Finance Bill

Rob Marris Excerpts

Tuesday 28th June 2016 Commons Chamber

[Mr Gauke]

My point would be about the sheer scale of the information provided to HMRC. I quoted the 125,000 pieces of information from the public, but by no means are all of those whistleblowers. HMRC certainly does receive a substantial amount of information from whistleblowers, which is helpful. As for how that works and its contribution to HMRC’s activities, I am not aware of worries that that is not working or that the existing provisions with regards to whistleblowers are ineffective. Of course these matters are always kept under review. If I thought that there was a strong case for returning to this issue, I would certainly be interested in doing so, but I am not hearing that at present.

The right hon. Member for Barking (Dame Margaret Hodge) has been waiting very patiently for me to turn to new clause 9, which would require the Government to estimate the impact on the tax gap of expanding our forthcoming register of persons with significant control to companies in the Crown dependencies and overseas territories. I do not believe that the clause would be effective in achieving its aims. It would cast the net too narrowly by focusing on companies with significant levels of trading activity in the UK. As the Prime Minister announced at the recent anti-corruption summit last month, the Crown dependencies and overseas territories have agreed to hold beneficial ownership information on all companies incorporated in their jurisdictions. Importantly, they will share that information with Her Majesty’s Revenue and Customs and UK law enforcement agencies, which means that our authorities will be able to see exactly who owns and controls companies incorporated there.

Although I understand the aims of the new clause, it would be less effective than the steps that we have already taken to improve transparency and tackle tax evasion. I do have some sympathy with the argument that, no doubt, we will hear from the right hon. Lady, but I am not persuaded by it, and I hope that she will not press her new clause to a vote.

I will not take up any more time of the Committee. I have tried to cover as much ground as I can and to anticipate the arguments that we will hear for the rest of this debate. I hope that the Government clauses, schedules and amendments can stand part of the Bill.

[Rob Marris (Wolverhampton South West) (Lab)]

I will try to be relatively brief, but, as the Minister has said, there is an awful lot to get through. I know that many Members wish to speak—indeed, today we have a profligacy of right hon. Members with us, particularly on the Opposition Benches, which is very good—so, perforce, I will have to be brief on various issues.

Labour does not oppose clause 144. On clause 145, which is to do with the general anti-abuse rule, I would like some assurance from the Minister that there are enough staff to deal with this work. I realise that the Government have gone into reverse gear on this, which I welcome, and the number of full-time equivalents has gone up from 57,000 to 60,000 this calendar year. That is a good step, but HMRC was significantly underperforming because it was very understaffed, and clause 145 proposes an additional amount of work for staff to do, so I should like some reassurance on that.

Clause 146 proposes penalties for the general anti-abuse rule. The Chartered Institute of Taxation, which has been extremely helpful to all Members, especially those on the Opposition Front Bench, is concerned that someone might be punished in a rather draconian manner for an innocent error of judgment. However, when my excellent researcher, Imogen Watson, looked at the case to which CIOT referred, she found that it was one to do with customs and excise rather than corporation tax and income tax. Perhaps the Minister can provide some clarification on that.

Amendment 4 on clause 146, which is tabled by me and my hon. and right hon. Friends, deals with raising the penalty from 60% to 100%. I heard what the Minister said about that, but I am concerned that the penalties would not be sufficient to change behaviour and encourage socially acceptable law compliant behaviour, which is what we all want to see.

Clause 147 deals with serial tax avoidance. The Chartered Institute of Taxation has expressed concern, and I understand its point, that this clause might introduce what would be a double penalty for an individual. Generally, we try to avoid double penalties for wrongdoing. Perhaps the Minister could have another think about the clause, or clarify for the Committee today that the CIOT has misunderstood things and there is no such double penalty being introduced. Could the Minister give us an indication—I know that these things are difficult—of how many non-taxpayers will mend their ways as a result of this measure and become taxpayers? Again, there is an issue of funding for HMRC.

Clause 148, which relates to the promoters of tax avoidance schemes, is supported by the Labour Front-Bench team. Although we support clause 149, which deals with special measures and so on, we have put forward amendments 5 to 18 on it—the Minister referred to them earlier. Those amendments deal with increasing the penalty to £25,000 from £7,500 and for holding a director or directors “jointly and severally liable”. Rather strangely, the Minister said that the Government were in the business of “encouraging behavioural change”. Well, so are we. Having higher penalties could encourage behavioural change, by which I mean somebody not indulging in bad behaviour, and filing their reports and so on. That is why we came up with the idea of joint and several liability rather than leaving it to one person. That means that all directors would be aware of what was going on. Furthermore, if the penalties were levied, they would not be reimbursable, as is too often the case. Too often, companies simply reimburse their staff when the staff have engaged in non-criminal wrongdoing. That is not an incentive for them to avoid wrongdoing in future—quite the reverse if anything.

With clause 149 comes amendment 1. I will be brief on that amendment, because my right hon. Friend the Member for Don Valley (Caroline Flint) will no doubt be speaking to it. It is an excellent amendment, which is fully supported by the Labour Front-Bench team. I will say a couple of things very briefly in response to what the Minister said on it. He said that the amendment is technically flawed. That may be the case, but this is the first of almost 200 amendments. If the Government supported it, they could have corrected any technical flaws they saw in it. I also think that they are being a bit timid here, because I do not see how the provisions under amendment 1 will lead to disadvantage to UK headquartered companies or to reputational damage—quite the reverse. Whether the Minister likes it or not, the reputation of Google was adversely affected in the United Kingdom because its tax deal with the UK authorities was not transparent and because people thought that Google was getting away with it. If there had been more transparency, Google’s reputation might not have been adversely affected.

Similarly, provisions in amendment 1 could lead not to reputational damage for UK headquartered companies, but reputational enhancement. I have to say to the Minister—I cannot resist it because he is such a good Minister—that, in our society, talking the talk is seen as hot air, but Gauking the Gauke is seen as being polite and helpful. May I urge him to walk the walk and support amendment 1? If it needs tidying up, he should do it and sort out the technicalities.

Let me talk now about clause 150 and schedule 20—I know that I am going at a bit of a gallop, but there are others who wish to speak. I heard what the Minister said about amendments 19 and 20, which are putative amendments to schedule 20. I defer to his superior knowledge, as this is a very technical area, and I am not an accountant. I think that I understood him to say that what was proposed in amendment 19 was already covered in schedule 20. In relation to amendment 20, he referred to “blind-eye knowledge”, which is a new one on me. I, like him, am a lawyer, and it seems that schedule 20 is introducing civil penalties and not criminal ones, so I accept what he says and will not be pursuing amendments 19 and 20.

Labour supports clause 151, which is to do with penalties in connection with offshore matters and offshore transfers. Clause 152 relates to offshore tax errors and publishing details of deliberate tax defaulters. Helpfully, the explanatory notes say that the clause will amend the Finance Act 2009 to allow HMRC

“the power to publish the details of an individual who controls a body corporate or a partnership”—

when it has been—

“charged a penalty for a deliberate failure to notify HMRC of a tax charge or deliberate inaccuracy in a return, and”—

when that individual—

“would have obtained a tax advantage”—

from it—

“had it not been corrected.”

This must involve an offshore matter or transfer.

--- Later in debate ---

[Mr Gauke]

I assure the right hon. Lady that I have asked civil servants about this particular issue—she will not be entirely surprised to learn that there have been fairly extensive conversations with civil servants about it. We believe that the amendment as drafted would not apply to foreign multinational entities. The challenge is that the information is, essentially, held in the UK and relating to UK-headquartered companies, so only UK-headquartered companies are well placed to provide it. She has highlighted one of the problems with a unilateral approach.

I have a huge amount of sympathy with the right hon. Lady’s argument, as she knows. We have discussed this before. I am pleased that the United Kingdom is leading the way in making progress on this at a number of international forums. I urge the House to consider that we do not need to go it alone at this point. We can work with other countries, given the progress that is being made, quite often at the UK’s instigation.

Another important point was touched on by my right hon. Friend the Member for Sutton Coldfield (Mr Mitchell) as well as the right hon. Lady, namely developing countries. I have a lot of sympathy with that point. It is worth noting that 39 countries, including the United Kingdom and developing countries such as Nigeria and Senegal, have signed the OECD mechanism for country-by-country reporting. That means that the information produced by companies and provided to tax authorities—not published, but already produced and provided to authorities—is shared with every one of the 39 signatories. I want to encourage other developing countries to sign that agreement, so that they have access to the information. The right hon. Lady made the point earlier that the EU proposals could go further on ensuring more information. I agree. That is the UK position and we have been arguing that case at EU level.

I never want to miss the opportunity to highlight what we do as a country to help developing countries’ tax authorities build up their tax capacity. That work does not get the coverage it deserves. The previous Labour Government also did such work, but we have built on that. The Department for International Development and HMRC do considerable work on helping developing countries ensure that they have the information they need and the capacity to do something with it.

[Rob Marris]

May I make this offer on amendment 1? My right hon. Friend the Member for Don Valley (Caroline Flint) and I are quite happy to meet the Minister and Treasury officials to iron out any technical deficiencies there may be. I make that offer today so that we can do so before Report. Secondly, I urge the Minister to think a little more broadly, in terms of the world that we live in now after the Brexit vote. If the United Kingdom, having left the European Union, chose to make it a condition of trading in the UK for multinational enterprises not headquartered here that they disclose that information, we could do so.

[Mr Gauke]

I am not sure about the practicality of that. I will also make the point that we remain members of the European Union. There does not seem to be any likelihood of our leaving the EU within two years. Given the progress currently being made on public country-by-country reporting, I hope that the process will conclude while our membership continues.

As I have said, there are some technical issues that could be ironed out in amendment 1, but the fundamental issue of not being able to access information from foreign multinational entities that are not headquartered in the UK would remain a problem. Even with the best will in the world—and the best lawyers and parliamentary counsel—we will not be able to solve that problem.

--- Later in debate ---

[Rob Marris]

Will the Minister meet us?

[Mr Gauke]

I am always happy to discuss this issue with the hon. Gentleman, but that underlying problem still exists.

In the light of all that, I will say that, yes, we want to make progress on public country-by-country reporting, but that needs to be on a multilateral basis. Amendment 1, despite some considerable ingenuity to get it in order to be debated today, does not do what is needed. I therefore urge hon. Members not to support it, in the knowledge that this Government want to make progress on this matter and expect to make considerable progress over the next few months.

Amendment 114 agreed to.

Clause 144, as amended, ordered to stand part of the Bill.

Clause 145

General anti-abuse rule: binding of tax arrangements to lead arrangements

Amendments made: 115, page 198, line 8, leave out “Condition 1 or 2” and insert—

“the condition in sub-paragraph (2)”.

Amendment 116, page 198, line 9, leave out “Condition 1” and insert “The condition”.

Amendment 117, page 198, line 10, at end insert—

“but no notice under paragraph 12 of Schedule 43 or paragraph 9 of Schedule 43B has yet been given in respect of the matter.”

Amendment 118, page 198, leave out lines 11 and 12.

Amendment 119, page 198, line 20, leave out from first “notice” to end of line 21 and insert—

“(a “pooling notice”) which places R’s arrangements in a pool with the lead arrangements.”

Amendment 120, page 198, line 21, at end insert—

“( ) There is one pool for any lead arrangements, so all tax arrangements placed in a pool with the lead arrangements (as well as the lead arrangements themselves) are in one and the same pool.

( )Tax arrangements which have been placed in a pool do not cease to be in the pool except where that is expressly provided for by this Schedule (regardless of whether or not the lead arrangements or any other tax arrangements remain in the pool).”

Amendment 121, page 198, line 22, leave out “notice of binding” and insert “pooling notice”.

Amendment 122, page 198, line 23, leave out

“(which has not been withdrawn)”.

Amendment 123, page 198, line 25, leave out from “43” to end of line 26.

Amendment 124, page 198, line 26, at end insert—

“Notice of proposal to bind arrangements to counteracted arrangements

1A (1) This paragraph applies where a counteraction notice has been given to a person in relation to any tax arrangements (the “counteracted arrangements”) which are in a pool created under paragraph 1.

(2) If a designated HMRC officer considers—

(a) that a tax advantage has arisen to another person (“R”) from tax arrangements that are abusive,

(b) that those tax arrangements (“R’s arrangements”) are equivalent to the counteracted arrangements, and

(c) that the advantage ought to be counteracted under section 209,

the officer may give R a notice (a “notice of binding”) in relation to R’s arrangements.

(3) The officer may not give R a notice of binding if R has been given in respect of R’s arrangements a notice under—

(a) paragraph 1, or

(b) paragraph 3 of Schedule 43.

(4) In this paragraph “counteraction notice” means a notice such as is mentioned in sub-paragraph (2) of paragraph 12 of Schedule 43 or sub-paragraph (3) of paragraph 9 of Schedule 43B (notice of final decision to counteract).

1B”.

Amendment 125, page 198, line 27, after “a” insert “pooling notice or”.

Amendment 126, page 198, line 30, after “A” insert “pooling notice or”.

Amendment 127, page 198, line 34, after “arrangements” insert

“or the counteracted arrangements (as the case may be)”.

Amendment 128, page 199, line 1, after “A” insert “pooling notice or”.

Amendment 129, page 199, leave out lines 4 to 10.

Amendment 130, page 199, line 12, after “a” insert “pooling notice or”.

Amendment 131, page 199, line 16, after “6” insert

“and Schedule 43B (generic referral of tax arrangements)”.

Amendment 132, page 199, line 17, leave out “of binding” and insert

“in question (and accordingly the tax arrangements in question are no longer in the pool)”.

Amendment 133, page 199, line 23, leave out “notice under paragraph 1” and insert “pooling notice or notice of binding”.

Amendment 134, page 199, line 26, leave out

“notice under paragraph 1”

and insert—

“pooling notice or notice of binding”.

Amendment 135, page 199, line 34, at end insert—

“( ) Where a person takes the first step described in sub-paragraph (3)(b), HMRC may proceed as if the person had not taken the relevant corrective action if the person fails to enter into the written agreement.”

Amendment 136, page 200, line 6, at end insert—

“Corrective action by lead taxpayer

2A If the person mentioned in paragraph 1(1) takes the relevant corrective action (as defined in paragraph 4A of Schedule 43) before the end of the period of 75 days beginning with the day on which the notice mentioned in paragraph 1(1) was given to that person, the lead arrangements are treated as ceasing to be in the pool.”

Amendment 137, page 200, line 9, leave out “notice of binding” and insert “pooling notice”.

Amendment 138, page 200, line 10, leave out from first “arrangements” to “and” in line 11.

Amendment 139, page 200, line 13, leave out from “about” to “is” in line 14 and insert

“another set of tax arrangements in the pool (“the referred arrangements”)”.

Amendment 140, page 200, line 16, leave out “bound” and insert “pooled”.

Amendment 141, page 200, line 17, at end insert—

“( ) No more than one pooled arrangements opinion notice may be given to a person in respect of the same tax arrangements.”

Amendment 142, page 200, line 19, leave out

“by virtue of Condition 2 in paragraph 1”.

Amendment 143, page 200, line 21, leave out “notice of binding” and insert “pooling notice”.

Amendment 144, page 200, line 22, leave out “bound” and insert “pooled”.

Amendment 145, page 200, line 25, leave out “lead” and insert “referred”.

Amendment 146, page 200, line 29, at end insert—

“( ) In relation to a person who is given a notice of binding “bound arrangements opinion notice” means a written notice which—

(a) sets out a report prepared by HMRC of any opinion of the GAAR Advisory Panel about the counteracted arrangements (see paragraph 1A(1)),

(b) explains the person’s right to make representations falling within sub-paragraph (2), and

(c) sets out the period in which those representations may be made.”

Amendment 147, page 200, line 30, after “given” and insert

“a pooled arrangements opinion notice or”.

Amendment 148, page 200, leave out lines 35 to 38.

Amendment 149, page 200, line 40, leave out “the lead arrangements” and insert

“(i) the referred arrangements (in the case of a pooled arrangements opinion notice), or

(ii) the counteracted arrangements (in the case of a bound arrangements opinion notice).”

Amendment 150, page 201, line 3, leave out from beginning to “paragraph” in line 4 and insert

“any tax arrangements have been placed in a pool by a notice given to a person under”.

Amendment 151, page 201, line 7, leave out “the lead arrangements” and insert

“any other arrangements in the pool (the “referred arrangements”)”.

Amendment 152, page 201, line 10, leave out “lead” and insert “referred”.

Amendment 153, page 201, line 17, leave out

“by virtue of Condition 2 in paragraph 1”

and insert “under paragraph 1A”.

Amendment 154, page 201, line 22, leave out “lead” and insert “counteracted”.

Amendment 155, page 202, line 25, leave out from “applies” to end of line 38 and insert

“if—

(a) pooling notices given under paragraph 1 of Schedule 43A have placed one or more sets of tax arrangements in a pool with the lead arrangements,

(b) the lead arrangements (see paragraph 1(1) of Schedule 43A) have ceased to be in the pool, and

(c) no referral under paragraph 5 or 6 of Schedule 43 has been made in respect of any arrangements in the pool.

(2) A designated HMRC officer may determine that, in respect of each of the tax arrangements that are in the pool, there is to be given (to the person to whom the pooling notice in question was given) a written notice of a proposal to make a generic referral to the GAAR Advisory Panel in respect of the arrangements in the pool.

(3) Only one determination under sub-paragraph (2) may be made in relation to any one pool.

(3A) The persons to whom those notices are given are “the notified taxpayers”.”

Amendment 156, page 203, leave out lines 1 to 4.

Amendment 157, page 203, line 6, leave out “representations, and” and insert “a proposal.”.

Amendment 158, page 203, leave out lines 7 to 16.

Amendment 159, page 203, line 18, leave out from “given” to end of line 20 and insert

“to propose to HMRC that it—

(a) should give T a notice under paragraph 3 of Schedule 43 in respect of the arrangements to which the notice under paragraph 1 relates, and

(b) should not proceed with the proposal to make a generic referral to the GAAR Advisory Panel in respect of those arrangements.”

Amendment 160, page 203, leave out lines 21 to 25.

Amendment 161, page 203, line 26, leave out

“representations are made in accordance with sub-paragraph (2)”

and insert

“a proposal is made in accordance with sub-paragraph (1)”.

Amendment 162, page 203, line 27, leave out “them” and insert “it”.

Amendment 163,  page 203, line 28, leave out from beginning to end of line 22 on page 204.

Amendment 164,  page 204, line 26, leave out “given a notice” and insert “made a proposal”,

Amendment 165, page 204, line 31, leave out “gives a notice” and insert “makes a proposal”.

Amendment 166, page 204, line 32, after “must” insert

“, after the end of that 30 day period,”.

Amendment 167, page 204, leave out lines 34 and 35 and insert

“( ) give a notice under paragraph 3 of Schedule 43 in respect of one set of tax arrangements in the relevant pool, or”.

Amendment 168, page 204, leave out lines 37 and 38 and insert

“tax arrangements in the relevant pool”.

Amendment 169, page 205, line 18, after “which” insert “the designated officer considers”.

Amendment 170, page 207, line 35, at end insert—

“( ) In section 210 (consequential relieving adjustments), in subsection (1)(b), after “Schedule 43,” insert “paragraph 5 or 6 of Schedule 43A or paragraph 9 of Schedule 43B,”.”

Amendment 171, page 207, line 40, after “1” insert “or 1A”.

Amendment 172, page 207, line 41, leave out “lead” and insert

“referred or (as the case may be) counteracted”.

Amendment 173, page 208, line 7, leave out “1(4)” and insert “1A(2)”.

Amendment 174, page 208, line 8, at end insert—

““pooling notice” has the meaning given by paragraph 1(4) of Schedule 43A;”.

Amendment 178, page 208, line 24, at end insert—

“(10A) Section 10 of the National Insurance Contributions Act 2014 (GAAR to apply to national insurance contributions) is amended in accordance with subsections (10B) to (10E).

(10B) In subsection (4), at the end insert “, paragraph 5 or 6 of Schedule 43A to that Act (pooling of tax arrangements: notice of final decision) or paragraph 9 of Schedule 43B to that Act (generic referral of arrangements: notice of final decision)”.

(10C) After subsection (6) insert—

“(6A) Where, by virtue of this section, a case falls within paragraph 4A of Schedule 43 to the Finance Act 2013 (referrals of single schemes: relevant corrective action) or paragraph 2 of Schedule 43A to that Act (pooled schemes: relevant corrective action)—

(a) the person (“P”) mentioned in sub-paragraph (1) of that paragraph takes the “relevant corrective action” for the purposes of that paragraph if (and only if)—

(i) in a case in which the tax advantage in question can be counteracted by making a payment to HMRC, P makes that payment and notifies HMRC that P has done so, or

(ii) in any case, P takes all necessary action to enter into an agreement in writing with HMRC for the purpose of relinquishing the tax advantage, and

(b) accordingly, sub-paragraphs (2) to (8) of that paragraph do not apply.”

(10D) In subsection (11)—

(a) for “and HMRC” substitute “, “HMRC” and “tax advantage””;

(b) after “2013” insert “(as modified by this section)”.

(10E) After subsection (11) insert—

“(12) See section 10A for further modifications of Part 5 of the Finance Act 2013.”

(10F) After section 10 of the National Insurance Contributions Act 2014 insert—

“10A Application of GAAR in relation to penalties

(1) For the purposes of this section a penalty under section 212A of the Finance Act 2013 is a “relevant NICs-related penalty” so far as the penalty relates to a tax advantage in respect of relevant contributions.

(2) A relevant NICs-related penalty may be recovered as if it were an amount of relevant contributions which is due and payable.

(3) Section 117A of the Social Security Administration Act 1992 or (as the case may be) section 111A of the Social Security Administration (Northern Ireland) Act 1992 (issues arising in proceedings: contributions etc) has effect in relation to proceedings before a court for recovery of a relevant NICs-related penalty as if the assessment of the penalty were a NICs decision as to whether the person is liable for the penalty.

(4) Accordingly, paragraph 5(4)(b) of Schedule 43C to the Finance Act 2013 (assessment of penalty to be enforced as if it were an assessment to tax) does not apply in relation to a relevant NICs-related penalty.

(5) In the application of Schedule 43C to the Finance Act 2013 in relation to a relevant NICs-related penalty, paragraph 9(5) has effect as if the reference to an appeal against an assessment to the tax concerned were to an appeal against a NICs decision.

(6) In paragraph 8 of that Schedule (aggregate penalties), references to a “relevant penalty provision” include—

(a) any provision mentioned in sub-paragraph (5) of that paragraph, as applied in relation to any class of national insurance contributions by regulations (whenever made);

(b) section 98A of the Taxes Management Act 1970, as applied in relation to any class of national insurance contributions by regulations (whenever made);

(c) any provision in regulations made by the Treasury under which a penalty can be imposed in respect of any class of national insurance contributions.

(7) The Treasury may by regulations—

(a) disapply, or modify the effect of, subsection (6)(a) or (b);

(b) modify paragraph 8 of Schedule 43C to the Finance Act 2013 as it has effect in relation to a relevant penalty provision by virtue of subsection (6)(b) or (c).

(8) Section 175(3) to (5) of SSCBA 1992 (various supplementary powers) applies to a power to make regulations conferred by subsection (7).

(9) Regulations under subsection (7) must be made by statutory instrument.

(10) A statutory instrument containing regulations under subsection (7) is subject to annulment in pursuance of a resolution of either House of Parliament.

(11) In this section “NICs decision” means a decision under section 8 of the Social Security Contributions (Transfer of Functions, etc) Act 1999 or Article 7 of the Social Security Contributions (Transfer of Functions, etc) (Northern Ireland) Order 1999 (SI 1999/671).

(12) In this section “relevant contributions” means the following contributions under Part 1 of SSCBA 1992 or Part 1 of SSCB(NI)A 1992—

(a) Class 1 contributions;

(b) Class 1A contributions;

(c) Class 1B contributions;

(d) Class 2 contributions which must be paid but in relation to which section 11A of the Act in question (application of certain provisions of the Income Tax Acts in relation to Class 2 contributions under section 11(2) of that Act) does not apply.””

Amendment 175, page 208, line 28, leave out from “notice” to “in” in line 30 and insert

“has been given under paragraph 5(2) or 6(2) of Schedule 43A to FA 2013 (notice of final decision after considering Panel’s opinion about referred or counteracted arrangements)”.

Amendment 176, page 208, line 34, leave out from “Panel” to end of line 36 and insert

“about the other arrangements (see subsection (8)) was as set out in paragraph 11(3)(b) of Schedule 43 to FA 2013.”

Amendment 177, page 209, line 2, leave out from “(4)(d)” to end of line 6 and insert

“other arrangements” means—

(a) in relation to a notice under paragraph 5(2) of Schedule 43A to FA 2013, the referred arrangements (as defined in that paragraph);

(b) in relation to a notice under paragraph 6(2) of that Schedule, the counteracted arrangements (as defined in paragraph 1A of that Schedule).”

Amendment 179, page 209, line 6, at end insert—

“(13A) In section 220 of FA 2014 (content of notice given while a tax enquiry is in progress)—

(a) in subsection (4)(c), after “219(4)(c)” insert “, (d) or (e)”;

(b) in subsection (5)(c), after “219(4)(c)” insert “, (d) or (e)”;

(c) in subsection (7), for the words from “under” to the end substitute “under—

(a) paragraph 12 of Schedule 43 to FA 2013,

(b) paragraph 5 or 6 of Schedule 43A to that Act, or

(c) paragraph 9 of Schedule 43B to that Act,

as the case may be.”

(13B) Section 287 of FA 2014 (Code of Practice on Taxation for Banks) is amended in accordance with subsections (13C) to (13E).

(13C) In subsection (4), after “(5)” insert “or (5A)”.

(13D) In subsection (5)(b), after “Schedule” insert “or paragraph 5 or 6 of Schedule 43A to that Act”.

(13E) After subsection (5) insert—

“(5A) This subsection applies to any conduct—

(a) in relation to which there has been given—

(i) an opinion notice under paragraph 7(4)(b) of Schedule 43B to FA 2013 (GAAR advisory panel: opinion that such conduct unreasonable) stating the joint opinion of all the members of a sub-panel arranged under that paragraph, or

(ii) one or more such notices stating the opinions of at least two members of such a sub-panel, and

(b) in relation to which there has been given a notice under paragraph 9 of that Schedule (HMRC final decision on tax advantage) stating that a tax advantage is to be counteracted.

(5B) For the purposes of subsection (5), any opinions of members of the GAAR advisory panel which must be considered before a notice is given under paragraph 5 or 6 of Schedule 43A to FA 2013 (opinions about the lead arrangements) are taken to relate to the conduct to which the notice relates.”

(13F) In Schedule 32 to FA 2014 (accelerated payments and partnerships), paragraph 3 is amended in accordance with subsections (13G) and (13H).

(13G) In sub-paragraph (5), after paragraph (c) insert—

(d) the relevant partner in question has been given a notice under paragraph 5(2) or 6(2) of Schedule 43A to FA 2013 (notice of final decision after considering Panel’s opinion about referred or counteracted arrangements) in respect of any tax advantage resulting from the asserted advantage or part of it and the chosen arrangements (or is given such a notice at the same time as the partner payment notice) in a case where the stated opinion of at least two of the members of the sub-panel of the GAAR Advisory Panel about the other arrangements (see sub-paragraph (7)) was as set out in paragraph 11(3)(b) of Schedule 43 to FA 2013;

(e) the relevant partner in question has been given a notice under paragraph 9(2) of Schedule 43B to FA 2013 (GAAR: generic referral of arrangements) in respect of any tax advantage resulting from the asserted advantage or part of it and the chosen arrangements (or is given such a notice at the same time as the partner payment notice) in a case where the stated opinion of at least two of the members of the sub-panel of the GAAR Advisory Panel which considered the generic referral in respect of those arrangements was as set out in paragraph 7(4)(b) of that Schedule.”

(13H) After sub-paragraph (6) insert—

“(7) “Other arrangements” means—

(a) in relation to a notice under paragraph 5(2) of Schedule 43A to FA 2013, the referred arrangements (as defined in that paragraph);

(b) in relation to a notice under paragraph 6(2) of that Schedule, the counteracted arrangements (as defined in paragraph 1A of that Schedule).”

(13I) In Schedule 34 to FA 2014 (promoters of tax avoidance schemes: threshold conditions), in paragraph 7—

(a) in paragraph (a), at the end insert “(referrals of single schemes) or are in a pool in respect of which a referral has been made to that Panel under Schedule 43B to that Act (generic referrals),”;

(b) in paragraph (b)—

(i) for “in relation to the arrangements” substitute “in respect of the referral”;

(ii) after “11(3)(b)” insert “or (as the case may be) 7(4)(b)”;

(c) in paragraph (c)(i) omit “paragraph 10 of”.”—(Mr Gauke.)

Clause 145, as amended, ordered to stand part of the Bill.

Clause 146

General Anti-Abuse Rule: Penalty

Amendments made: 82, page 209, line 14, after “person” insert “(P)”.

Amendment 83, page 209, leave out lines 15 and 16.

Amendment 84, page 209, line 17, leave out “the person” and insert “(P)”.

Amendment 85, page 209, line 21, leave out “the” and insert “particular”.

Amendment 86, page 209, line 22, at end insert—

“(ba) a tax document has been given to HMRC on the basis that the tax advantage arises to P from those arrangements,

(bb) that document was given to HMRC—

(i) by P, or

(ii) by another person in circumstances where P knew, or ought to have known, that the other person gave the document on the basis mentioned in paragraph (ba), and”

Amendment 87, page 209, line 33, at end insert—

‘( ) In this section the reference to giving a tax document to HMRC is to be interpreted in accordance with paragraph 11(g) and (h) of Schedule 43C.”

Amendment 88, page 210, line 16, at end insert—

‘( ) For the purposes of this paragraph consequential adjustments under section 210 are regarded as part of the counteraction in question.

( ) If the counteraction affects the person’s liability to two or more taxes, the taxes concerned are to be considered together for the purpose of determining the value of the counteracted advantage.”

Amendment 89, page 214, line 33, after “tax” insert

“(including any amount chargeable as if it were corporation tax or treated as corporation tax)”

Amendment 90, page 214, line 34, at end insert

“and (v) diverted profits tax;”.

Amendment 91, page 215, line 34, after “given” insert “a pooling notice or”.

Amendment 92, page 215, line 34, leave out “paragraph 1 of”.

Amendment 93, page 215, line 41, at beginning insert

“in the case of a pooling notice,”.

Amendment 94, page 215, line 47, leave out from beginning to “with” in line 48 and insert

“in the case of a notice of binding,”.

Amendment 95, page 215, line 49, leave out “of binding”.

Amendment 96, page 216, line 6, leave out “binding” and insert

“pooling or binding (as the case may be)”.

Amendment 97, page 216, line 43, at end insert—

(ja) an appeal under section 103 of FA 2016 (apprenticeship levy: appeal against an assessment), or”.

Amendment 98, page 216, line 45, leave out “(j)” and insert “(ja)”.

Amendment 99, page 217, line 23, at end insert—

‘( ) Where the taxpayer takes the first step described in sub-paragraph (3)(b), HMRC may proceed as if the taxpayer had not taken the relevant corrective action if the taxpayer fails to enter into the written agreement.”—(Mr Gauke.)

Clause 146, as amended, ordered to stand part of the Bill.

Clause 147 ordered to stand part of the Bill.

Schedule 18

Serial Tax Avoidance

Amendments made: 100, page 480, line 19, at end insert “, associated persons and partnerships”

Amendment 101, page 480, line 32, at end insert—

‘( ) A warning notice given by virtue of paragraph 46C must also explain the effect of paragraph 46E (information in certain cases involving partnerships).”

Amendment 102, page 484, line 10, after “decision)” insert—

“, paragraph 5 or 6 of Schedule 43A to that Act (pooled arrangements: notice of final decision) or paragraph 9 of Schedule 43B to that Act (generic referrals: notice of final decision)”.

Amendment 103, page 484, leave out lines 23 and 24 and insert—

“the necessary corrective action for the purposes of section 208 of FA 2014 has been taken”.

Amendment 104, page 484, line 28, at end insert—

“(1A) In sub-paragraph (1) the reference to giving a follower notice to P includes a reference to giving a partnership follower notice in respect of a partnership return in relation to which P is a relevant partner (as defined in paragraph 2(5) of Schedule 31 to FA 2014).”

Amendment 105, page 484, line 35, leave out from “advantage”” to end of line 36 and insert—

“has the same meaning as in Chapter 2 of Part 4 of FA 2014 (see section 208(3) of and paragraph 4(3) of Schedule 31 to that Act).”

Amendment 106, page 484, line 42, at end insert—

“(6) For the purposes of this paragraph a partnership follower notice is given “in respect of” the partnership return mentioned in paragraph (a) or (b) of paragraph 2(2) of Schedule 31 to FA 2014.”

Amendment 107, page 485, line 8, after “election” insert—

“, or a partnership return is made,”

Amendment 108, page 490, line 22, at end insert—

“( ) If the person mentioned in sub-paragraph (1) is a person carrying on a trade or business in partnership, the information which may be published also includes—

(a) any trading name of the partnership, and

(b) information about other members of the partnership of the kind described in sub-paragraph (4)(a) or (b).”

Amendment 109, page 494, line 31, at end insert—

“( ) In this paragraph “relevant failure”, in relation to a relevant defeat, is to be interpreted in accordance with sub-paragraphs (2) to (7) of paragraph 43.”

Amendment 110, page 504, line 43, at end insert—

“Associated persons treated as incurring relevant defeats

46A (1) Sub-paragraph (2) applies if a person (“P”) incurs a relevant defeat in relation to any arrangements (otherwise than by virtue of this paragraph).

(2) Any person (“S”) who is associated with P at the relevant time is also treated for the purposes of paragraphs 2 (duty to give warning notice) and 3(2) (warning period) as having incurred that relevant defeat in relation to those arrangements (but see sub-paragraph (3)).

For the meaning of “associated” see paragraph 46B.

(3) Sub-paragraph (2) does not apply if P and S are members of the same group of companies (as defined in paragraph 46(9)).

(4) In relation to a warning notice given to S by virtue of sub-paragraph (2), paragraph 2(4)(c) (certain information to be included in warning notice) is to be read as referring only to paragraphs 3, 17 and 18.

(5) A warning notice which is given to a person by virtue of sub-paragraph (2) is treated for the purposes of paragraphs 19(1) (duty to give relief restriction notice) and 30 (penalty) as not having been given to that person.

(6) In sub-paragraph (2) “the relevant time” means the time when P is given a warning notice in respect of the relevant defeat.

Meaning of “associated”

46B (1) For the purposes of paragraph 46A two persons are associated with one another if—

(a) one of them is a body corporate which is controlled by the other, or

(b) they are bodies corporate under common control.

(2) Two bodies corporate are under common control if both are controlled—

(a) by one person,

(b) by two or more, but fewer than six, individuals, or

(c) by any number of individuals carrying on business in partnership.

(3) For the purposes of this section a body corporate (“H”) is taken to control another body corporate (“B”) if—

(a) H is empowered by statute to control B’s activities, or

(b) H is B’s holding company within the meaning of section 1159 of and Schedule 6 to the Companies Act 2006.

(4) For the purposes of this section an individual or individuals are taken to control a body corporate (“B”) if the individual or individuals, were they a body corporate, would be B’s holding company within the meaning of those provisions.

Partners treated as incurring relevant defeats

46C (1) Where paragraph 46D applies in relation to a partnership return, each relevant partner is treated for the purposes of this Part of this Act as having incurred the relevant defeat mentioned in paragraph 46D(1)(b), (2) or (3)(b) (as the case may be).

(2) In this paragraph “relevant partner” means any person who was a partner in the partnership at any time during the relevant reporting period (but see sub-paragraph (3)).

(3) The “relevant partners” do not include—

(a) the person mentioned in sub-paragraph (1)(b), (2) or (3)(b) (as the case may be) of paragraph 46D, or

(b) any other person who would, apart from this paragraph, incur a relevant defeat in connection with the subject matter of the partnership return mentioned in sub-paragraph (1).

(4) In this paragraph the “relevant reporting period” means the period in respect of which the partnership return mentioned in sub-paragraph (1), (2) or (3) of paragraph 46D was required.

Partnership returns to which this paragraph applies

46D (1) This paragraph applies in relation to a partnership return if—

(a) that return has been made on the basis that a tax advantage arises to a partner from any arrangements, and

(b) that person has incurred, in relation to that tax advantage and those arrangements, a relevant defeat by virtue of Condition A (final counteraction of tax advantage under general anti-abuse rule).

(2) Where a person has incurred a relevant defeat by virtue of sub-paragraph (1A) of paragraph 13 (Condition B: case involving partnership follower notice) this paragraph applies in relation to the partnership return mentioned in that sub-paragraph.

(3) This paragraph applies in relation to a partnership return if—

(a) that return has been made on the basis that a tax advantage arises to a partner from any arrangements, and

(b) that person has incurred, in relation to that tax advantage and those arrangements, a relevant defeat by virtue of Condition C (return, claim or election made in reliance on DOTAS arrangements).

(4) The references in this paragraph to a relevant defeat do not include a relevant defeat incurred by virtue of paragraph 46A(2).

Partnerships: information

46E (1) If paragraph 46D applies in relation to a partnership return, the appropriate partner must give HMRC a written notice (a “partnership information notice”) in respect of each sub-period in the information period.

(2) The “information period” is the period of 5 years beginning with the day after the day of the relevant defeat mentioned in paragraph 46D.

(3) If, in the case of a partnership, a new information period (relating to another partnership return) begins during an existing information period, those periods are treated for the purposes of this paragraph as a single period (which includes all times that would otherwise fall within either period).

(4) An information period under this paragraph ends if the partnership ceases.

(5) A partnership information notice must be given not later than the 30th day after the end of the sub-period to which it relates.

(6) A partnership information notice must state—

(a) whether or not any relevant partnership return which was, or was required to be, delivered in the sub-period has been made on the basis that a relevant tax advantage arises, and

(b) whether or not there has been a failure to deliver a relevant partnership return in the sub-period.

(7) In this paragraph—

(a) “relevant partnership return” means a partnership return in respect of the partnership’s trade, profession or business;

(b) “relevant tax advantage” means a tax advantage which particular DOTAS arrangements enable, or might be expected to enable, a person who is or has been a partner in the partnership to obtain.

(8) If a partnership information notice states that a relevant partnership return has been made on the basis mentioned in sub-paragraph (6)(a) the notice must—

(a) explain (on the assumptions made for the purposes of the return) how the DOTAS arrangements enable the tax advantage concerned to be obtained, and

(b) describe any variation in the amounts required to be stated in the return under section 12AB(1) of TMA 1970 which results from those arrangements.

(9) HMRC may require the appropriate partner to give HMRC a notice (a “supplementary information notice”) setting out further information in relation to a partnership information notice.

In relation to a partnership information notice “further information” means information which would have been required to be set out in the notice by virtue of sub-paragraph (6)(a) or (8) had there not been a failure to deliver a relevant partnership return.

(10) A requirement under sub-paragraph (9) must be made by a written notice and the notice must state the period within which the notice must be complied with.

(11) If a person fails to comply with a requirement of (or imposed under) this paragraph, HMRC may by written notice extend the information period concerned to the end of the period of 5 years beginning with—

(a) the day by which the partnership information notice or supplementary information notice was required to be given to HMRC or, as the case requires,

(b) the day on which the person gave the defective notice to HMRC,

or, if earlier, the time when the information period would have expired but for the extension.

(12) For the purposes of this paragraph—

(a) the first sub-period in an information period begins with the first day of the information period and ends with a day specified by HMRC,

(b) the remainder of the information period is divided into further sub-periods each of which begins immediately after the end of the preceding sub-period and is twelve months long or (if that would be shorter) ends at the end of the information period.

(13) In this paragraph “the appropriate partner” means the partner in the partnership who is for the time being nominated by HMRC for the purposes of this paragraph.

Partnerships: special provision about taxpayer emendations

46F (1) Sub-paragraph (2) applies if a partnership return is amended at any time under section 12ABA of TMA 1970 (amendment of partnership return by representative partner etc) on a basis that—

(a) results in an increase or decrease in, or

(b) otherwise affects the calculation of,

any amount stated under subsection (1)(b) of section 12AB of that Act (partnership statement) as a partner’s share of any income, loss, consideration, tax or credit for any period.

(2) For the purposes of paragraph 14 (Condition C: counteraction of DOTAS arrangements), the partner is treated as having at that time amended—

(a) the partner’s return under section 8 or 8A of TMA 1970, or

(b) the partner’s company tax return,

so as to give effect to the amendments of the partnership return.

(3) Sub-paragraph (4) applies if a partnership return is amended at any time by HMRC as a result of a disclosure made by the representative partner or that person’s successor on a basis that—

(a) results in an increase or decrease in, or

(b) otherwise affects the calculation of,

any amount stated under subsection (1)(b) of section 12AB (partnership statement) as the share of a particular partner (P) of any income, loss, consideration, tax or credit for any period.

(4) If the conditions in sub-paragraph (5) are met, P is treated for the purposes of paragraph 14 as having at that time amended—

(a) P’s return under section 8 or 8A of TMA 1970, or

(b) P’s company tax return,

so as to give effect to the amendments of the partnership return.

(5) The conditions are that the disclosure—

(a) is a full and explicit disclosure of an inaccuracy in the partnership return, and

(b) was made at a time when neither the person making the disclosure nor P had reason to believe that HMRC was about to begin enquiries into the partnership return.

Supplementary provision relating to partnerships

46G (1) In paragraphs 46C to 46F and this paragraph—

“partnership” is to be interpreted in accordance with section 12AA of TMA 1970 (and includes a limited liability partnership);

“the representative partner”, in relation to a partnership return, means the person who was required by a notice served under or for the purposes of section 12AA(2) or (3) of TMA 1970 to deliver the return;

“successor”, in relation to a person who is the representative partner in the case of a partnership return, has the same meaning as in TMA 1970 (see section 118(1) of that Act).

(2) For the purposes of this Part of this Act a partnership is treated as the same partnership notwithstanding a change in membership if any person who was a member before the change remains a member after the change.”

Amendment 112, page 507, leave out lines 15 to 20.

Amendment 111, page 507, line 38, at end insert—

““partnership follower notice” has the meaning given by paragraph 2(2) of Schedule 31 to FA 2014;

“partnership return” means a return under section 12AA of TMA 1970;”

Amendment 113, page 508, line 13, at end insert—

‘( ) For the purposes of this Schedule a partnership return is regarded as made on the basis that a particular tax advantage arises to a person from particular arrangements if—

(a) it is made on the basis that an increase or reduction in one or more of the amounts mentioned in section 12AB(1) of TMA 1970 (amounts in the partnership statement in a partnership return) results from those arrangements, and

(b) that increase or reduction results in that tax advantage for the person.”—(Mr Gauke.)

Schedule 18, as amended, agreed to.

Clause 148

Promoters of tax avoidance schemes

Amendments made: 69, page 219, line 15, at end insert—

‘(1A) An authorised officer must make the determination set out in subsection (1B) if the officer becomes aware at any time (“the relevant Part 2B time”) that—

(a) a person meets a condition in subsection (6), (7) or (8), and

(b) at the relevant Part 2B time another person (“P”), who is carrying on a business as a promoter, meets that condition by virtue of Part 2B of Schedule 34A (meeting the section 237A conditions: bodies corporate and partnerships).

(1B) The authorised officer must determine whether or not—

(a) the meeting of the condition by the person as mentioned in subsection (1A)(a), and

(b) P’s meeting of the condition as mentioned in subsection (1A)(b),

should be regarded as significant in view of the purposes of this Part.”

Amendment 70, page 219, line 16, leave out “Subsection (1) does” and insert “Subsections (1) and (1A) do”.

Amendment 71, page 219, leave out lines 21 to 25.

Amendment 72, page 219, line 25, at end insert—

‘(3A) Subsection (1A) does not apply if, at the relevant Part 2B time, an authorised officer is under a duty to make a determination under section 237(5) in relation to P.

(3B) But in a case where subsection (1) does not apply because of subsection (3), or subsection (1A) does not apply because of subsection (3A), subsection (5) of section 237 has effect as if—

(a) the references in paragraph (a) of that subsection to “subsection (1)”, and “subsection (1)(a)” included subsection (1) of this section, and

(b) in paragraph (b) of that subsection the reference to “subsection (1A)(a)” included a reference to subsection (1A)(a) of this section and the reference to subsection (1A)(b) included a reference to subsection (1A)(b) of this section.”

Amendment 73, page 219, line 28, at end insert—

‘( ) If the authorised officer determines under subsection (1B) that—

(a) the meeting of the condition by the person as mentioned in subsection (1A)(a), and

(b) P’s meeting of the condition as mentioned in subsection (1A)(b),

should be regarded as significant in view of the purposes of this Part, the officer must give P a conduct notice, unless subsection (5) applies.”

Amendment 74, page 225, line 7, at end insert—

( ) Part 2A contains provision about when a relevant defeat is treated as occurring in relation to a person;

( ) Part 2B contains provision about when a person is treated as meeting a condition in subsection (6), (7) or (8) of section 237A;”

Amendment 75, page 226, line 9, leave out from “person” to end of line 11 and insert

“is carrying on a business as a promoter and—the person is or has been a promoter in relation to the arrangements, or that would be the case if the condition in sub-paragraph (2) were met.”

(i) the person is or has been a promoter in relation to the arrangements, or

(ii) that would be the case if the condition in sub-paragraph (2) were met.”

Amendment 76, page 228, line 26, after first “to” insert

“, paragraph 5(2) or 6(2) of Schedule 43A to or paragraph 9(2) of Schedule 43B to”.

Amendment 77, page 230, line 9, at end insert—

Part 2A

Relevant defeats: associated persons

Attribution of relevant defeats

16A (1) Sub-paragraph (2) applies if—

(a) there is (or has been) a person (“Q”),

(b) arrangements (“the defeated arrangements”) have been entered into,

(c) an event occurs such that either—

(i) there is a relevant defeat in relation to Q and the defeated arrangements, or

(ii) the condition in sub-paragraph (i) would be met if Q had not ceased to exist,

(d) at the time of that event a person (“P”) is carrying on a business as a promoter (or is carrying on what would be such a business under the condition in paragraph 3(2)), and

(e) Condition 1 or 2 is met in relation to Q and P.

(2) The event is treated for all purposes of this Part of this Act as a relevant defeat in relation to P and the defeated arrangements (whether or not it is also a relevant defeat in relation to Q, and regardless of whether or not P existed at any time when those arrangements were promoted arrangements in relation to Q).

(3) Condition 1 is that—

(a) P is not an individual,

(b) at a time when the defeated arrangements were promoted arrangements in relation to Q—

(i) P was a relevant body controlled by Q, or

(ii) Q was a relevant body controlled by P, and

(c) at the time of the event mentioned in sub-paragraph (1)(c)—

(i) Q is a relevant body controlled by P,

(ii) P is a relevant body controlled by Q, or

(iii) P and Q are relevant bodies controlled by a third person.

(4) Condition 2 is that—

(a) P and Q are relevant bodies,

(b) at a time when the defeated arrangements were promoted arrangements in relation to Q, a third person (“C”) controlled Q, and

(c) C controls P at the time of the event mentioned in sub-paragraph (1)(c).

(5) For the purposes of sub-paragraphs (3)(b) and (4)(b), the question whether arrangements are promoted arrangements in relation to Q at any time is to be determined on the assumption that the reference to “design” in paragraph (b) of section 235(3) (definition of “promoter” in relation to relevant arrangements) is omitted.

Deemed defeat notices

16B (1) This paragraph applies if—

(a) an authorised officer becomes aware at any time (“the relevant time”) that a relevant defeat has occurred in relation to a person (“P”) who is carrying on a business as a promoter,

(b) there have occurred, more than 3 years before the relevant time—

(i) one third party defeat, or

(ii) two third party defeats, and

(c) conditions A1 and B1 (in a case within paragraph (b)(i)), or conditions A2 and B2 (in a case within paragraph (b)(ii)), are met.

(2) Where this paragraph applies by virtue of sub-paragraph (1)(b)(i), this Part of this Act has effect as if an authorised officer had (with due authority), at the time of the time of the third party defeat, given P a single defeat notice under section 241A(2) in respect of it.

(3) Where this paragraph applies by virtue of sub-paragraph (1)(b)(ii), this Part of this Act has effect as if an authorised officer had (with due authority), at the time of the second of the two third party defeats, given P a double defeat notice under section 241A(3) in respect of the two third party defeats.

(4) Section 241A(8) has no effect in relation to a notice treated as given as mentioned in subsection (2) or (3).

(5) Condition A1 is that—

(a) a conduct notice or a single or double defeat notice has been given to the other person (see sub-paragraph (9)) in respect of the third party defeat,

(b) at the time of the third party defeat an authorised officer would have had power by virtue of paragraph 16A to give P a defeat notice in respect of the third party defeat, had the officer been aware that it was a relevant defeat in relation to P, and

(c) so far as the authorised officer mentioned in sub-paragraph (1)(a) is aware, the conditions for giving P a defeat notice in respect of the third party defeat have never been met (ignoring this paragraph).

(6) Condition A2 is that—

(a) a conduct notice or a single or double defeat notice has been given to the other person (see sub-paragraph (9)) in respect of each, or both, of the third party defeats,

(b) at the time of the second third party defeat an authorised officer would have had power by virtue of paragraph 16A to give P a double defeat notice in respect of the third party defeats, had the officer been aware that either of the third party defeats was a relevant defeat in relation to P, and

(c) so far as the authorised officer mentioned in sub-paragraph (1)(a) is aware, the conditions for giving P a defeat notice in respect of those third party defeats (or either of them) have never been met (ignoring this paragraph).

(7) Condition B1 is that, had an authorised officer given P a defeat notice in respect of the third party defeat at the time of that relevant defeat, that defeat notice would still have effect at the relevant time (see sub-paragraph (1)).

(8) Condition B2 is that, had an authorised officer given P a defeat notice in respect of the two third party defeats at the time of the second of those relevant defeats, that defeat notice would still have effect at the relevant time.

(9) In this paragraph “third party defeat” means a relevant defeat which has occurred in relation to a person other than P.

Meaning of “relevant body” and “control”

16C (1) In this Part of this Schedule “relevant body” means—

(a) a body corporate, or

(b) a partnership.

(2) For the purposes of this Part of this Schedule a person controls a body corporate if the person has power to secure that the affairs of the body corporate are conducted in accordance with the person’s wishes—

(a) by means of the holding of shares or the possession of voting power in relation to the body corporate or any other relevant body,

(b) as a result of any powers conferred by the articles of association or other document regulating the body corporate or any other relevant body, or

(c) by means of controlling a partnership.

(3) For the purposes of this Part of this Schedule a person controls a partnership if the person is a controlling member or the managing partner of the partnership.

(4) In this paragraph “controlling member” has the same meaning as in Schedule 36 (partnerships).

(5) In this section “managing partner”, in relation to a partnership, means the member of the partnership who directs, or is on a day-to-day level in control of, the management of the business of the partnership.

Part 2B

Meeting section 237A conditions: bodies corporate and partnerships

Treating persons under another’s control as meeting section 237A condition

16D (1) A relevant body (“RB”) is treated as meeting a section 237A condition at the relevant Part 2B time if—

(a) that condition was met by a person (“C”) at a time when—

(i) C was carrying on a business as a promoter, or

(ii) RB was carrying on a business as a promoter and C controlled RB, and

(b) RB is controlled by C at the relevant Part 2B time.

(2) Sub-paragraph (1) does not apply if C is an individual.

(3) For the purposes of determining whether the requirements of sub-paragraph (1) are met by reason of meeting the requirement in sub-paragraph (1)(a)(i), it does not matter whether RB existed at the time when C met the section 237A condition.

Treating persons in control of others as meeting section 237A condition

16E (1) A person other than an individual is treated as meeting a section 237A condition at the relevant Part 2B time if—

(a) a relevant body (“A”) met the condition at a time when A was controlled by the person, and

(b) at the time mentioned in paragraph (a) A, or another relevant body (“B”) which was also at that time controlled by the person, carried on a business as a promoter.

(2) For the purposes of determining whether the requirements of sub-paragraph (1) are met it does not matter whether A or B (or neither) exists at the relevant Part 2B time.

Treating persons controlled by the same person as meeting section 237A condition

16F (1) A relevant body (“RB”) is treated as meeting a section 237A condition at the relevant Part 2B time if—

(a) another relevant body met that condition at a time (“time T”) when it was controlled by a person (“C”),

(b) at time T, there was a relevant body controlled by C which carried on a business as a promoter, and

(c) RB is controlled by C at the relevant Part 2B time.

(2) For the purposes of determining whether the requirements of sub-paragraph (1) are met it does not matter whether—

(a) RB existed at time T, or

(b) any relevant body (other than RB) by reason of which the requirements of sub-paragraph (1) are met exists at the relevant Part 2B time.

Interpretation

16G (1) In this Part of this Schedule—

“control” has the same meaning as in Part 2A of this Schedule;

“relevant body” has the same meaning as in Part 2A of this Schedule;

“relevant Part 2B time” means the time referred to in section 237A(1A);

“section 237A condition” means any of the conditions in section 237A(6), (7) and (8).

(2) For the purposes of paragraphs 16D(1)(a), 16E(1)(a) and 16F(1)(a), the condition in section 237A(6) (occurrence of 3 relevant defeats in the 3 years ending with the relevant time) is taken to have been met by a person at any time if at least 3 relevant defeats have occurred in relation to the person in the period of 3 years ending with that time.”

Amendment 78, page 234, line 27, at end insert—

‘(9A) Schedule 36 (promoters of tax avoidance schemes: partnerships) is amended in accordance with subsections (9B) to (9G).

(9B) In Part 2, before paragraph 5 insert—

“Defeat notices

4A A defeat notice that is given to a partnership must state that it is a partnership defeat notice.”.

(9C) In paragraph 7(1)(b) after “a” insert “defeat notice,”.

(9D) In paragraph 7(2) after “the” insert “defeat notice,”.

(9E) After paragraph 7 insert—

“Persons leaving partnership: defeat notices

7A (1) Sub-paragraphs (2) and (3) apply where—

(a) a person (“P”) who was a controlling member of a partnership at the time when a defeat notice (“the original notice”) was given to the partnership has ceased to be a member of the partnership,

(b) the defeat notice had effect in relation to the partnership at the time of that cessation, and

(c) P is carrying on a business as a promoter.

(2) An authorised officer may give P a defeat notice.

(3) If P is carrying on a business as a promoter in partnership with one or more other persons and is a controlling member of that partnership (“the new partnership”), an authorised officer may give a defeat notice to the new partnership.

(4) A defeat notice given under sub-paragraph (3) ceases to have effect if P ceases to be a member of the new partnership.

(5) A notice under sub-paragraph (2) or (3) may not be given after the original notice has ceased to have effect.

(6) A defeat notice given under sub-paragraph (2) or (3) is given in respect of the relevant defeat or relevant defeats to which the original notice relates.”

(9F) In paragraph 10—

(a) in sub-paragraph (1)(b) for “conduct notice or a” substitute “, defeat notice, conduct notice or”;

(b) in sub-paragraph (3), after “partner—” insert—

“(za) a defeat notice (if the original notice is a defeat notice);”.

(c) in sub-paragraph (4), after “(“the new partnership”)—” insert—

“(za) a defeat notice (if the original notice is a defeat notice);”

(d) after sub-paragraph (5) insert—

“(5A) A notice under sub-paragraph (3)(za) or (4)(za) may not be given after the end of the look-forward period of the original notice.”

(9G) After paragraph 11 insert—

11A The look-forward period for a notice under paragraph 7A(2) or (3) or 10(3)(za) or (4)(za)—

(a) begins on the day after the day on which the notice is given, and

(b) continues to the end of the look-forward period for the original notice (as defined in paragraph 7A(1)(a) or 10(2), as the case may be).”

Amendment 79, page 234, line 27, at end insert—

‘(9A) Part 2 of Schedule 2 to the National Insurance Contributions Act 2015 (application of Part 5 of FA 2014 to national insurance contributions) is amended in accordance with subsections (9B) and (9C).

(9B) After paragraph 30 insert—

“Threshold conditions

30A (1) In paragraph 5 of Schedule 34 (non-compliance with Part 7 of FA 2004), in sub-paragraph (4)—

(a) paragraph (a) includes a reference to a decision having been made for corresponding NICs purposes that P is to be deemed not to have failed to comply with the provision concerned as P had a reasonable excuse for not doing the thing required to be done, and

(b) the reference in paragraph (c) to a determination is to be read accordingly.

(2) In this paragraph “corresponding NICs purposes” means the purposes of any provision of regulations under section 132A of SSAA 1992.

Relevant defeats

30B (1) Schedule 34A (promoters of tax avoidance schemes: defeated arrangements) has effect with the following modifications.

(2) References to an assessment (or an assessment to tax) include a NICs decision relating to a person’s liability for relevant contributions.

(3) References to adjustments include a payment in respect of a liability to pay relevant contributions (and the definition of “adjustments” in paragraph 17 accordingly has effect as if such payments were included in it).

(4) In paragraph 9(3) the reference to an enquiry into a return includes a relevant contributions dispute (as defined in paragraph 6 of this Schedule).

(5) In paragraph 21(3)—

(a) paragraph (a) includes a reference to a decision having been made for corresponding NICs purposes that the person is to be deemed not to have failed to comply with the provision concerned as the person had a reasonable excuse for not doing the thing required to be done, and

(b) the reference in paragraph (c) to a determination is to be read accordingly.

“Corresponding NICs purposes” means the purposes of any provision of regulations under section 132A of SSAA 1992.”

(9C) In paragraph 31 (interpretation)—

(a) before paragraph (a) insert—

(za) “NICs decision” means a decision under section 8 of SSC(TF)A 1999 or Article 7 of the Social Security Contributions (Transfer of Functions, etc) (Northern Ireland) Order 1999 (SI 1999/671);”

(b) in paragraph (b), for “are to sections of” substitute “or Schedules are to sections of, or Schedules to”.”

Amendment 80, page 234, line 39, after “person” insert “or an associated person”.

Amendment 81, page 235, line 2, at end insert—

‘(12A) For the purposes of subsection (11) a person (“Q”) is an “associated person” in relation to another person (“P”) at any time when any of the following conditions is met—

(a) P is a relevant body which is controlled by Q;

(b) Q is a relevant body, P is not an individual and Q is controlled by P;

(c) P and Q are relevant bodies and a third person controls P and Q.

(12B) In subsection (12A) “relevant body” and “control” are to be interpreted in accordance with paragraph 16C of Schedule 34A to FA 2014.”—(Mr Gauke.)

Clause 148, as amended, ordered to stand part of the Bill.

Clause 149 ordered to stand part of the Bill.

Schedule 19

Large businesses: tax strategies and sanctions

Amendment proposed: 1, page 516, line 21, at end insert—

‘(2A) A group tax strategy of a qualifying group which is a MNE group must also include a country-by-country report.

(2B) In paragraph (2A) “country-by-country report” has the meaning given by the Taxes (Base Erosion and Profit Shifting) (Country by Country Reporting) Regulations 2016.”—(Caroline Flint.)

Question put, That the amendment be made.

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[Rob Marris]

The Labour party supports all these grouped clauses except clause 42. I will not press amendment 21 to a Division because it has not been selected, but I will be inviting all Members, particularly those in the Opposition, to vote against clause 42 on corporation tax.

Clause 41 is effectively a technical change. I appreciate that it is on corporation tax and it goes with clause 42, but I think it need not detain the House now. On the abolition of vaccine research relief, paragraph 15 of the explanatory notes on clause 43 helpfully says:

“The low level of take-up of the relief suggests it does not have a significant impact on a company’s research decisions. The government believes that direct spending programmes like the recently announced Ross Fund offer a more effective and flexible approach to the production of medicines and vaccines.”

The Ross Fund is £1 billion and was announced by the Chancellor of the Exchequer in November 2015.

I appreciate this is not directly the Minister’s departmental responsibility, but if we are looking at things such as the Ross Fund, where the Government are directly funding rather than encouraging research through fiscal levers, I would like him to indicate whether that Ross Fund money will count as part of the 0.7% of GDP commitment for overseas aid. I again salute the Government for reaching that 0.7% target. The Labour Government of whom I was a Back Bencher for many years moved significantly towards that target, but it was the coalition Government who reached it, and it is this Government who have maintained that in spite of some pressure on occasions from what might be called their natural supporters, who have reservations about that 0.7%. I do salute the Government for reaching that, and they have the complete support of Opposition Members on maintaining that commitment, but there are always potential difficulties in how one measures what goes into that 0.7%. Whether this would come under the Department for International Development or the Department of Health in terms of vaccine research and the Ross Fund I know not, but I hope the Minister will, as a Treasury Minister, be able to give some indication as to whether this kind of thing counts towards the 0.7%, because were it to do so, some of us would raise an eyebrow, and I think one ought to know.

It also appears that the Government have decided that direct spending programmes are more effective and flexible for research than funding through fiscal measures. For us socialists, it is a welcome conversion on the part of the Government that they agree that they have a role in direct funding, but in terms of clause 43 and the abolition of vaccine research relief, this must form part of a wider canvas. I found it a bit shocking when the National Audit Office said a few months ago that there were about 1,200 tax reliefs. From memory, it found about six different sorts of measures that are often commonly called tax reliefs, and that only about 300 of them were being monitored by the Government as to their efficacy or otherwise.

It appears that the Government have monitored the efficacy of vaccine research relief and decided that it is not very efficacious. As I understand it, fewer than 10 companies were claiming the relief. I can understand that if that is the case the Government might wish to remove it, although of course in terms of pharmaceutical research, they could be 10 extremely large companies. The Government monitored that, however, and I salute them for doing so and for coming up with some results from their monitoring.

Clause 44 updates aspects of the cap on research and development aid. Broadly, we on the Opposition Benches—Labour, certainly—support this, because it was a Labour Government who introduced R and D relief for small and medium-sized companies in the Finance Act 2000, and the large companies scheme was introduced in the Finance Act 2002—I believe I sat on the Committee of that Bill as well, Sir Roger. At that time there was cross-party consensus, as there was when we were in opposition in 2013 regarding the introduction of R and D expenditure credits and their gradual replacement of the large companies scheme; we supported those measures in 2013. However, R and D tax credits have in very round terms led to £1 billion a year being claimed between the tax years of 2000-01 and 2013-14. That sounds very good and I have all kinds of figures here—helpfully supplied by the indefatigable researcher Imogen Watson, with whom the Minister will be familiar by now. I will not detain the House by reading them all out, but 33,800 different companies were claiming under the SME scheme and 7,800 were claiming under the large companies scheme.

Those figures are impressive: an average claim of £1 billion sounds impressive. However, since 2008 productivity has of course stalled in this country. One reason why successive Governments have given R and D tax reliefs of various different orders of magnitude and types is to encourage R and D, which will lead to newer products, goods and services and also to more efficient ways of doing things. Unfortunately, that has not been reflected in the productivity situation in the UK for many years, and I urge the Minister to reflect on that. In terms of the previous clause, he looked at the efficacy of the vaccine relief and decided to go in-house rather than carry on with the relief. I am not saying that the Government should take R and D in-house—I do not want to be misunderstood on that—but they should be looking at the efficacy, or otherwise, of it.

Clause 65 extends the capital allowances to designated assisted areas within enterprise zones for up to eight years. Of course the Labour party supports that. It is designed to encourage the purchase of energy-saving technologies. Again, I have a long list of qualifying technologies, which I will not read out.

I do want to ask a technical question, however, which I hope the Minister, with his usual omniscience, will be able to reply to. Pipework insulation is a qualifying technology, as are things such as high-speed hand air dryers and solar thermal systems, but I do not see on the list—it may be a lacuna on the list, or my fault—other forms of insulation other than pipework insulation. This is all part of the programme, which broadly has cross-party support from, I think, all parties in this House, that the UK should cut its CO₂ emissions and greenhouse gas emissions, and one way to do that is by using fiscal levers. It would appear on the face of it that it would be good to have on that list insulation generally, in contradistinction to just pipework insulation. If it is not on the list, no doubt the Minister can explain why in his reply.

The second point that I want to make on the extension of capital allowances, the eight-year period and so on was raised by my hon. Friend the Member for Leeds West (Rachel Reeves) in a written question on 26 April this year to which the Minister helpfully replied on 5 May 2016 when he said:

“The government has carefully considered the case for exempting plant and machinery from business rates. However, there would also be fundamental operational challenges to delivering an exemption on account of the way in which the plant and machinery is embedded in the premises concerned”.

I ask the Minister to look at that again. It is a long time since I practised property law—I do not know whether the Minister ever did; that may have been a good few years ago as well—but there used to be things called fixtures and fittings, and indeed I believe that they still exist. They are often set out in commercial, rather than residential, leases. I am not sure why the issue of the embedded plant and machinery to which the Minister referred in his written answer is so difficult. I may be missing something, but I should have thought that if commercial lawyers can do it for fixtures and fittings in commercial leases, HMRC could do it for plant and machinery, embedded or otherwise, and that it would be worth the Government’s looking again at the issue raised by my hon. Friend.

Clause 66 is entitled “Capital allowances: anti-avoidance relating to disposals”. I wonder whether the Minister might be able to supply figures showing how much has been lost to the Exchequer through such avoidance schemes, but of course we support a clampdown on them.

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[Sammy Wilson (East Antrim) (DUP)]

While there may have been a drop from 11.7% of total receipts to 8.3%, will the hon. Gentleman accept that other new forms of taxation, such as climate change levies and other climate taxes, have been imposed on businesses and have increased total tax revenues? The cake is bigger, so the slice of corporation tax is smaller, but the total amount is larger.

[Rob Marris]

The hon. Gentleman is quite right about the climate change levy. Changes in this Finance Bill effectively make the climate change levy just another tax, because it will no longer be used by the Government as a lever to change behaviour, which is why Labour dislikes the proposal. Business tax has probably gone up a bit overall, but what has happened in the economy, which the Minister described as fundamentally strong, is that employment is up by almost 2.5 million, and we salute that as a considerable achievement.

However, it has been bought on a sea of debt, on the drip, on the never-never. The national debt has gone up 60% in six years. We still have a huge annual deficit. Pay has stagnated for six years, and public sector pay will remain stagnant for another two or three years. Overall capital investment is markedly down. We have the biggest trade deficit in our history. Productivity is completely stalled. It is welcome that 2 million more people have jobs, which is good and the best route out of poverty, but almost every other economic indicator is poor and the Government propose to cut corporation tax.

[Mr Jim Cunningham (Coventry South) (Lab)]

My hon. Friend mentioned borrowing. Given the economic situation over the last few days, it seems that the Chancellor might have to borrow more money to add to the national debt, and he is now talking about increasing taxes and cutting public services as well.

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[Rob Marris]

I will not go too far down that route, but this Chancellor—in this sense and this sense only—has been saved by the Brexit vote. He was never going to meet his forecasts for getting the deficit down in the lifetime of this Parliament. He also completely failed when he forecast in the previous Parliament that the deficit would be down to zero by 2015. He then forecast that it would be down to zero by 2020. That was never going to happen. We predicted that and I am sad that it was the case.

Now, with the Brexit vote, as my hon. Friend the Member for Coventry South (Mr Cunningham) says, the forecast will be nowhere near right, but no doubt the Chancellor will then use the vote as an excuse. The Brexit vote has revealed some of the underlying problems in the British economy that just about every serious economist has been pointing out for the last five years. Cutting corporation tax in this circumstance is a bad idea, and I urge all hon. and right hon. Members to vote against clause 42.

[Nigel Mills]

It is a pleasure to follow the hon. Member for Wolverhampton South West (Rob Marris). I want to say a few words about clause 42, because although I clearly welcome the planned reduction in corporation tax by 2020, following the welcome vote last week, it may now need to be part of the picture of how we change our business tax regime over that period. Unlike earlier, there are now a few more of us present who thought the vote was welcome.

For us to capitalise on the opportunities of leaving the European Union, we will have to make our country even more attractive to outside investment to stimulate growth, a key part of which is our corporation tax system. As the Minister is planning ahead that far and as we now have the special group in the Cabinet Office under the Chancellor of the Duchy of Lancaster, I urge careful thought about what our tax system should look like by the time we leave the European Union, what signals we are giving and how we can further improve it and make it more attractive. Perhaps we could look at an even lower rate to send out a signal that we are positive about business activity and that we want more investment and will reward it further.

Perhaps we could look again at how we do capital allowances, especially for infrastructure investment and manufacturing items, for example. Perhaps we could re-examine how we give tax relief for the building of new factories. This country is not actually that generous and does not give tax relief for any industrial building, which is not a clever way of encouraging manufacturing. In fact, we are one of the least attractive tax regimes for various infrastructure investment activity because of our lack of relief for structures. Perhaps now that we have the need and the time to review that, we should ask whether it is clever to structure our tax system in a way that is not as attractive as possible for industrial building and infrastructure activity, especially as we will need a lot of investment as we go forward.

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[Sammy Wilson]

I want to show our support for clause 42. In fact, I think it would be a bit strange for someone from Northern Ireland to take a different stance, especially given the fact that the Northern Ireland Government have put the reduction and devolution of corporation tax at the centre of their policy for attracting investment into Northern Ireland over the next 10 to 15 years.

There are two things. First, we must ask ourselves whether we believe that a reduction in taxation on businesses acts as an incentive. As I listened to the Opposition spokesman’s opposition to this measure, it raised a query in my mind: is the reduction of other business taxes regarded as acceptable and indeed desirable by the Labour party as a means of incentivising and helping small business? For the Opposition, it seems as though the reduction in business rates, which are a form of taxation, is desirable because it helps small businesses, but that the reduction of corporation tax seems to have no effect, or the opposite effect. If we are going to have some consistency, we must ask ourselves whether the principle of reducing taxes on businesses and their profits, and the impact that that has on the amount of money they retain for investment, is an effective means of stimulating business. If it is true of one form of tax, it is true of another. That is one of the reasons why I believe that the reduction in corporation tax is an important decision.

Secondly, during my former role as a Member of the Northern Ireland Assembly and as a Minister there, one of the things that came up consistently when we spoke to investors was corporation tax. We had an especially big problem, because we were living next door to a country—we have a land border with it—that had emphasised the reduction in corporation tax. Time and again, though not exclusively—there is no point in over-egging this pudding—investors mentioned the level of corporation tax: 12.5% in the Irish Republic and 22% then in Northern Ireland. When companies looked at the headline level of taxation, they viewed the Irish Republic as a much more desirable place to invest. Of course they looked at other things—the skills base, the availability of office and factory space, the infrastructure and so on—but corporation tax was an important factor.

[Rob Marris]

May I caution the hon. Gentleman? For some of those companies—not all of them—this is a classic sob story. Corporation tax in America is roughly twice the rate that it is here. People still invest in companies in America. Corporation tax is part of an overall picture, as he says. Yes, companies should pay tax. If we followed the logic of some of the things that he has said this afternoon, we would not tax companies. That may be his position; it is not the position of Labour party.

[Sammy Wilson]

It is not the position of the Democratic Unionist party either, because there are other ways in which companies can be held responsible for their infrastructure requirements. For example, one of the forms of taxation that the Government have introduced recently is the apprenticeship levy, where companies will be held responsible. They need trained workers, and they have to make a contribution from their profits to train those workers. There are ways to target the contribution that we require companies to make. I am not saying that companies should not pay for the infrastructure from which they benefit, but we must address one of the issues that they raise when they are considering whether we are a competitive place to invest.

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[Mr Gauke]

I thank hon. Members for their contributions to the debate. I will perhaps turn to corporation tax rates and clause 42 at the end of my speech—I think we will save the most exciting element to the end. Let me first pick up some of the other points that have been raised.

Vaccine research relief is currently available only to large firms; it was removed for small and medium-sized enterprises in 2011, at the same time as the general SME R and D relief was increased. It is also worth pointing out that all vaccine producers can claim normal R and D relief on qualifying expenditure. Incentivising vaccine production remains a priority for the Government, but we believe that spending programmes such as the Ross fund are more effective at doing that. The amount claimed through VRR is less than £5 million a year, despite a generous raise.

The Ross fund was announced by my right hon. Friend the Chancellor in November 2015. It will target infectious diseases, including malaria, diseases with epidemic potential, neglected tropical diseases, which affect more than 1 billion people globally, and antimicrobial resistance, which poses a substantial and growing threat to global health. In January 2016 the Chancellor built on the announcement of the Ross fund by confirming that the Government will invest £500 million a year over the next five years in the fight to end deaths from malaria. That formed part of the £3 billion commitment between the Government and Bill Gates. The UK continues to contribute to the Global Fund to Fight AIDS, Tuberculosis and Malaria, an internationally supported organisation designed to accelerate the end of AIDS, tuberculosis and malaria as epidemics. I wanted specifically to come back on the very good point raised by the hon. Member for Aberdeen North (Kirsty Blackman).

The Ross fund does constitute official development assistance. It is worth pointing out that all UK ODA is administered with the promotion of the economic development and welfare of developing countries as its main objective, and it is in line with internationally agreed rules on ODA, so it is perfectly reasonable that we include the fund in the 0.7%, and it can clearly make a huge difference to large numbers of people.

The hon. Member for Wolverhampton South West (Rob Marris) asked how much is lost to the Exchequer through some of the schemes we seek to address in clause 66. Over the scorecard period, which takes us to 2020-21, it is expected that the changes will yield about £20 million of tax that would otherwise have been avoided and that they will potentially protect much more. This is not the largest measure by any means, but it is, none the less, a contribution. By way of background, the relevant case law is the 1948 House of Lords decision, Gold Coast Selection Trust Ltd v. Humphrey—no doubt familiar to the hon. Member for Wolverhampton South West. It has been suggested that this is no longer good law as it predates generally accepted accounting practice and the enactment of current legislation setting out the rules for the calculation of trading income. Let me be very clear that HMRC does not accept this proposition. [Interruption.] As the hon. Member for Wolverhampton South West mutters, it is a case of belt and braces. HMRC’s view, and the Government’s view, is that we should change the law now as a response to the potential risk, which is in the region of £125 million in one case alone. The challenge we have seen seeks to suggest that the current case law that dictates the tax treatment is outdated. I hope that clause 67 helps to address this risk.

[Rob Marris]

I asked the Minister for reassurance that this would not affect the barter economy. He might wish to write to me later.

[Mr Gauke]

I think I can provide that reassurance, but perhaps it would be best if I wrote to the hon. Gentleman—again, on a belt and braces basis.

The hon. Gentleman raised the concern that had been put to him that clause 68 might force businesses to claim capital allowances and that that might complicate the system. He gave the example of a saw, with a carpenter potentially encountering complications in his or her tax affairs . The answer is that that is very unlikely. Most small businesses will find that their capital spending on equipment is fully relieved by the £200,000 annual investment allowance, which is now at a record permanent level. Accordingly, they would receive a full deduction for their expenditure in the year and would not usually have to calculate annual writing-down allowances. The changes will ensure that tax relief for expenditure incurred by business on replacement and alteration of tools means that all capital expenditure on equipment is dealt with in a fair and proportionate way.

I was asked whether clauses 69 and 70 will cause some complication in the old 10% wear-and-tear deduction, which was simple. Of course, Labour Members highlighted the wear-and-tear allowance as a potential saving within the tax system. It is interesting that, despite its simplicity, a significant number of interested parties agreed with the Government that the wear-and-tear allowance was not fair. It applies only to landlords of fully furnished properties, and provides relief even where landlords have not had to meet any actual expense. We have carefully considered the different ways in which a relief based on actual expenditure could be designed and implemented, and we have legislated for the simplest possible basis.

Turning to clause 42 and the wider issues, I am grateful for the supportive contributions by my hon. Friends the Members for Amber Valley (Nigel Mills) and for Macclesfield (David Rutley), and by the hon. Member for East Antrim (Sammy Wilson). If the hon. Gentleman had argued a different case, I might have pointed to the many conversations that we have had over very many years in the context of devolution of corporation tax to Northern Ireland. I was struck by his point about how, when talking to international businesses, people often note the headline rate of corporation tax; international investors are aware of that. It is certainly my experience, having met many international businesses over a number of years when promoting the UK as a place in which to do business, that our low corporation tax rate, and our destination towards an even lower rate, attracts attention and a fair degree of admiration, and ultimately attracts jobs and investment to the UK. That is why we have taken steps to reduce the corporation tax rate, and I think that that has played a significant role in the fact that business investment is up significantly; that employment numbers are as high as they are; and that foreign direct investment in this country has been so strong. Of course, that is not the only factor; there are others. This country also faces particular challenges in the light of recent events, but, as my hon. Friends the Members for Amber Valley and for Macclesfield have said, it is absolutely right that we have a competitive corporation tax rate.

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[Roger Mullin]

I welcome the hon. Member for Salford and Eccles (Rebecca Long Bailey) to her new post. If I recall correctly, one of the first debates that we took part in together was about that very important topic of whisky. It is appropriate that I mention that given the Minister’s condition.

[Rob Marris]

It was not from drinking whisky.

[Roger Mullin]

No, I know, but perhaps the Minister could take a few drams to relieve the pain. I certainly think that he deserves it given what he has put himself through over the past couple of days.

May I also say to the hon. Lady that we on the SNP Benches agree with everything that she has argued? I am delighted to say that we will be supporting her opposition to clause 72.

[Rob Marris]

That was a short speech.

[Roger Mullin]

It is not quite as short as that.

I want to speak to new clause 2, which is in my name, and I will begin with a quote that I have used before in this House:

“I was shocked to see that some of the very wealthiest people in the country have organised their tax affairs, and to be fair it’s within the tax laws, so that they were regularly paying virtually no income tax. And I don’t think that’s right.”

I entirely agreed with the Chancellor of the Exchequer when he said that in April 2012. That is precisely why we are bringing this new clause to the Floor of the House today. Many people in remunerated employment, working hard every day of the week, will be surprised to learn that the managing director of an average European firm can expect to receive around £8 million in remuneration. Private equity fund managers are able to shrink their bills by paying, as we have heard, only 28% in capital gains, rather than 45% in income tax simply because it is classified as carried interest. In effect, they are getting a remuneration for managing other people’s money, and therefore they should be taxed in the same way that other people are taxed—through income tax.

A fund manager’s ability to pay capital gains instead of income tax allows them to avoid paying national insurance on part of their income. I am well aware of the Minister’s technical explanations about why we are dealing with a different form of gain. However, that does not wash with people in society who are undertaking their work in most other occupations in life. The Government yesterday indicated that they were content to squeeze yet more money out of the contractor sector, affecting teachers, nurses, people in rural communities and the like. These are not the people who are aggressively avoiding tax. The people who are aggressively avoiding tax are people working in the City of London. They are avoiding paying the income tax that the rest of the people in society are quite happy to comply with.

The loopholes that continue are simply an example of the over-complication of our tax system, a matter that has been referred to by hon. Members on both sides of the House. As we look at the thousands upon thousands of pieces of paper in the tax code, it is clear that the bigger we make it the more we create the possibility of loopholes. Surely the time has come for a more fundamental review of all forms of business taxation, a matter that I know the hon. Member for East Antrim (Sammy Wilson) has raised in the past.

Indeed, some of the people gaining considerable sums of money have great sympathy with this. I would like to quote not some of the campaigners but one of the highest-paid people in the country, the head of the private equity firm Cerberus, Stephen Feinberg. He said in 2011, tellingly:

“In general, I think that all of us are way overpaid in this business. It is almost embarrassing.”

I do not think that we should allow this gentleman, the head of an investment fund, and others to be embarrassed any more. I think we should end their embarrassment by making sure that in the future they pay appropriate levels of income tax.

We also find ourselves in agreement with the OECD, which in May 2014 recommended in its position on tax

“taxing as ordinary income all remuneration, including fringe benefits, carried interest arrangements, and stock options”,

and that this should be paid as income tax.

We have evidence not just from campaigners but from people in the City who admit that this is an anomaly that needs closing, so I ask the Minister to give further consideration to this important move. I would also say in general that we welcome quite a lot of the technical changes that have been made on investment, entrepreneurs relief and the like. We want to encourage an entrepreneurial economy, but not at the cost of heightening income inequality and of further division in society.