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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.

George Crozier
CIOT External Relations Manager
Friday 25 May 2012

Dozens of Olympic torches are up for sale on eBay. But what are the tax implications?

Torch carriers are allowed to buy the torch they carry (the flame is transferred from one torch to another as the torch relay continues) for £199 each as a memento, a discount on the reported £495 it costs to make the torch. But faced with a choice between mounting the torch above the mantelpiece and auctioning it off to benefit a favourite charity or the seller’s bank balance some enterprising carriers have unsurprisingly decided to put it up for sale.

What they may have missed though are the tax consequences. Capital gains tax could be due on the sale if it goes for more than £6,000. If the torch carrier sells it for personal gain they will at least have the proceeds in their bank account to pay their CGT. If they give the money to charity they could get a very nasty shock when they realise they could be liable for a bill of up to 28 per cent of the proceeds. Much more sensible would be to just give the torch to a charity, for them to sell on.

And then there is gift aid. Working out then how much to gift aid so as to minimise the tax bill is not straightforward. For a higher rate taxpayer the mechanics change – and they can potentially gift aid part, and end up with more IT relief than CGT due so they actually get a tax repayment (while the gift aid rules don’t limit it to £50k!). Basic rate taxpayers could also end up with an additional income tax liability,on top of the CGT if they give the proceeds under gift aid and the have not already paid enough tax to cover the charitable donation. Though in some cases the gift aid relief can reduce the CGT tax rate.

Paul Lewis, presenter of MoneyBox on Radio 4, has blogged in more detail on this topic, incorporating input from the CIOT’s Director, Technical, Tina Riches.

The moral of all of this? See a Chartered Tax Adviser (CTA) before you carry out a transaction!

George Crozier
CIOT External Relations Manager
Friday 25 May 2012

The CIOT and our Low Incomes Tax Reform Group (LITRG) won no fewer than four awards at last night's Taxation awards.

Anthony Thomas, who was of course Institute President until earlier this month, won the Tax Personality of the Year award. Anthony took over today as Chairman of LITRG.

Anthony's predecesor as LITRG Chairman, John Andrews, took the prestigious Lifetime Achievement award. As a tax practitioner John's clients ranged from entertainers like Frankie Howerd and Barry Humphries to corporate giants like IBM and British Leyland. In his 'retirement' he set up LITRG and built it into a real force for good on behalf of the ordinary taxpayer. He has won numerous awards, from an OBE to a tax transparency award, and this latest accolade is as well deserved as the rest.

Kelly Sizer, from LITRG's Technical Team, won the Rising Star award. As well as her work for LITRG, which has included the Group's acclaimed guides to the tax reconciliation process, Kelly has spent time on secondment to the Office of Tax Simplification over the last year, working on their recommendations on how the Government can simplify tax for pensioners.

LITRG also picked up the Technological Innovation award for the Revenue Benefits website, which was launched in July 2011 in partnership with rightsnet. The site is designed to provide advisers with access to the latest information on the range of HMRC 'products', including tax credits, child benefit and guardian’s allowance and the national minimum wage.

Congratulations to all the winners. A full list is available on the Taxation website.

George Crozier
CIOT External Relations Manager
Friday 25 May 2012

This is the fourth 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 five and six of the standing committee on the Bill, which sat on Tuesday 22 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).

Finance Bill Standing Committee – Sitting 5 – Tue 22 May (am)

Clause 7 - small profits rate

Back to the previous glacially slow progress. Between sitting 4 and sitting 5 a small Labour reshuffle replaced Owen Smith with Catherine McKinnell as the Shadow Exchequer Secretary and she took his place on the committee. Labour have continued their practice of tabling amendments calling for broad-ranging reviews – in this case a review of the impact of the corporate tax structure on businesses of different sizes – which enable their shadow minister and backbenchers to make wide-ranging speeches beyond the scope of the individual clauses – in this case the small profits rate.

In general terms this sitting saw a debate about whether the Government was doing enough for small businesses compared to big business. Labour offered grudging support for the Government’s corporation tax cuts but said this was not enough for growth and would not help small business. Areas diverted to by Labour MPs during speeches on this clause included the Beecroft ‘fire at will’ proposals and IMF chief Christine Lagarde’s comments earlier in the day about the UK economy.

Finance Bill Standing Committee – Sitting 6 – Tue 22 May (pm)

Clause 7 (continued), clause 9 (post-cessation trade or property relief) and clause 10 (property loss relief)

A little welcome progress, with three clauses approved during the sitting and some debate on the substance of the proposals in the Bill. However with more than 200 clauses to cover in the remaining 12 sittings the pace will obviously need to be picked up further still if we are to avoid the committee having to sit through the night!

After a brief wind-up speech on clause 7 (small profits rate) the sitting divided up fairly evenly into two substantive debates on clauses 9 and 10.

While clause 9 just deals with an anti-avoidance measure on post-cessation trade or property relief, thanks to the tabling of a Labour amendment calling on the Government to review the ability of HMRC to deliver the anti-avoidance measures contained in the clause, debate ranged far more widely, covering anti-avoidance in general and also HMRC staffing and service levels. Labour’s spokeswoman, Catherine McKinnell, warned that government cuts were leaving HMRC overstretched and underperforming, calling into question their ability to deliver this and other anti-avoidance measures. She said the Government were right to crack down on abuse of post-cessation reliefs but asked if the phrasing of the legislation was ambiguous in a way that could end up catching legitimate users of the relief? The minister, David Gauke, responded that he was confident that only those entering into avoidance schemes would be caught.

Gauke also defended the effect of the spending review process on HMRC, responding to accusations of cuts. He preferred to describe the putting of savings that could be made within HMRC into areas where it could deliver a return as ‘re-investment’. £917m of re-investment should bring in £2bn extra for 2011-12 and around £7bn a year extra by 2014-15 he said, adding that there would be an increase of 2,500 in the number of people in compliance and enforcement at HMRC. Asked if HMRC was capable of dealing with avoidance/evasion and still delivering a reasonable level of customer service, Gauke said the Government recognised the need for contact centres to improve, though feedback from agent bodies in the last six months suggested some improvement in service levels already. An intervention asked if child benefit changes would mean staff would need to be redeployed to this area. Gauke recognised this would mean additional costs for HMRC and said HMRC would get additional resources to do this so it would not have a knock on effect on service levels.

Lib Dem John Pugh said that the Treasury Committee, National Audit Office and Public Accounts Committee should do more research into the execution of tax policy. This was a dull area but worthwhile, he said.

Clause 10 is a targeted anti-avoidance measure relating to property loss relief. Labour welcomed the measure and most of the debate was on wider anti-avoidance issues, in particular proposals for a general anti-avoidance or anti-abuse rule (GAAR). There was an interesting debate on this issue with a range of views and concerns expressed. From the opposition side, McKinnell began by explaining why Labour had not introduced a GAAR themselves (quoting the CIOT's John Whiting from 2004!) but that there was a renewed case for a GAAR. Indeed, by only applying to the most egregious schemes, Aaronson may not go far enough, she said. Quoting the CIOT’s recent GAAR submission, McKinnell asked how the minister planned to minimise uncertainty, and for assurances a GAAR would not give too much discretionary power to HMRC.

The concern expressed from the government benches was slightly different in tone and focused on the rule of law. Nigel Mills urged caution, to ensure that we do not wander into the trap of HMRC “becoming almost a baseball bat-wielding, threatening organisation that says, “We’re a bit short of money this month. We’re going to use this as a tool to get some more money out of you.”” He suggested a de minimis threshold for the GAAR - that the tax at stake has to be at a certain level before the rule could be invoked. Jacob Rees-Mogg gave a passionate defence of the rule of law, describing it as “one of the most precious things that this Parliament protects”. If this House is not competent enough to pass tax law that collects the amount of revenue that we wish to collect, it is a matter for us to revise the law, he said. John Pugh was supportive of a GAAR but recognised there was a trade-off between complexity and clarity/certainty in tax law.

Responding, Gauke defended the principle of a GAAR, while reminding MPs there was a consultation about to happen, and addressed concerns expressed by the committee. There is an area in which tax behaviour is so artificial, contrived and clearly contrary to the intention of Parliament that an additional tool in the armoury of HMRC is legitimate, he said. On whether a GAAR would mean government could repeal a load of legislation, he was cautious, saying he expected the GAAR to be effective but government would still need to retain existing TAARs and to amend other legislation that provides unintended tax planning opportunities that are outside the scope of the GAAR. In response to a question from McKinnell, he said it was too early to say whether a GAAR would catch the avoidance being discussed under clause 10.

The committee approved clauses 7, 9 and 10 without any objections and rejected three Labour amendments calling for reviews, voting along party lines in each case.

Decisions by the standing committee

Amendment 6 (Lab Treasury team)
Clause 7, page 4, line 28, at end add—
‘(4) The Chancellor of the Exchequer shall review the impact of the corporate tax structure on businesses of different sizes, and shall place a copy of the review in the Library of the House of Commons.’.
Vote: Ayes 10, Noes 16

Clause 7 (small profits rate) stand part
Approved without a division

Amendment 7 (Lab Treasury team)
Clause 9, page 5, line 44, at end add—
‘(9) The Chancellor of the Exchequer shall review the ability of HMRC to deliver the anti-avoidance measures contained in this section and lay a report of his review before Parliament.’.
Vote: Ayes 10, Noes 15

Amendment 33 (Lab Treasury team)
Clause 10, page 6, line 43, at end insert—
‘(5A) The Chancellor of the Exchequer shall review how the targeted anti-avoidance measure contained in this section will interact with the proposed General Anti-Abuse Rule in Finance Bill 2013, and lay a report of his review in the House of Commons Library.’.
Vote: Ayes 11, Noes 15

Clause 10 (property loss relief) stand part
Approved without a division

George Crozier
CIOT External Relations Manager
Wednesday 23 May 2012

HMRC this week announced a new dedicated helpline and address box for people who need to contact them about PAYE and Self Assessment matters relating to bereavement. They have also revised the form R27 which is used to finalise the tax affairs of a deceased person.

Much credit for this news should go to the CIOT’s Low Incomes Tax Reform Group. LITRG has long taken a keen interest in how bereaved taxpayers are dealt with by HMRC and has ben pressing on this area. Along with Tax Help for Older People, in 2009 LITRG researched and published a report entitled Bereavement and the Tax System. The recommendations in that report included revising and simplifying the R27, and setting up a working party with representatives from Government and the voluntary sector to consider proposals such as a bereavement helpline.

More information on the announcement can be found on LITRG’s website.

George Crozier
CIOT External Relations Manager
Wednesday 23 May 2012

This is the third of a series of reports on the progress of this year's Finance Bill, as it goes through its various parliamentary stages.

There have been no further sittings of the committee since the last report so this report covers the timetable for the remainder of the Bill's progress.

A note on the stages the Finance Bill goes through appears here.
Links to the various debates are available here.

Where are we now?
In the early stages of standing committee debate. After four sittings, only four clauses have been covered by the standing committee, with debate concluding on April 26 after the approval of clause 6. Because of prorogation ahead of the Queen’s Speech on May 9th, the committee did not sit from April 26 to May 22.

When does committee restart?
Tomorrow, Tuesday May 22. There will be four sittings this week (sittings 5-8). Parliament then goes on recess for two weeks, returning on June 11th. So committee sittings 9 and 10 will take place on Tuesday June 12th, with two sittings each Tuesday and Thursday until the final sittings (17 and 18) on Tuesday June 26th. The sittings are from 10.30am and 4.30pm on Tuesdays, and 9am and 1pm Thursdays.

What is the timetable for what gets debated when?
There is no formal timetable for what gets debated at each committee sitting. The clauses are being debated in the order they appear in the Bill, with the schedules associated with them debated at the same time. Clauses and schedules debated in committee of the whole House (CWH) will not be debated again in standing committee. (This means, for example, that the 50 minutes of debate in CWH on the child benefit charge is all it will get during committee stage.)

It is difficult to predict with any accuracy what point will be reached at each sitting of the committee. Some clauses may be straightforward in their effects but have a lot of MPs wanting to chip in on the topic (e.g. the income tax personal allowance) which can mean they take up a disproportionate amount of time. Much will depend on whether the committee actually debate the insurance and friendly society clauses (55-179) in any meaningful way.

For what it’s worth my guess, based on what MPs will want to most talk about, or around, combined with a degree of optimism that the slow pace so far will pick up and we won't end up with clauses in the second half of the Bill being rushed through in the final couple of sittings, is that timings will be along the lines of -

Tue May 22 (sittings 5 and 6) – clauses 7-24 (including anti-avoidance measures, income tax reliefs, corporation tax changes (including patent box, R&D relief, REITs, loan relationships) (NB. Not including child benefit, which was CWH)

Thur May 24 (sittings 7 and 8) – clauses 25-46 (including CGT, enterprise allowances (SEIS, EIS, VCT), capital allowance changes)

Tue Jun 12 (sittings 9 and 10) – clauses 47-179 (including charitable giving, insurance companies, friendly societies)

Thur Jun 14 (sittings 11 and 12) – clauses 180-188 (including controlled foreign companies, oil, tobacco and alcohol duty) (NB. Not including air passenger duty, which was CWH)

Tue Jun 19 (sittings 13 and 14) – clauses 190-204 (gambling duties, VED, VAT, landfill tax) (NB. Some debate on changes to VAT exemptions during CWH but may be more)

Thur Jun 21 (sittings 15 and 16) – clauses 205-215 (including climate change levy, inheritance tax (inc gifts to charities), SDLT)

Tue Jun 26 (sittings 17 and 18) – clauses 216-225 (including UK Swiss agreement, financial sector regulation, incapacitated persons, dishonest conduct by tax agents, info powers, PAYE regulations, new tax on ownership of high value properties, repeal of reliefs (OTS/simplification) plus new clauses

NB. This is only an educated guess and not to be relied upon!

What amendments have been tabled?
Among the amendments which have been tabled so far to the parts of the Bill yet to be reached are:
• Labour amendment on qualifying time deposits to require HMRC to draw up plans to ensure that investors who are eligible to receive interest payments gross are made aware of the need to register with their account provider, to ensure that they do not overpay income tax
• Amendments from Conservative MP Nigel Mills on R&D reliefs and loan relationships
• A number of government amendments to clause 24 (Companies carrying on business of leasing plant or machinery)
• A Lib Dem / Green /SDLP amendment to delay coming into effect of CFC rules until an impact assessment has been prepared and approved by MPs, reviewing the effect of the proposals on developing countries’ tax revenue, and aid and technical assistance being provided to developing countries to increase the capability and technical expertise in their tax regimes

When will the Bill get Royal Assent?
There is only a short period between the end of committee stage (Jun 26) and the rise of Parliament for the summer recess on July 17. However this should still be enough time to fit in report stage and third reading (1-2 days) in the Commons and the one day of debate the Bill will get in the Lords (the Lords don't amend tax legislation so they will only have a second reading debate) before Parliament rises.

So Royal Assent in July is a reasonable working assumption and will almost certainly be the case. However, unlike previous years, this is not certain and Royal Assent could theoretically be as late as October 26. (For why, see here).

George Crozier
CIOT External Relations Manager
Monday 21 May 2012

This is the second 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 the first four sittings of the standing committee on the Bill, which sat on Tuesday 24 and Thursday 26 April, and made only slow progress. 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.

Finance Bill Standing Committee – Sitting 1 – Tue 24 Apr (am)

Clause 2 - basic rate limit for income tax

Not much of technical interest. Mostly speeches by Labour MPs about people suffering from government tax increases and other austerity measures, primarily focusing on those on the threshold of the higher rate of income tax who are being drawn into the higher rate by fiscal drag. Notionally the discussion was on clause 2 (basic rate IT limit) but debate was far more wide-ranging, from the cost of living to the relative merits of different taxes for helping those on lower incomes.

Finance Bill Standing Committee – Sitting 2 – Tue 24 Apr (pm)

Clause 2 (continued), clause 3 (personal allowance for under-65s)

Again, debate focused on the effects of the Government's fiscal policies, rather than technical scrutiny of the Finance Bill measures. In theory the discussion was about the personal allowance for people of working age (clause 3). Session interrupted by two divisions in the House as well as two in the committee. Inbetween Owen Smith MP (Shadow Exchequer Secretary and Labour's lead spokesperson on the committee) spoke at length, mostly about the effect of measures not in the Finance Bill on people on low and middle earners which, he argued, outweighed the increases in the personal allowance. There was a brief contribution from Lib Dem John Pugh calling on the Treasury Committee to do more retrospective assessment of tax changes. The rest of the time saw three Labour MPs give scathing assessments of the effects of the Government’s policies on those in poverty.

Finance Bill Standing Committee – Sitting 3 – Thur 26 Apr (am)

Clause 3 (continued)

Once again, slow progress. Debate notionally on clause 3 (the personal allowance for people of working age) continued but did not conclude. The double dip recession, regional pay and a Conservative MP’s efforts to give up smoking were among the diversions. Ongoing disputes over the cost of cutting the 50p rate and the wiping out of the personal allowance increase by other measures made a reappearance. The sitting concluded midway through the Labour spokesman’s winding up speech.

Finance Bill Standing Committee – Sitting 4 – Thur 26 Apr (pm)

Clause 3 (continued), clauses 5 and 6 (corporation tax main rate)

Slightly faster progress. Labour’s spokesman Owen Smith concluded his summing up on clause 3 (personal allowance for under-65s) and the committee then approved clause 3 and rejected a Labour amendment proposing a review of “the overall impact on families of this section compared with other measures the Government is introducing”.

Owen Smith then opened the debate on clauses 5 and 6 (corporation tax main rate). His arguments were essentially (a) that the Chancellor is a ‘one club golfer’ betting the farm on CT, and (b) that business confidence has collapsed because there is no belief the Government will deliver growth. There was much back and forward over the relationship between cutting CT and growth, with Labour unconvinced that there is much of one. While sceptical of its impact, Labour did not oppose the CT cut, arguing that the economy needs all the stimulus it can get. Two Labour amendments to the CT clauses were pushed to the vote, calling for reviews on the impact of CT on business investment, and growth and jobs. Both were rejected as the committee divided again along party lines. Clauses 5 and 6 were approved.

There were three speeches of note from the backbenches during the debate on CT, with Conservatives Nigel Mills and Charlie Elphicke, both former tax professionals, once again making interesting contributions. Mills called for radical reform (simplification) of CT – preferably using the OTS - and said he might table amendments to do this at Report Stage. He advocated allowing companies to file a single tax return, rather than them having to file dozens of separate returns. He also drew on his professional experience, explaining how he used to compare various tax regimes and their attractive features: “One of the problems with the United Kingdom is that we could probably tick most of the criteria [but] there had to be a tick with a little star in brackets next to it beside phrases such as, “Yes, we exempt capital gains on sales of overseas companies, but that is quite complex and we have difficult rules on what a share is.”

Elphicke said rules should be made more purposive – pursuing substance over form: “ensure that companies that are trading here and have trading revenues here pay their fair share of tax in this country.” We should ask: “is that person paying tax somewhere on that deduction or are they paying no tax at all?” Mills said he had some sympathy with Elphicke’s argument. Elphicke, in turn, agreed with Mills’ suggestion that we remove “the arcane definitions that enable businesses to argue that they are not within the charge to UK tax.”

Inbetween, Labour MP Fabian Hamilton drew on his experience running a small business to speak about the frustration felt by small business owners at the level of bureaucracy they face. He said that they spent a lot of time not selling products but filling in forms and dealing with inspectors. Forget CT, he said, the biggest problem was being able to make a profit at all and collect money owed (problems with bad debt).

David Gauke’s speech winding up the debate was a now familiar defence of the Government’s strategy of CT cuts as “an advertisement for investment and jobs in Britain”. He quoted favourable remarks from the tax and business community about the Government’s corporate tax strategy. He accused Labour of drifting away from business and from the centre ground.

The week's decisions by the standing committee

Tuesday 24 April

Amendment 8 (Lab Treasury team)
Clause 2, page 2, line 27, at end add—
‘(3) The Chancellor of the Exchequer shall review the impact of the setting of the basic rate limit on increasing the number of higher rate income tax payers and place a copy of the review in the Library of the House of Commons.’.
Vote: Ayes 13, Noes 19

Amendment 9 (Lab Treasury team)
Clause 2, page 2, line 27, at end add—
‘(3) The Chancellor of the Exchequer shall review the impact that setting the basic rate limit will have on average tax rates paid by total income and a copy of the report shall be placed in the House of Commons Library.’.
Vote: Ayes 13, Noes 19

Clause 2 (basic rate limit for 2012-13) stand part
Approved without a division

Thursday 26 April

Amendment 10 (Lab Treasury team)
Clause 3, page 2, line 33, at end add—
‘(3) The Chancellor of the Exchequer shall review the overall impact on families of this section compared with other measures the Government is introducing and place a copy of the review in the Library of the House of Commons.’.
Vote: Ayes 13, Noes 15

Clause 3 (personal allowance for 2012-13 for those aged under 65) stand part
Approved without a division

Amendment 4 (Lab Treasury team)
Clause 5, page 4, line 12, at end add—
‘(3) The Chancellor of the Exchequer shall review the impact of the corporate tax structure including the principal rates and investment allowances on the level of business investment, and place a copy of the review in the Library of the House of Commons.’.
Vote: Ayes 13, Noes 15

Amendment 11 (Lab Treasury team)
Clause 5, page 4, line 12, at end add—
‘(3) The Chancellor of the Exchequer shall review the impact of the corporate tax structure on different sectors and place a copy of the review in the Library of the House of Commons’.
Amendment withdrawn

Amendment 12 (Lab Treasury team)
Clause 5, page 4, line 12, at end add—
‘(3) The Chancellor of the Exchequer shall review the impact of the corporation tax rate on growth, jobs, and investment in the economy, and produce a plan for jobs and growth, which he shall lay before the House of Commons.’.
Vote: Ayes 13, Noes 15

Clause 5 (main CT rate for 2012) stand part
Approved without a division

Amendment 5 (Lab Treasury team)
Clause 6, page 4, line 19, at end add—
‘(4) The Chancellor of the Exchequer shall review the evidence in favour of using reductions in the headline rate of corporation tax as a means of promoting long term international competitiveness and place a copy of the review in the Library of the House of Commons.’.
Amendment withdrawn

Clause 6 (CT charge and main rate for 2013) stand part
Approved without a division

George Crozier
CIOT External Relations Manager
Wednesday 2 May 2012