This is the fifth of a series of reports on the progress of this year's Finance Bill, as it goes through its various parliamentary stages.
This report covers sittings seven and eight of the standing committee on the Bill, which sat on Thursday 24 May. As previously noted, these reports focus on the aspects of the debates most relevant to the CIOT and our members, which is primarily the technical elements of the Bill, although the reports will aim to give a flavour of the main issues debated, which will often be more political.
A note on the stages the Finance Bill goes through appears here.
Links to the various debates are available here.
The pace continues to be slower than anticipated (see previous note).
The next sitting will not be until w/c Jun 11.
Finance Bill Standing Committee – Sitting 7 – Thur 24 May (am)
Clause 13 - Champions League Final 2013
Clause 13 gives an exemption from income tax to non-resident players and officials of visiting teams in the Champions League Final 2013 at Wembley. Labour’s shadow minister, Cathy Jamieson, observed that in some years this might not have seemed controversial, but in this time of austerity we needed some explanation as to why highly paid footballers are not paying, or not perceived to be paying, their fair share. Labour backbencher John Mann challenged the Government’s claim that hosting the Champions League Final gives an economic boost to the country. In a move perhaps designed in part to tease Conservative eurosceptics he said that he regretted that he had not put in a clarifying amendment saying that ‘we in the British Parliament recognise the supremacy of pan-European organisations in determining British taxation rates’!
MPs used the clause as the opportunity to explore wider issues around the taxation of visiting sportspeople, highlighted in the media in recent years by the decision of stars such as Usain Bolt to stay away from UK events because of what they see as disproportionate taxation of their endorsement income. The debate also saw a series of footballing anecdotes and enthusiasm among committee members for the highlighting of their local sports teams. Labour’s Ian Lavery told the committee that as chairman of his local football club in Ashington he had been confronted by HMRC over a £14,000 tax bill: “The silly thing about the situation was that I said, “I want to make sure that you get this money... by the end of the week,” and he said, “Sorry, I am not allowed to take it. It has gone too far.””
At the start of the debate clauses 11 (Gains from contracts for life insurance, etc.) and 12 (Settlements: Income originating from settlers other than individuals) were passed without debate.
Finance Bill Standing Committee – Sitting 8 – Thur 24 May (pm)
Clause 13 - Champions League Final 2013 (continued)
Rather better progress. Began with a further 80 minutes of debate on the Champions League tax exemption (see above). Some good contributions. John Pugh (Lib Dem) asked whether the rationale for the measure might not be to do with the complexities of double taxation. Nigel Mills (Conservative) said that taxing overseas sportsmen and musicians when they perform in the UK “is not some obscure or bizarre UK thing that we dreamed up decades ago. It is an arrangement that many regimes around the world follow. It is specifically allowed by the OECD, and covered by article 17 of the model tax convention”. Waiving it, he said, set an interesting principle: “How much does one have to put on the table before HMRC is willing to think about varying the tax regime?” He suggested HMRC would not negotiate with a multinational business which offered to bring jobs to the UK in return for an exemption from corporation tax.
Responding to the debate, the Exchequer Secretary, David Gauke, explained that the principle behind the measure was that footballers will be taxed in their country of residence, rather than in the UK. That approach, he said, was applied consistently to champions league finals, by other countries as well as the UK. Given that UK clubs have a good record of making it to the final of the Champions League, there are clearly certain advantages for the UK Exchequer, he noted. In response to a question from Labour’s spokeswoman he confirmed that the exemption was a UEFA requirement and without it the champions league final would not take place at Wembley. Throughout his speech the minister emphasised that there was no cost to the exemption because without it there would be no UK final. The clause was passed without opposition.
Humorous moment of the day was from David Gauke, who noted, as an Ipswich Town supporter and shareholder, that many years ago, when Robert Maxwell sought to merge Reading with Oxford United to create the “Thames Valley Royals”, there was some talk about Ipswich and Norwich [the team supported by the Economic Secretary] merging and locating in a town between the two. The best town suggested was Diss, and thus the name of the club would have been [insert groan] Diss United.
Clause 14 - Cars: security features not to be regarded as accessories
There was a brief 15 minute debate on clause 14, which ensures that individuals who are provided with security-enhanced cars due to the nature of their employment are not unfairly affected by the removal of the cap on the cash equivalent of the benefit on company cars made available for private use. Speaking for Labour, Cathy Jamieson was supportive, saying it was important to understand that people “are not getting some kind of tax break for no good reason or simply because they are able to afford these incredibly expensive vehicles.” She quoted the CIOT’s observation that in most cases before the cap was introduced in 2011, the cars in question were already expensive brands so often the addition of security features did not add to the benefit, and the Institute’s drawing attention to the fact that the clause leaves out the cost of security features for all company cars and not just the more expensive brands. A couple of other Labour MPs asked probing questions. Responding, Economic Secretary Chloe Smith said that the Government estimate that up to 100 employees would be affected. Again, the clause was passed without the need for a vote.
Clause 15 - Termination payments to MPs ceasing to hold office
MPs spent a little longer, about 25 minutes, on clause 15. Both the minister and the Labour spokeswoman were keen to stress that the purpose of the clause was to ensure continuity in the tax treatment of MPs’ resettlement payments, where they lose their seats, and did not represent any kind of special treatment. A number of MPs on both sides raised queries about the reference in legislation to “a candidate for re-election for the same seat, but not re-elected.” The question, in the context of boundary changes, was what constituted “the same seat”? The minister said it was up to IPSA (the Independent Parliamentary Standards Authority) to answer this. There was one dissenting voice on this clause – Conservative Jacob Rees-Mogg, who said he had “the greatest concerns about the principle of the electorate being charged for making a democratic decision to remove a Member of Parliament... Constitutionally, that is wrong. We are not in ordinary jobs. We are not ordinary employees.” Nevertheless, the clause went through on the nod.
Clause 16 - Employment income exemptions: armed forces
Clause 16, exempting payments of the Continuity Education Allowance by the MoD from income tax, got 15 minutes of debate. The shadow minister was supportive and explained that the allowance was paid to service personnel to enable them to provide a continuity of education for their children that would not be possible if they accompanied their parents on frequent assignments at home or overseas. She asked for further information about the eligibility criteria and whether use of state boarding schools (cheaper) should be more encouraged. The minister responded that the Government did not have a detailed breakdown of the distribution, “but we understand that the recipients are distributed evenly, and that the regime is not just the preserve of officers”. The exemption’s financial impact would, he said, be neutral for service personnel and their families, because the MOD already foots the tax bill on their behalf. However, the change will simplify administration of the allowance. Again, the clause was agreed without a vote.
Clause 17 - Taxable benefits: “the appropriate percentage” for cars for 2014-15
Finally, there was 40 minutes of debate on clause 17, relating to use of company cars for private use and the treatment of this as a taxable benefit. Labour’s spokeswoman posed a series of questions about the impact of the changes but did not oppose the clause. She also noted the Government’s failure so far to agree a definition of environmental taxation, an issue taken up by Parliament’s Environmental Audit Committee after the CIOT raised it with them in a submission. Two other Labour MPs, Julie Hilling and Seema Malhotra, expressed concern that while many of those using company cars would be affluent, some were not, and their standard of living would be hit. The Economic Secretary acknowledged that the clause was partly about revenue raising but said it was proper that individuals should pay a fair rate of tax on the private use of a company car. There was some debate about how much information there is on who uses company cars, their occupations, location and salary levels. The minister said the Government did not have research on this area. Again, the clause went through unopposed.
Although the committee got through seven clauses in the two sittings (equal to the progress in the previous six sittings) it does still leave 218 clauses to be passed in the remaining ten sittings, which will recommence on Tuesday 12 June, after Parliament’s two week whitsun recess.
CIOT External Relations Manager
Friday 25 May 2012