Finance Bill (First sitting)

Rachel Blake Excerpts

Committee stage
Tuesday 28th January 2025 Public Bill Committees

[Gareth Davies]

Oh, so it was more of a heckle than an intervention, but that is very welcome too; it makes it a bit more lively for the very large audience we have today.

I would be grateful if the Minister could set out the policy of this Labour Government. Do they support holiday lets? The Environment Secretary clearly supports them and wants farmers to diversify into them, while at the same time the Treasury—yes, we announced the policy in March—clearly wants to tighten up the rules on taxation. It would be great to hear the Minister clarify that, but it seems that the answer depends on which Minister one talks to on any given day. Let us see what the answer is in this Committee, from this Minister, today.

Clause 25 also touches on a long-standing issue of whether letting constitutes a trading activity or a property business. The FHL regime created a clear distinction by deeming a letting business to be considered a trade for certain purposes. Some organisations, such as the excellent Chartered Institute of Taxation, are concerned that removing the regime removes this distinction and could open up a whole can of worms, leading to costly disputes for both the taxpayer and HMRC. Can the Minister clarify what defines a letting as a trading activity in the absence of the FHL regime, or at least commit to the publication of updated, clearer guidance for the industry on that subject? The Chartered Institute of Taxation is also seeking confirmation on the following points—

[Rachel Blake (Cities of London and Westminster) (Lab/Co-op)]

I am confused as to why a party that brought in the proposals is now arguing so vehemently against them—perhaps it is still attached to its chaotic approach to government. What I am not following in the hon. Gentleman’s remarks is the argument that the equalisation of the taxation could have negative consequences. Has the hon. Gentleman interrogated the evidence that has been brought forward by those people who are letting out their holiday lets, and does he really think that there would not be an economic benefit to supporting a change in use of those homes?

[Gareth Davies]

These sittings are long, but I did say at the beginning of my speech that we announced in March 2024 that we would bring in this same measure and that we will support it today.

I am not saying that we are against it, but I am saying two things. First, as I was saying at the beginning of my speech, the context in which the measure is being introduced is very different from the context in March 2024. The context today is that hospitality businesses across the country, but particularly in rural communities, are being hit by a series of taxes that they did not ask for, did not vote for and were told would not happen. That is the context in which we find ourselves.

Secondly, His Majesty’s official Opposition have a duty to communicate the concerns of the British public and the sectors that will be directly impacted by this measure. It is vital that His Majesty’s Opposition scrutinise whatever policies are put in front of us, with a forward look at how that will economically damage or benefit communities. As you can tell, Mr Mundell, and as the hon. Member for Cities of London and Westminster can tell, I take a constructive tone. When we do support measures, we will say so, and when we do not, or we feel that additional scrutiny is needed, Members better believe that I will be there. That is what I am doing today. I hope that addresses the intervention from the hon. Member for Cities of London and Westminster.

In the interests of scrutiny on behalf of the many thousands of people that will be impacted by the measure and in a context of a wider hammering through the tax system by this Labour Government, let me continue my questions on behalf of the Chartered Institute of Taxation.

First of all, I seek confirmation from the Minister that an FHL disposal must be made before 6 April 2025 in order for a qualifying replacement asset to be eligible for roll-over relief, even though the replacement asset itself can be purchased up to three years after FHL disposal. Secondly, I seek confirmation that lettings must cease altogether before 6 April 2025—not just furnished holiday lettings, but even unfurnished long-term rentals—for an FHL disposal to qualify for business asset disposal relief. Thirdly, I seek confirmation that married couples or civil partners who jointly own an FHL must make an election if they are to continue to split the income unequally, rather than reverting to the normal 50:50 rule, and make a declaration to HMRC before 6 April 2025 if this is to have effect in the 2025-26 tax year. I ask those questions constructively, on behalf of the Chartered Institute of Taxation, and if the Exchequer Secretary is not able to answer them, of course I will take a written answer by way of letter following this sitting.

In addition to the confirmation on those three points, I would be grateful if the Minister could provide reassurance that HMRC guidance has been specifically and sufficiently clear on these points, so that those affected are aware of the implications of the changes. It is important to remember that when the Government make changes and when we made changes, we were very conscious—I am sure he is too—that the public are aware. He should take all measures possible to ensure that people are aware of these changes, but I appreciate his guidance on what measures are being taken.

Finally, on the case of joint ownership—