to date for taxpayers by the end of 2012-13. It is on track to deliver on that commitment and it has already settled 17.9 million unreconciled customer records. As a consequence of those improvements, in the last two years, the number of unexpected tax repayments and demands issued by HMRC has been higher than usual, and in turn, that has led to an unprecedented number of customers contacting HMRC for help and advice. HMRC recognises that on occasions its customer service has fallen short of the standards that it wants to provide. HMRC has taken steps to improve its customer service over the past year—for example, by investing in its contact centres—and it is making customer information more accessible and easier to understand. It recognises, however, that there is more to do, and it is building on this year’s improvements to give all taxpayers the services that they rightly expect.

A significant proportion of the complaints that HMRC has received relate to HMRC’s implementation of ESC A19, and HMRC consulted on the operation of the concession over the summer. It has listened to the views of taxpayers and to comments in the media. Its current operational process was developed in response to the exceptional circumstances of 2010, when steps needed to be taken to ensure that the 166,000 requests that it received could be dealt with quickly. To respond to a question raised by my hon. Friend, from September 2010 to 31 March 2012, HMRC received 166,000 claims to the value of £185 million, and 41,766 of those requests were successful, at an estimated value of £53.7 million.

HMRC looked to deal with those matters as quickly as possible, creating a dedicated team and a streamlined process that included a more relaxed approach to the reasonable belief test during 2010 and 2011. It also raised the collection threshold to £300, and as I said in my statement to the House in January 2011, HMRC would not reconcile the tax affairs of 250,000 pensioners for whom we believe a request under the concession would have been successful. HMRC recognises that there is much more that it needs to do to improve its implementation of the concession for the future. There is work in progress to deliver process improvements and better guidance for officers dealing with requests, and particularly to improve the service for those customers who will always need help understanding and managing their tax affairs. That work is specifically aimed at reducing the number of customer requests that become formal complaints.

At this point, it may be helpful if I try to respond to some of my hon. Friend’s specific questions. He asked whether HMRC had published all the internal guidance on ESC A19. HMRC has published all guidance except where it considers that publication of the decision-making process that it uses to determine the reasonable belief test would prejudice its application. If HMRC published certain items, all cases would be phrased in a particular way to meet it. That would not be helpful, but that is the only reason why guidance would not be published.

HMRC has not changed its policy on ESC A19. HMRC has been looking to improve its consistency of decision making in these cases. Taxpayers have an appeal route to the Revenue adjudicator if they cannot agree the position directly with HMRC. Perhaps it is worth saying a word or two about that appeal route, which was raised by my hon. Friend. If a claim is refused, the taxpayer can request a second review. The taxpayer can make a formal complaint to HMRC. The taxpayer can then request a review of the formal complaint decision. The taxpayer can ask the adjudicator or ultimately even the parliamentary ombudsman to conduct a review. It is correct to say that there is no statutory right of appeal to the tribunal. That point has been tested with the tribunal, and that was the conclusion reached in that case.

Of course, HMRC has a responsibility to collect the tax correctly as prescribed by Parliament. ESC A19 is a concession that applies where HMRC has not acted in a timely or accurate way, but clearly there is not complete flexibility for HMRC to agree not to collect the tax that is due.

My hon. Friend asked whether, in some cases, the matter should be taken to the employer or pension provider first, rather than going to the taxpayer. HMRC has a process that allows it to approach both the employer and the taxpayer at the same time. In the majority of cases, a review under ESC A19 can be conducted quite quickly to establish the nature of the error. HMRC is happy to discuss individual cases with taxpayers if the taxpayer feels that it is their employer who has made the mistake.

[Nigel Mills]

Is it not the case that under, I think, PAYE regulation 72, the Revenue should go to the employer first? I think that it can then issue a notice to say that it can go after the taxpayer. In theory, the taxpayer should be sent a copy of that notice. I am not entirely sure that that is the process that is followed very often, but I think that it is the one set out in the regulations.

[Mr Gauke]

If I may, I shall come back to that specific point, because I want to deal with another issue raised by my hon. Friend, which was whether the P14 forms could be used for information and why that does not happen. I just point out that due to the volumes received each year—approximately 60 million—P14 forms are processed over several months. That is an automated process. There is currently no scope within the process that would enable HMRC to identify and amend a tax code for the current year on receipt of the previous year’s P14.

My hon. Friend asked about the ESC A19 consultation. The outcome of that consultation has yet to be decided. Obviously, he will be keen to know what it is. When that has been concluded, I will ensure that he is fully aware of it.

It is right to say that HMRC has delivered a real change in the operation of PAYE and brought its legacy issues up to date. That means that 85% of PAYE customers will have paid the right tax during the year. The remaining 15% will be due a refund or owe tax for a variety of reasons other than HMRC error. Furthermore, the vast majority of customers will be notified of their tax position well before the end of the tax year.

ESC A19 is designed to apply routinely when HMRC has failed to act on information received and also fails to notify the customer of their arrears for a full 12 months after the end of the tax year. This year, HMRC has received significantly fewer requests, and most of those were received immediately following the issue of the tax calculation. The vast majority were not eligible for the concession because there had been notification of the arrears within the 12-month deadline. The occasions on which taxpayers will need to make a request under ESC A19 in the future are significantly diminished. HMRC does not envisage the problems and complaints that arose from its implementation of the concession in the exceptional circumstances of the past two years arising to the same extent in the future.

However, my hon. Friend raises an important point about the difficulty that some taxpayers have when they simply have a tax code. That can make it difficult for them to assess exactly what the right amount of tax to be paid is and, if they are paying the wrong amount, what can be done about it. My hon. Friend will be pleased about the progress that we are making with tax statements. We are making much more information available to taxpayers, so that they can see what tax has been paid. The way I see that developing is that ultimately it should provide a much clearer route—much greater clarity to taxpayers—to ensure that the correct amount of tax has been collected.

Let me return to regulation 72, which my hon. Friend raised a moment or so ago. He is correct about the process. The NPS is fully automated and cost-effective and deals with 1.5 million underpayment cases per annum without recourse to this process—without going into regulation 72. These cases do not arise only because of employer error. Regulation 72 is really an anti-avoidance measure to prevent collusion between employer and employee. I hope that that provides some clarity to my hon. Friend.

It is important to distinguish between HMRC’s obligation to apologise and provide redress for customers who experience poor service and its collection and management discretions in effect to withdraw tax rightly due from the Consolidated Fund. HMRC has a statutory obligation to collect the right amount of tax from each taxpayer and to be fair to all taxpayers in that respect.

ESC A19 was intended to remedy the hardship and injustice of unexpected demands caused by the then Inland Revenue’s error and delay. Although HMRC’s tax commissioners can forgo tax in cases of financial hardship, its discretions to forgo tax that is rightly due are limited and are certainly restricted to the strict application of the conditions of the concession.

Compensation payments to remedy the cost and distress of poor service are ex gratia and are applied using the guidelines in the “Managing Public Money” rulebook. Those must not allow recipients to gain financial advantage as a result of poor customer service. It would be acting outside the parameters of the authority delegated to HMRC to provide redress that clearly linked someone’s tax liability with the amount of their compensation. To be fair, HMRC does have to operate a difficult balance.

We must recognise that the complaints and problems that we have heard about today, although serious and distressing for the individuals involved, have arisen in exceptional circumstances. HMRC has recognised and apologised for poor service and is taking steps to put things right for the future, particularly for pensioners and other vulnerable customers. It is working closely with professional organisations and charities to understand customer needs and improve services.

The need for customers to turn to ESC A19 for redress in response to an unexpected tax demand is diminishing. I would like to reassure my hon. Friend that HMRC will compensate customers for poor service, using its authority within “Managing Public Money” rules, and use its collection and management discretions to forgo tax where that is appropriate and necessary and where it has the power to do so.

Question put and agreed to.

Oral Answers to Questions

Debate between Nigel Mills and David Gauke

Tuesday 6th November 2012 Commons Chamber

[Nigel Mills (Amber Valley) (Con)]

The Government have seen the benefits that transparency can bring. Would it be good to require large corporates to publish their tax returns so that we can all see how they achieve the low rates of tax they pay?

[Mr Gauke]

It is right that large corporates engage in this debate, and there is a lot of public interest in the matter. One must ask whether tax returns in themselves will provide the full information—my hon. Friend has great expertise in this area—and whether that is the right way to address the issue. We have a tradition of taxpayer confidentiality in this country, as does every major economy.

Finance Bill

Debate between Nigel Mills and David Gauke

Tuesday 3rd July 2012 Commons Chamber

[Mr Gauke]

A number of VAT measures are to be debated today. To help the House, let me outline how I intend to deal with them. I will first address new clause 4, which relates to VAT on face-value vouchers, before turning to Government amendment 17 and new schedule 1, which address VAT anomalies. I am also conscious that a number of new clauses have been tabled by other right hon. and hon. Members, which I will respond to more fully later in the debate. I will also address amendments 18 to 20, which are consequential amendments dealing with VAT anomalies.

New clause 4 is a Government change to protect revenue. It guards against the possibility of widespread VAT avoidance by the use of so-called single-purpose face-value vouchers. Because of the seriousness of the threat, I announced the change by way of a written ministerial statement on 10 May. Following a decision by the European Court of Justice in May, we need to amend our legislation as it relates to single-purpose face-value vouchers, such as phone cards, so that VAT is due when such vouchers are issued.

We need to act with immediate effect to prevent a loophole due to the mismatch between the ECJ decision and current UK legislation. This could occur because individuals could argue that VAT cannot be collected on redemption by virtue of the Court’s decision, and it cannot be collected on issue by virtue of UK legislation. Therefore, the new clause protects around £200 million of revenue a year and guards against avoidance that could otherwise run into hundreds of millions of pounds.

The changes made by new clause 4 will remove single-purpose face-value vouchers from the UK’s VAT regime. For face-value vouchers more generally, normal VAT rules will apply and they will be taxed when they are first sold. There is also a transitional rule to ensure the taxation of vouchers that were issued before 10 May but used to pay for goods and services after that date, other than where that would lead to double taxation.

It might be helpful to hon. Members if I provide a little background to the new clause. As I have said, the issue arose in connection with a recent decision of the European Court of Justice concerning the VAT treatment of cross-border supplies of single-purpose vouchers, in this case phone cards supplied by a business in the UK to customers in other member states. Most member states tax single-purpose vouchers when they are issued, but in the UK the issue is disregarded and VAT becomes due only when the vouchers are used to obtain the underlying goods or services. This treatment is welcomed by UK businesses, because it delays the point at which they have to account for VAT, so creating a cash-flow advantage and an absolute saving on those vouchers that are issued but never redeemed.

However, in the case before the European Court of Justice, the business concerned complained that the difference in treatment between the UK and some other member states caused double taxation, because VAT was due in the member state where the card was sold to the final consumer and again in the UK when it was used to pay for telephone calls. The Court found against the UK’s approach in such a way that, until UK law was changed, suppliers of single-purpose face-value vouchers could have escaped VAT altogether. In the current market, that would have led to a tax loss of £200 million a year. In addition, if UK law had not been changed there would have been the risk of widespread avoidance involving the use of single-purpose vouchers, which could have led to a significant loss of tax.

To give an example, a car manufacturer could have issued a face-value voucher for a new car of £15,000, which the customer could then redeem at his local dealership. UK law said that there was no tax on the issue of the voucher, and the Court of Justice of the European Union said that there was no supply at redemption and, therefore, no tax. That may be an extreme example, but it illustrates the problem that could arise in a variety of retail scenarios.

The changes that new clause 4 make would remove single-purpose face-value vouchers from the UK’s VAT regime. For face-value vouchers more generally, this means that normal VAT rules will apply, and such vouchers will be taxed when first sold. There is also a transitional rule to ensure the taxation of vouchers that were issued before 10 May but used to pay for goods or services after that date, other than when that would lead to double taxation, but the Court’s definition of what constitutes a single-purpose voucher allowed us to retain the UK’s treatment for most vouchers.

The Court took the view that a single-purpose voucher is one that can be used to obtain goods or services of only one type, and which are subject to a single rate. Single-purpose face-value vouchers that are for one type of good or service form only a small proportion of the overall market for face-value vouchers, because most face-value vouchers can be exchanged for a range of goods or services. For example, a cinema voucher may be exchanged for tickets as well as for confectionary. Both the entry to see the film and the confectionary make suppliers liable to standard-rate VAT, but as they cannot be said to be of the same type the voucher is not caught by the judgment. We therefore expect the change to affect a relatively small number of businesses, and I hope that that explanation is helpful to the House.

In conclusion on face-value vouchers, the new clause is a proportionate response to the significant risk of tax loss arising from the use of single-purpose vouchers. It is carefully targeted against the risks and retains the VAT treatment for the great majority of vouchers sold in this country, and I commend it to the House.

Amendment 17 and new schedule 1 relate to the categorisation of suppliers for the purposes of value added tax. New schedule 1 would implement the changes announced at the Budget, which have been refined in the light of consultation, to address anomalies and loopholes in the area of VAT liability. The VAT system contains a number of anomalies along the borderlines of VAT exemptions and VAT zero rates, and addressing some of those anomalies and loopholes is precisely what the Chancellor announced at the Budget.

The Government announced at the Budget that they were introducing a number of measures to address some of those VAT anomalies, reducing uncertainty, costs for business and for HMRC, and raising revenue. On Budget day, we proposed a number of measures and launched a consultation to engage stakeholders and to listen to their ideas. The measures that we announced proposed to clarify the treatment of catering to ensure that all hot takeaway food is taxed, and to clarify the meaning of “premises” in the context of whether food is consumed on or off a supplier’s premises.

We proposed also to tax sports nutrition drinks to ensure that all sports drinks receive the same tax treatment, and to remove self-storage from exemption in order to ensure that all suppliers of storage receive the same tax treatment and to counter avoidance.

[Nigel Mills (Amber Valley) (Con)]

Will my hon. Friend give way?

[Mr Gauke]

I certainly will, although at this point I am just setting out what we set out at the Budget. I will turn to each individual measure in more detail in a moment and happily give way to my hon. Friend at that point.

We propose to remove the anomaly whereby approved alterations to certain listed buildings are zero-rated while alterations to other buildings and repairs to and maintenance on all buildings are standard-rated. We included transitional arrangements for alteration works to listed buildings which had been contracted before the Budget, and we wanted to put beyond doubt the fact that VAT applies to the rental of hairdressers’ chairs.

Finally, we proposed to ensure that holiday caravans are taxed consistently at the standard rate of VAT. The proposal, as set out in the consultation document, was that all the changes would take effect from 1 October via secondary legislation, supported by anti-forestalling provisions in this Bill. The consultation was opened on 21 March, and overall HMRC received some 1,500 responses. Owing to the volume of interest in the consultation, we decided to extend it, and since it has closed we have reflected fully on the points made during the process.

As the House will be aware, in two areas—hot food that is cooling down naturally and static holiday caravans—the Budget proposals created a high degree of business uncertainty, so the Government wanted to let people know our preferred course of action as soon as possible; we did that on 28 May. Last Thursday, we published a consultation response document and tabled the new schedule setting out our approach to all the measures on which we consulted. We stand by the rationale for removing anomalies, but have made several refinements, including those we announced on 28 May. They are intended to improve the policy and reflect the practical concerns raised in the consultation.

--- Later in debate ---

[Nigel Mills]

My hon. Friend refers to the marketing of such things as sold hot. Will he confirm that a baker who markets something as freshly baked would not fall foul of this provision, given that presumably when something is freshly baked it is hot? I think that the intention is that, say, a freshly baked sausage roll that is cooling down would not be subject to VAT, but if that marketing term were used it could perhaps be caught by the provision.

[Mr Gauke]

The final details as to what exactly will or will not constitute marketing something as hot will be set out in the HMRC guidance. However, I take on board my hon. Friend’s perfectly reasonable point that something that is presented essentially as fresh, but cooling, is different from something that is clearly presented as hot at the point at which one purchases it.

--- Later in debate ---

[Mr Gauke]

The right hon. Gentleman is attempting to draw me into dangerous, and perhaps more interesting, territory. All I would say to him is that all decisions are for the Chancellor, although of course the Department for Culture, Media and Sport was involved at an appropriate level.

The Budget proposal for self-storage changed the liability of supplies of facilities for self-storage from exempt to taxable. Following consultation, we planned to avoid creating a competitive advantage for those larger operators with more expensive facilities. These businesses can partially mitigate the impact of the change by using the capital goods scheme to claim back some of the VAT they had previously paid on the purchase of these facilities, whereas smaller businesses with less expensive facilities cannot. We will therefore make a separate provision by statutory instrument to amend the capital goods scheme so that self-storage providers affected by the measure whose individual capital items are worth less than a £250,000 threshold for the scheme can opt into it and have the same input tax recovery benefits as larger providers with capital items that would already qualify for the scheme.

We also propose to ensure that the storage of live animals will remain exempt, as the original proposal might inadvertently have applied VAT to stabling, and we propose to introduce an anti-avoidance provision so that if the storage is used by a third party with the permission of the person who contracts for the storage, it is taxed in the same way as if it were self-storage. This will prevent someone from avoiding taxation by getting a third party to contract with the supplier. We have revised the exclusion for storage facilities provided to persons connected with the supplier so that it is more directly targeted on facilities that are subject to the capital goods scheme. This fine-tuning reflects the benefit of consulting and listening to what respondents say, but it does not undermine the rationale for the measure.

For hairdressers’ chairs, the schedule provides a clearer description of the services typically provided under a chair rental agreement and excludes services that could legitimately be provided with a simple supply of a right over land. The schedule also reflects a change to make it clear that the supply of a whole building to a hairdresser will not become taxable unless it is supplied along with other goods or services.

Finally, regarding the measure to apply VAT to all sports drinks and to clarify the definition of premises for the purposes of determining whether food is consumed on or off the suppliers’ premises, we are proceeding as planned in the Budget.

[Nigel Mills]

I am grateful to the Minister for giving way to me again. On the sports drink issue, I am sure he will remember the old milk advert suggesting that if children did not drink their milk, they would end up playing for Accrington Stanley rather than Liverpool. The gap between those two teams might be a bit less nowadays, but the idea was that milk improves physical performance. Will my hon. Friend confirm that an ordinary pint of milk will not be caught within these provisions?

[Mr Gauke]

I confirm that I remember the adverts and that milk will not be standard rated for these purposes. I refer my hon. Friend to the remarks the Chancellor made in respect, I think, of the 2010 Budget—that everyday essentials will not become standard rated. However great the advance of Accrington Stanley and the decline of Liverpool, that will remain the case.

Budget Leak Inquiry

Debate between Nigel Mills and David Gauke

Thursday 22nd March 2012 Commons Chamber

[Mr Gauke]

I am afraid that if we were looking at the previous Government we could round up the usual suspects there, because there was plenty of leaking under them, but we heard none of the synthetic outrage from the Labour party then.

[Nigel Mills (Amber Valley) (Con)]

I have a dream in which the Budget is merely the confirmation of ideas that have been fully consulted on and people can actually understand what the tax regime will be in advance. I commend the Minister for his work in trying that, rather than worrying about this flim-flam.

[Mr Gauke]

My hon. Friend makes a good point about our more deliberative and consultative process for tax policy making, and some of the announcements in the Budget yesterday were the culmination of a long process of consultation, for example the reforms of controlled foreign companies, which have been widely welcomed. As a corporate tax regime, ours is increasingly recognised around the world, and I am delighted that, as my hon. Friend the Member for Mid Norfolk (George Freeman) pointed out earlier, we had the announcement from GlaxoSmithKline this morning.

Finance (No. 3) Bill

Debate between Nigel Mills and David Gauke

Monday 4th July 2011 Commons Chamber

[Mr Gauke]

There have been assessments of the enterprise investment scheme, which has been in place since 1994. We want to encourage greater investment, particularly in smaller companies. We recognise that sometimes there is market failure in that area, which is why tax incentives are justifiable. We have set out as much information as we can, but it is not something on which we can provide precise numbers. That is not the nature of the economy, but the scheme will encourage greater investment and that should be welcomed.

I thank my hon. Friend the Member for Amber Valley (Nigel Mills) for his remarks on my award as tax personality of the year. Some may think it a somewhat oxymoronic award, but I can tell the House that it has changed my life considerably.

My hon. Friend brings much greater expertise to these matters than I do. I welcome the fact that he seeks simplicity, which is not always the case with new clauses and amendments to Finance Bills. I want to make a couple of points that relate to both his new clauses.

First, we do not see it as our role to direct the Office of Tax Simplification. The office has done a lot of good work, but it is important that its independence is respected. Secondly, in its broad work the OTS has looked at the various allowances and reliefs in the tax system and has concluded that they are not areas where it wants to devote its efforts. None the less, I know that the OTS will closely read my hon. Friend’s speech. We are always keen to look at areas where we can improve the administration of the tax system, including his proposals in new clause 14 on consolidated filing.

On new clause 12, the OTS has given initial consideration to capital allowances as part of its review of tax reliefs and its ongoing review of small business taxation. The Government have set out their approach to capital allowances in the corporate tax road map. Allowing each business asset to be written off for tax purposes in line with its own depreciation rates would not necessarily bring the benefits to businesses that the new clause anticipates. Some business assets would depreciate more slowly than they currently do under the capital allowances regime, and it should be noted that the annual investment allowance gives immediate write-off for the plant and machinery expenditure of 95% of UK businesses. There is thus a danger that the new clause could increase business tax complexity.

I know that my hon. Friend tabled his new clauses as probing provisions. I may not have entirely satisfied him, but he has put his case on record and the OTS will of course look carefully at what he says.

I turn finally to amendment 51, tabled by my right hon. Friend the Member for Gordon (Malcolm Bruce), who has played a constructive role on the issue in the three months since the Budget announcement on oil and gas. He made an important contribution when the House debated clause 7 in the Committee of the whole House. He has stressed the importance of working closely with the industry in the months ahead, which the Government committed to do at the time of the Budget. We announced then that we would work with the industry in three key areas: setting the right trigger price for the fair fuel stabiliser; looking at whether we can find a way to provide long-term certainty on decommissioning relief; and looking at the case for new categories of field qualifying for the field allowance. I am pleased to tell the House that we are making good progress in these discussions. My hon. Friend the Economic Secretary, who is here this evening, will update the House on progress on those discussions as soon as is appropriate. I hope and expect that she will be able to do so in the very near future. I thank my right hon. Friend for tabling his amendment. Although I have been unable to respond in full detail, I hope that the Government will be in a position to do so shortly.

In conclusion, I remind the House that it is the Government’s aim to create the most competitive corporate tax regime in the G20. We have set out our plans for reform over the next five years in the corporate tax road map, which was published last November. In order to provide businesses with the certainty they need to invest in the UK, tax reforms need to maintain stability, avoid complexity and ensure a level playing field for taxpayers. Therefore, although we have had a good debate, I invite my hon. Friend the Member for Amber Valley to withdraw the motion.

[Nigel Mills]

My purpose in moving the new clause was to encourage the Government down the route of tax simplification, which I hope I have achieved tonight. Therefore, I beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.

Clause 1

Charge and main rates for 2011-12

Finance (No. 3) Bill

Debate between Nigel Mills and David Gauke

Wednesday 4th May 2011 Commons Chamber

[Mr Gauke]

Amendment 6 would require the Chancellor to publish by 31 October 2012 an assessment of the impact of the proposed changes to capital allowances on the UK economy, as we have heard. The amendment was tabled to clause 10, which reduces the rates of writing-down allowance on the main rate pool of plant and machinery expenditure to 18% and on the special rate pool to 8%. Before I deal with the amendment, I will explain the purpose of clause 10, which is key to the amendment.

Capital allowances allow businesses to write off their expenditure on capital assets, such as plant and machinery, against their taxable income. They act as a simple, statutory system in place of commercial depreciation. Capital allowances are given at different rates, depending on the year of investment and the type of asset acquired. The principal year-on-year allowance for plant or machinery expenditure is the writing-down allowance. The main rate is currently 20% per annum, and the special rate is 10%.

Both are calculated on the reducing-balance basis. We are making changes also to the annual investment allowance, in clause 11, reducing it to £25,000, as we have heard, and extending the short-life assets regime from four to eight years, in clause 12.

The changes announced last year, which are given effect by clauses 10 and 11, enable a reduction in the main rate of corporation tax, which will reaffirm Britain’s competitive tax system and support enterprise and growth. The right hon. Member for Delyn (Mr Hanson) was right to highlight the fact that this is part of a package. In his earlier remarks, the hon. Member for Edmonton (Mr Love) pointed out that this was a partial contribution. There is none the less a gap, and further funding has been found—from the bank levy, for example—which has enabled us to reduce the corporation tax rate.

We have already debated the benefits of reducing the corporation tax rate and we have returned to that topic to some extent in the present debate. I note that it does not have the support of all hon. Members, although it is supported by the Opposition Front-Bench team. It is helpful to repeat what was said by John Cridland, the director general of the CBI:

“The extra 1p cut in corporation tax will help firms increase investment.”

The objective is not just to reduce the amount of tax that companies pay, but to enable them to invest and grow businesses in the United Kingdom. I am pleased that that is welcomed throughout much of the Chamber.

Our initial assessment of the package as a whole suggested that that would lead to an additional £13 billion of business investment by 2016 by making the cost of capital investment cheaper. The additional reductions in corporation tax rate and the extension of the short-life assets regime will help to increase further the levels of investment by business. We estimate that the overall effect of these measures will be to reduce the tax liabilities of the manufacturing sector by around £700 million by 2015. The changes to the rates of writing-down allowances do not mean that businesses will not continue to receive full tax relief for their investments in plant and machinery. Rather, the relief will be over a slightly extended time frame.

Let me give an example. Where it would have taken 11 years under the current rate to write off more than 90% of the cost of a machine, it will now take 12 years. Meanwhile, the rates will continue to align broadly with average rates of depreciation across the economy. This does not mean that we intend to remove capital allowances in favour of pure accounting depreciation.

On the issue raised by my hon. Friend the Member for Amber Valley (Nigel Mills), the previous Government did consult in some detail on their reform of corporation tax between 2002 and 2004. I am sure you remember it well, Ms Primarolo. The business response to that consultation was strongly in favour of retaining capital allowances. It was argued that capital allowances provide certainty and a level playing field, with the same rates of allowances applying to all. The flexibility of the system allows the pooling of expenditure and the ability to claim less than full allowances, depending on the individual’s business circumstances. My hon. Friend set out the case for a different approach to capital allowances. He brings great expertise on the matter and there is ongoing debate, but we do not intend to reopen discussion of that point.

[Nigel Mills]

I am grateful to my hon. Friend for reminding me of that study from almost a decade ago. I gently point out to him that the rate of capital allowances was quite a bit higher at the time of the study. If he did the same exercise now, he might get a slightly different answer.

[Mr Gauke]

Again, my hon. Friend raises an interesting point. We look forward to receiving any representations that he may wish to make on that. He is right to say that the rate of capital allowances has changed since 2004, and he highlighted in an intervention the fact that the previous Government—as I am sure you will recall well, Ms Primarolo—reduced writing-down allowances in 2007, a point that my hon. Friend made to the right hon. Member for Delyn.

In response to those Opposition Members who raised their concern about the approach that the Government have been taking, I point out the approach taken by their Government in the previous Parliament, when they were all Members of this place. Whereas we are reducing the writing-down allowance from 20% to 18%, the previous Government reduced it from 25% to 20%. In our case that is a contribution towards reducing the main rate of corporation tax from 28% to 23%. The previous Government reduced it from 30% to 28%. Ours is a much more generous package for business and as a consequence a much better package for manufacturing than that contained in the 2007 Budget, where essentially the entire reduction in corporation tax from 30% to 28% was paid for by the reduction in the writing-down allowance from 25% to 20%.

On amendment 6, the Government are fully committed to providing greater transparency on the impact of tax measures. I am sure Opposition Members have examined the tax information and impact notes that we published on 9 December relating to clauses 10 and 11, and the additional note that we published at Budget in relation to clause 12. It is clear that there is no need to publish a report into the impact of the capital allowances changes. We have provided a great deal of detail already, but for those hon. Members who have not had the opportunity to read the published notes, let me provide a brief summary.

The note states:

“The OBR assessment of the package was that the cuts in CT”—

that is, corporation tax—

“rates more than offset the reductions in investment allowances”,

and that the businesses affected

“will benefit from related reductions in the rates of CT.”

As I said earlier, we expect the overall effects of the cuts in corporation tax rates and capital allowances changes to lead to an additional £13 billion of investment, and the additional changes to increase that further.

Although this is not strictly in scope, as the amendment is to clause 10, I hope I may be allowed to make a few comments about the other changes to capital allowances in the Bill, to which we shall return in Committee upstairs. The reduction in the annual investment allowance to £25,000 is estimated to affect between 100,000 and 200,000 businesses. As the tax information and impact note clearly states, however:

“The CT reform package will promote higher levels of business investment than would otherwise have been the case.”

Further, more than 95% of businesses in the UK will be unaffected, as the qualifying capital expenditure will continue to be completely covered by the annual investment allowance, so companies, be they small, medium or large, will benefit from the CT cuts, including the cut in the small profits rate in clause 5, while most unincorporated businesses, which by their nature tend to be the smallest businesses in the economy, will still have their expenditure covered by the annual investment allowance.

Tax Avoidance

Debate between Nigel Mills and David Gauke

Wednesday 16th June 2010 Westminster Hall

[The Exchequer Secretary to the Treasury (Mr David Gauke)]

It is a great pleasure to serve under your chairmanship, Dr McCrea. Let me begin by endorsing your words with regard to the right hon. Member for East Ham (Mr Timms). It was a great privilege to shadow him for a number of years, and I look forward to his return. I know that he has a formidable intellect and is a fine parliamentarian, so he will be a very testing person to have as a shadow. He is also a very good man, and I wish him well. I endorse the words of the hon. Member for Wallasey (Ms Eagle).

I congratulate my hon. Friend the Member for Southport (Dr Pugh) on securing this debate and on his excellent contribution. He has the benefit and experience of serving on many Finance Bill Committees. The second excellent contribution was from my hon. Friend the Member for Amber Valley (Nigel Mills), who, I suspect, will serve on many Finance Bill Committees. He brought great expertise and considerable practical experience to the debate.

We had a thoughtful debate on some of the matters relating to the general anti-avoidance rule, and I shall say more on that during the course of my remarks. The quality of this debate has been extremely helpful, and I am very grateful to my hon. Friend the Member for Southport for highlighting this particular issue, and for giving me the opportunity to say a bit more about tax avoidance and the tax gap.

I am grateful to the hon. Lady for her kind remarks in respect of my position. I had the pleasure of shadowing her to some extent. I did not directly shadow her position, but we served on Finance Bills together. She has demonstrated today that she is as tenacious in her Opposition role as she was as a Minister, and I hope to be able to answer her questions.

The issue of the tax gap, which incorporates tax avoidance but does not consist solely of it, is important for the Government. As earlier speakers have mentioned, it has been brought into even sharper relief by the dreadful state of the public finances, which we have inherited from our predecessors. As the hon. Lady pointed out, there is a public mood for people to do the right thing and to play by the rules, and that includes paying the taxes that are due under the law. Those who do not do that have very little public sympathy. The hon. Lady said that she felt that the previous Government are being traduced and unfairly criticised over their record. Although I would be the first to point out the failings of the previous Government with regard to the public finances, there are elements of both HMRC and the previous Government that I want to address in a fair manner, and their record is not all bad.

We are grateful to HMRC for publishing, for the first time, tax gap figures across all of its regimes in December 2009. It was the right thing to do and we welcome that greater transparency of information. Tax gap figures for VAT have been published for some years, but this was the first time that figures for direct taxes had been published. As we have heard, HMRC estimated the UK tax gap to be around £40 billion in 2007-08. That figure is net of the amounts collected through HMRC’s compliance activity.

The tax gap is the result of several different factors, ranging from tax evasion and organised criminal attacks on the tax system through to errors made by customers. One of the largest factors contributing to the tax gap is avoidance. Tax avoidance is estimated to contribute around 17.5%—around £7 billion—of the total tax gap. It is worth making that point at the beginning because, although those contributing to this debate today have not fallen into this trap, there is sometimes a conflation between the tax gap, which is a considerable figure, and tax avoidance, which is still a considerable figure but is only part of the £40 billion figure. None the less, £7 billion is a substantial sum, and this Government are determined to reduce it as far as possible.

As our coalition programme for government says, we will make every effort to tackle tax avoidance, which will include considering the Liberal Democrat proposals. I hope that my hon. Friend the Member for Southport will forgive me, but with the Budget in six days’ time, I do not intend to pre-empt anything that my right hon. Friend the Chancellor may say on that day. My hon. Friend rightly says that my previous responses in this area have been more like holding answers, and perhaps they have, but I hope, given the proximity of the Budget, that he will understand why. For that reason, and that reason alone, I do not intend to wander down the path of capital gains tax, which he gently mentioned. I have no doubt that my hon. Friend will be paying attention to what the Chancellor has to say next Tuesday.

I will say a word or two about the general anti-avoidance rule, which was well debated by both my hon. Friends. They managed to tease out some of the issues as well as outline some of the questions that have to be asked. The hon. Lady talked about the balance between principles and something that is much more targeted. One of the questions that we must consider is whether it enables us to reduce targeted anti-avoidance rules. Do we know the answer to that until we know what the attitude of the courts is? That is clearly something that is worth exploring. Does it require a clearance regime in order to make it work? If it does—in some countries it does and in others it does not—what resources will be necessary? My hon. Friend mentioned HMRC resources in that area. In total, HMRC has something like 17,000 tax professionals. Not all of them work exclusively on tax avoidance matters, but many of them do. There is a question, therefore, over how resources are deployed.

[Nigel Mills]

If the Minister was minded to proceed down that line, a clearance mechanism would be essential to avoid creating huge uncertainty for taxpayers. Having had much experience of dealing with the clearance system, I can say that it would take huge amounts of resources to deal with the amount of clearances that we would get for a general anti-avoidance rule. Almost everybody would want to get that certainty. In any remotely complicated transaction, there would be some element of doubt in the situation. There is a real risk in the case of a purpose transaction. For example, someone may say, “My intention here is commercial and not to avoid tax.” They want HMRC to write back and say, “Yes, we agree.” However, they would have to give a lot of information to achieve that response. There is a risk that if the transaction changes slightly, the claim becomes invalid, or that a hugely long and detailed inquiry would be needed covering many aspects and many different taxes, and that would take a huge amount of time and a lot of resources to complete, which will discourage the transaction from taking place at all.

[Mr Gauke]

I am very grateful to my hon. Friend for that intervention. At this point, given that we will have a Budget next week, I will say that there are a number of issues here. The Government are not hostile to exploring these areas. The coalition agreement is very clear in saying that we want to look at the Liberal Democrat proposals, which included a general anti-avoidance rule. However, my hon. Friend is right to raise some of the complexities and difficulties that may exist and that may need to be overcome. That is a debate that I think the Government, across the board, welcome and want to take forward.