Finance (No. 3) Bill

Debate between Stewart Hosie and Mel Stride

Committee: 2nd sitting: House of Commons
Tuesday 20th November 2018 Commons Chamber

[Mel Stride]

As a UK Government, we are always happy, and indeed keen, to work co-operatively with the devolved Administrations, including the Scottish Government, as my hon. Friend suggests. Ultimately, however, these will be decisions for the Scottish Government to make. It will be for them to decide how to spend the revenues that will come through by way of additional funding via the Barnett formula. I can only suggest once again—I think this echoes my hon. Friend’s thoughts—that the best way forward is to keep taxes down and, in the case of Scotland, to have a country that is known for low taxation, rather than gaining a reputation for higher taxation.

Clauses 46 and 47 address the use of contrived arrangements that seek to avoid stamp duty on shares. The Government are aware that some corporate groups are transferring shares to connected companies for an artificially low consideration. The clauses create a targeted marketed value rule for transfers of listed shares to connected companies. This rule will prevent the use of artificially low consideration by charging stamp taxes on shares on the higher of the market value of, or the sum paid for, the shares transferred.

The Bill also re-emphasises our commitment to leading the way in implementing internationally agreed initiatives to combat tax avoidance. Clauses 19, 20 and 23 make changes to the UK’s rules on controlled foreign companies, hybrid mismatches and corporation tax exit charges to ensure that they comply with the EU’s anti-tax avoidance directive. The UK is a strong supporter of the objectives of the directive, as it will ensure that member states take a common approach to tackling tax avoidance. The UK’s rules are already comprehensive, and they already meet or exceed most of the requirements set out by the directive, but some limited changes are needed to ensure that we are fully compliant in all areas.

[Stewart Hosie (Dundee East) (SNP)]

On a point of clarity, the Minister has said that stamp duty on shares will be charged at either the market rate or the actual rate, whichever is higher. Will he confirm that shares will still be able to be sold below the market rate so long as the tax is paid on a marked market basis? Is that correct?

Finance (No. 3) Bill

Debate between Stewart Hosie and Mel Stride

2nd reading: House of Commons & Programme motion: House of Commons
Monday 12th November 2018 Commons Chamber

[Mel Stride]

I thank my hon. Friend for that important intervention. I know what a doughty supporter he is of the high street, and pubs in particular. We do of course, as a Government, support and have frequent conversations with organisations such as the British Beer and Pub Association. However, I would be very happy to meet him, as he requests, to have that discussion.

This Bill will provide additional relief from stamp duty for first-time buyers who enter into a shared ownership arrangement, and will back-date this relief to benefit those who entered into their purchase on or before the date of the Budget. We will continue to champion home ownership, as well as backing hard-working people and bearing down on the cost of living.

For every Member of this House, the high street lies right at the heart of the communities that we serve. High streets hold within them the very essence of the best of the human spirit—community, creativity, individuality and a collective purpose. They are the places we come together to work, to shop, to socialise, to support, to celebrate, and to invent and create, and this Government wish to see them thrive. That is why we have announced a two-year reduction in business rates of one third for smaller retailers, meaning that up to 90% of high street retailers will benefit. It is also why, in this Bill, we will legislate to allow for the further reduction of corporation tax from 19% to 17% in 2020, helping businesses both large and small. As tax rates have declined—as we have discussed—the corporation tax yield has increased by 50% since 2010. Backing our high streets means backing Britain, and this Government will play their part in this great endeavour.

This Bill will support businesses through the introduction of key allowances and enhancements to important tax reliefs. The structures and buildings allowance will provide a vital tax break for those businesses investing in new commercial property. The annual investment allowance will be increased from £200,000 to £1 million for the next two years, ensuring that companies have a critical additional incentive to invest.

For businesses concerned with deep-sea oil extraction, we will allow for the transfer of their historical tax history, ensuring that jobs, expertise and businesses involved in the North sea are preserved—a measure that the shadow Treasury Minister, the hon. Member for Norwich South (Clive Lewis), described as “corporate welfare” and said should be voted down. That position should be evidence enough that Labour has truly given up on Scotland, something that the Conservative and Unionist party will never do. On the Opposition Benches we have Labour Members who have given up on hard-working people, SNP Members who have given up on our precious Union, and Liberal Democrat Members who have just given up.

This Bill is also about fairness. It introduces a number of important measures that will further clamp down on tax avoidance and evasion. The House will know that this Government have an outstanding record with regard to the collection of tax. We have one of the lowest tax gaps in the world—far lower than was the case under Labour. In fact, the additional revenue raised by having our tax gap at its current level, compared with that in 2005-06 under the last Labour Government, is enough to pay for every policeman and policewoman in England and Wales.

Collecting tax also matters because where taxation goes uncollected, others who do the right thing are required to pay still more, our vital public services go without, or we have to increase borrowing and the burden is passed on to our children. Tax avoiders, whether the largest corporates or the wealthiest best-advised individuals, diminish us all. This Government will continue to clamp down on avoidance, evasion and non-compliance. Specifically, this Bill brings in measures further to address corporate profit fragmentation, whereby companies reduce their tax burden by artificially shifting around their revenues. In the Bill, we will ensure that non-residents pay tax on the capital gains they make on UK commercial property. The Bill also strengthens our diverted profits tax, which has already brought in and protected £700 million since 2015.

This House will know that we have announced a digital services tax, so that large multinational businesses such as search engines, social media platforms and online marketplaces pay their fair share in tax—right here in the United Kingdom.

[Stewart Hosie (Dundee East) (SNP)]

I want to ask the Minister a technical question. Given that the digital companies’ turnover and, indeed, profits are substantial, why have the Government been so modest in seeking to achieve only a £400 million tax take from those companies?

[Mel Stride]

As the hon. Gentleman will know, the scope of this tax is very clearly targeted on businesses that make substantial value in the United Kingdom as a consequence of the interaction of UK users and the digital platforms they trade across. He will know that there is a small number—relative to the size of the UK economy—of important businesses that are therefore within the scope of the measure. A figure of 2% is very much in line with the kind of figures that the EU was looking at or is continuing to look at—[Interruption.] From a sedentary position, the hon. Member for Oxford East (Anneliese Dodds) is talking about 3%, but she is not actually comparing like with like, because different revenues would be in scope under the two different approaches. The short answer is that this has to be proportionate: it is about levelling the playing field. Along with this particular measure, we have also announced that, for our high streets, we will be reducing business rates by a full one third for 90% of smaller retailers.

Paradise Papers

Debate between Stewart Hosie and Mel Stride

Monday 6th November 2017 Commons Chamber

[Mel Stride]

I thank my hon. Friend for his question, which I take to be directed at me, Mr Speaker. It is of course for the Labour party to account for any situation in which its headquarters may or may not be owned by an overseas trust.

[Stewart Hosie (Dundee East) (SNP)]

It may well be that sheltering from our tax authorities sums of money greater than the GDP of many countries is not illegal, but does the Minister agree that that is precisely the problem? Does he also agree that the Paradise papers revelations, and the massive sums involved, now offer no hiding place for those who would deny a public register of beneficial ownership of funds and trusts, as well as businesses?

This tax avoidance is a driver of global inequality that runs to the very top of business, politics, entertainment and the establishment, in many countries, but these papers also shine a light on the hidden ownership of large corporations by foreign state institutions and individuals. To allow the public, customers and small investors to know who is really behind the most trusted of brands, will the Government now throw their weight behind not just local but global transparency on the beneficial ownership of businesses through offshore trusts, funds, and other opaque devices?

[Mel Stride]

The hon. Gentleman will know that this Government have been at the forefront of clamping down on international tax avoidance, evasion and non-compliance through the OECD’s base erosion and profit shifting project, which we have been in the vanguard of, and through the work on common reporting standards that we have been introducing among our Crown dependencies and overseas territories. He will find that we are no slouches when it comes to grappling with the items that he raises.

Finance Bill

Debate between Stewart Hosie and Mel Stride

Tuesday 12th September 2017 Commons Chamber

[Mel Stride]

I thank my hon. Friend for those observations, which I am sure the House has duly noted.

Let me now deal with termination payments, an issue on which the Opposition divided the House last week. The current rules are unclear and complicated. Some payments are taxed as earnings, some are only taxed above £30,000, and others are completely exempt from tax and national insurance contributions. Although most employers use the current rules as intended, the present system allows some to ignore those rules and deliberately manipulate their payments to minimise their tax by exploiting the differential tax treatment. That is clearly not fair. The Bill makes the rules simpler and fairer by recommending that we exempt the first £30,000 of termination payments from tax, while tightening the rules in respect of what is rightly included within such payments.

In last week’s debate, some Members raised concerns that the Government would be taxing compensation that is paid to employees when it is proved that they have been discriminated against—for example, after an employment tribunal. I am happy to reassure them. All compensation awards caused by proven discrimination against someone in employment will remain completely exempt from tax. All that the Bill does in the way of change is close the obvious loophole that enables an employer to treat part of a termination payment, as opposed to a tribunal award, as an “injury to feelings” in order to benefit from the tax exemption. It is HMRC’s longstanding position that if an employee claims a tax exemption for injury, it must have actually impaired that employee’s ability to work, and the Bill simply reconfirms that position.

Members also raised concerns that the Government intended to reduce the tax-free amount from £30,000. The Bill makes no such provision. If there were ever any desire to reduce the tax-free amount, it would be subject to a statutory instrument and the affirmative procedure, so the House would have to expressly approve any such proposal.

We also need to ensure that the taxation of different ways of working is sustainable, so that we have the funds to invest in the public services on which we all rely. It is therefore important that this tax treatment is fair between different individuals. The Office for Budget Responsibility has highlighted the fiscal risks arising from the growing number of people working through companies. Such individuals can pay themselves in dividends, and, in so doing, can pay significantly less tax than employees and the self-employed, although in many cases their economic activities are broadly the same. Part of the reason for that difference is the entitlement to a £5,000 dividend allowance, which is available in addition to the income tax personal allowance that the Government introduced at £11,500 in April.

Reducing this allowance to £2,000 will help to reduce the differential in tax treatment and help remove some of the working distortions to which I have referred. It will also ensure that support for investors is more effectively targeted: a £2,000 dividend allowance will ensure that around 80% of general investors continue to receive dividend income tax-free. The less well-off will be protected, with those general investors who are affected having investment portfolios worth around £100,000 on average, putting them in the top 10% of wealthiest households in the country. So the Bill will make our tax system fairer in a number of ways.

[Stewart Hosie (Dundee East) (SNP)]

The Financial Secretary uses the example of someone who works through a company, and compares that with a wealthy investor with a large portfolio. The concern many of us have is for the small businessperson—the owner-proprietor—with a start-up business earning a very modest wage who relies on the £5,000 tax-free dividend in order to make ends meet. What consideration has he given in that regard?

[Mel Stride]

There are other considerations that the hon. Gentleman should focus on when he looks at individuals setting up in business, and there are many successful entrepreneurs throughout our country. We are the party and Government who have reduced taxation on business. It used to be 28% under the last Government and we have brought it down now to 19% and it will be further reduced to 17% over time. So the hon. Gentleman should look at this in the round, and I persist in my point that we need to look at the different tax consequences of the different models—an individual going into business on their own, whether as a sole trader or partner, or in an incorporated structure—to make sure we do not have people effectively just using one model for no other reason than the tax advantages thereof.

--- Later in debate ---

[Mel Stride]

My hon. Friend is entirely right. The amount of onshore corporation tax that we took in the last financial year is close to £50 billion—50% more than in 2010. As we have brought taxes down, the tax revenue take has increased. We can draw only one corollary from all this: if the Labour party gets its way and starts to put those rates up again, some of that tax take might be damaged.

[Stewart Hosie]

The Minister just prayed in aid the new penalties for the enablers of tax avoidance, which I welcome. This Bill is riddled with retrospective legislation, which I hope he will say more about later, but will the Minister explain to the House why those new penalties do not kick in until after the Bill receives Royal Assent when there is retrospectivity all over the place in the rest of the legislation?

[Mel Stride]

I believe that that is due to an element of convention, but I am happy to speak to the hon. Gentleman after the debate. We have already clamped down on those who generate such schemes, and we are clearly clamping down on those who use and seek to benefit from them. The third thing is that we will now be actively clamping down on those who enable those schemes through their advice along the way, and they will face penalties of up to the entire amount that they have charged for their services. That is just another example of this Government’s determination to leave absolutely no stone unturned when it comes to clamping down on tax avoidance, evasion and non-compliance.