37 government amendments including a new tax as Finance Bill clears Commons

The amendments and new clauses and schedules were grouped together in a single group for debate. The report below covers amendments and discussion by topic, with contributions grouped in this way rather than chronologically.

The full Hansard of the session is here.

Public interest business protection tax

The most interesting change made to the bill at report stage was the introduction, through new clause 3 and new schedule 2, of a new tax imposed (according to its explanatory statement) by reference to the value of an asset that was held by a person for the benefit of a public interest business that enters special measures but was instead used in a way that materially contributed to it entering special measures, or to a significant increase of the costs of that business.

Financial Secretary Lucy Frazer told MPs the reasoning behind the new tax. She explained that energy groups “will often enter into derivative contracts to hedge their exposure to fluctuations in wholesale energy prices… They will typically use a forward purchase agreement to buy energy in the future at a price that is fixed at the time when the contract is entered into.” However, she said, the government has a serious concern about arrangements whereby some energy suppliers do not own, control or have the economic rights to the key assets needed to run their businesses, including forward purchase contracts. “It is currently possible for an energy business to derive value from such a valuable asset for its own benefit and the benefit of its shareholders, while leaving its energy supply business to fail, or increasing the costs of a failure. The costs of that failure would then be picked up by the taxpayer or consumers, because it would trigger a special administration regime or a supplier of last resort scheme.”

The minister said that she was acting in this way because it will take months for actions that Ofgem is consulting on to come into effect. “It would be unacceptable for a government to allow business owners to profit from engineering this kind of outcome in the interim period, at great and direct expense to the taxpayer.”

Intervening, the SNP’s Peter Grant was supportive of the intention of this measure, but said it was “not so much a new schedule as a Bill within a Bill. It is 25 pages long, and it introduces a tax that has not existed before. It was tabled less than 48 hours ago, and as far as I can see there has been no consultation with anyone.” Why has it taken until now for the Government to table such a large, complex and unwieldy amendment to their own legislation? he asked.  Lucy Frazer said the government needed to act now because Ofgem has identified a risk which, if it came to pass, would have a significant cost to taxpayers.

The minister agreed with Treasury Committee Chair Mel Stride (Conservative) that the purpose of this measure was to discourage certain types of behaviour rather than to raise revenue. She explained it would only be in force for a short period until Ofgem takes its own regulatory action, that it will capture only the very largest energy businesses and that HMRC can recover the tax from other persons if it cannot recover it from the relevant company (joint and several liability provisions). She added that safeguards will permit certain affected persons to make a claim for relief to limit the amount of joint and several liability to the amount that they potentially benefit from such transactions. 

The SNP’s lead Treasury spokesperson Alison Thewliss complained that there is no consultation or evidence gathering on this measure that MPs can see before they vote on it. She made a general point she often makes that Bill Committees should take evidence. On this new tax, she said: “We just do not know sufficiently whether it will be effective, what the evidence is or the government’s full motivations for introducing it.”

Thewliss added that she was very grateful to the Chartered Institute of Taxation and the Association of Taxation Technicians for writing the previous day with some of their concerns about the proposal and the way that it has appeared at this late stage. “It is supposedly time-limited to 12 months, so theoretically it could then be extended in time and in scope by regulation. We do not know whether the Government intend to do that if Ofgem do not move as quickly as they want it to. Again, I accept that the proposal may be about getting Ofgem out of a hole. I am sure that is fine, if that is what the Government want to do, but does that not indicate that it is much easier to make tax changes than effective regulatory changes when there is a point of crisis?”

In his speech her SNP colleague Peter Grant was equally scathing about the lack of time for MPs to scrutinise this new tax, not least because there is ‘no indication as to why the tax is the way to prevent the kind of behaviour that we are trying to deter. It appears that it is just because they can change the tax system immediately and make it retrospective, whereas other things would take a bit longer’. On Schedule 2, Grant remarked that no Parliament should ever lightly agree to such a power, but tonight MPs have been given no choice: “We simply have not had sufficient time to look at the detail of that or to get the assurances we would usually want about what that power will and will not be used for.”

Grant also drew on the comments of CIOT and ATT, noting they had said: ‘We have a brand-new tax without any prior announcement, no consultation, little debate, which will be enacted before the next Budget, and will be effective from 28 January 2022. OK, these are arguably special circumstances, but is this a good way to run a tax system?’ He thought it was not a good way to run a tax system.

New clause 3 and new schedule 2 were added to the bill.

Freeports

This saw the other new schedule to the bill. New clause 1 and new schedule 1 make provision about powers to make regulations in relation to the circumstances in which certain reliefs are available in relation to freeports. It affects first-year allowance for plant and machinery, structures and buildings allowances and stamp duty land tax.

Financial Secretary Lucy Frazer said these measures allow the government to introduce new reporting requirements if needed, and to respond if companies do not adhere to them by removing reliefs or taking other action. She said the ‘critical’ freeports programme will create employment in ‘left-behind areas’.  There was not much debate on this matter, although in previous debates on this bill, opposition MPs argued that the main impact of freeports will be to alter the location rather than the volume of economic activity.

New clause 1 and new schedule 1 were added to the bill.

Economic crime (anti-money laundering) levy

Government amendments 9 and 10 ensure that those liable to pay the economic crime levy are referred to as “persons” in each place for consistency with other provisions of Part 3. This was uncontroversial but there was plenty of discussion of the government’s efforts to tackle money laundering more generally.

This focused in particular on calls for a register of beneficial owners of property. New clause 27 tabled by Liberal Democrat MP Layla Moran with cross-party support would have required the government to produce an impact assessment of the operation of the new levy, and to assess how such a register would contribute to the levy’s effectiveness. Moran said a register would close the loopholes that allow oligarchs to launder money through British property.

Labour’s Shadow Financial Secretary James Murray is frustrated that he is still waiting for the government to establish a register of beneficial owners of overseas entities that own UK property even though it was first announced by the Government in 2016 (and legislation published in 2018). It is desperately needed, has been greatly delayed and would bring transparency to the overseas ownership of UK property – and stop UK used as ‘world’s laundromat for illicit finance’. Labour had tabled its own proposal - new clause 4 which would have required the government to review the levy every year until a register of beneficial owners of overseas entities that own UK property is in place – but Murray also voiced support for the Moran amendment.

Alison Thewliss remarked that while the levy is broadly welcome, ‘it strikes me that a lot of taxes here are taxing people who are doing the right thing already, rather than chasing the people who are not’.  The SNP wants an economic crime Bill because so much of the legislation on this issue is still held at Westminster. Thewliss is frustrated that there is not any kind of checking, verification or anti-money laundering organisation at Companies House. She said Scottish limited partnerships tarnish Scotland with a ‘dirty name by association’. The SNP tabled two new clauses, seeking a review of the levy which would consider how the introduction of corporate transparency measures would affect its operation (new clause 8), and also an assessment of the impact of the levy on the tax gap and on opportunities for tax avoidance, evasion and other economic crimes.

For the government, Lucy Frazer countered that the Prime Minister is committed to introducing legislation on a beneficial ownership register. Since 2010 the government has introduced more than 150 new measures and invested more than £2 billion in HMRC to tackle fraud, she claimed. The international Finance Action Task Force concluded in December 2018 that we have some of the strongest controls in the world.

Amendments 9 and 10 were passed. Moran’s New Clause 27 was pushed to a vote but was defeated 230:301. Other new clauses were not pressed to a vote.

Residential property developer tax

The government made 8 amendments to this part of the bill:

• Amendments 1-3 and 8 remove an unnecessary potential circularity in the meaning of an “interest in land” for the purposes of residential property developer tax (RPDT).
• Amendments 4 and 5 make another RPDT change. They provide that a licence to use or occupy land that is granted because of arrangements under which an estate in the land is to be conveyed, at the request of a company or related company, is not an excluded interest for the purposes of clause 36 (and, accordingly, is an interest in land for the purposes of that clause).
• Amendments 6 and 7 provide that a licence of the sort mentioned in subsection (3A) of clause 36 (inserted by amendment 5) would form part of a company’s trading stock for the purposes of that clause.

For Labour, James Murray said he supported the RPDT and any moves to protect leaseholders from these costs. But he complained that it will in ‘no way end the cladding scandal’, nor will it even settle the question of who pays for the crucial remediation works. Murray asked for the Treasury’s view on what will happen if developers do not hand over voluntarily the £4 billion needed to remediate buildings of between 11 and 18 metres. If they do not, could the level of the RPDT be reconsidered to help to meet some of the shortfall? New clause 26 tabled by Labour (and not pressed to a vote) would have required an assessment of the revenue the RPDT would raise at a range of rates at 0.5 percentage point increments.

SNP spokespeople did not raise the tax in their remarks but did table new clause 16 which would have required a government assessment of the effect of the tax on opportunities for tax evasion and avoidance.

Financial Secretary Lucy Frazer responded briefly to James Murray’s comments, saying only that the Secretary of State for Levelling Up, Housing and Communities is actively working on issues relating to unsafe cladding.

Banking surcharge

The one clause of the bill opposed by Labour during committee stage was clause 6 which reduces the rate of the banking surcharge and the level of the surcharge allowance. At report stage Labour once again tried to remove this clause from the bill, tabling amendment 35 to do so.

Explaining Labour’s objective, James Murray said he was unhappy with the cut to the surcharge because bankers’ earnings are on the rise, with investment banks’ profits ‘soaring’ off the back of a wave of takeovers and mergers caused by the pandemic. He contrasted this unfavourably with the national insurance hike which threatens people’s financial security.

Murray accused the Financial Secretary of using ‘smoke and mirrors’ to pretend that the government are not cutting taxes for banks. He suggested she was trying to hide the change ‘under a separate change to corporation tax that may never even come to pass’. Conservative MP Anthony Browne challenged him that, “including corporation tax and the surcharge, the taxation of banks is currently at 27 per cent. After this legislation, it will be 28 per cent. Does the hon. Member agree that 28 per cent is higher than 27 per cent, and therefore taxes on banks are actually going to rise, not go down?” Murray said it was clear in the bill that the surcharge was being cut from 8 per cent to 3 per cent.

Murray pushed his amendment to a vote, but it was defeated 228:301

Tonnage tax

New clause 2 tabled by Labour backbencher Grahame Morris and Conservative backbencher Jackie Doyle-Price would have required the government to report on the impact of the provisions of clause 25 (tonnage tax) on the training and employment of UK seafarers. Amendment 34 tabled by Morris would have required the government to consult trade unions representing UK seafarers before making regulations pursuant to subsection (8) of clause 25.

Doyle-Price, whose constituency includes Tilbury, Purfleet and the Thames Freeport, said it was great that the government ‘are taking advantage of the new freedoms that we have now that we have left the European Union’ but she was ‘very keen that workers get a better chance to share in our post-Brexit freedom.’ That was why she had worked with the RMT union and Morris on this new clause.

For his part Morris said new clause 2 was common sense, joined-up government and the application of the principle of trying to ensure benefits for British-based seafarers from the growth predicted for the maritime sector, particularly in relation to zero-carbon and offshore. He remarked that the real measure required to boost seafarer jobs and training, including in some of our most deprived coastal communities — would be a new mandatory link to ratings training, as well as officer cadet training.

For Labour, James Murray asked the government to set out its plans for the training and employment of UK seafarers. Alison Thewliss, for the SNP, said: “If this tonnage tax is to mean anything, it should be about more than just changing a flag; it should be about changing the culture.”

Financial Secretary Lucy Frazer responded that in 2020, the Government extended the minimum wage entitlement to seafarers on domestic voyages. The Department for Transport’s ‘Maritime 2050’ strategy shows that we want a diverse and rewarded workforce, she added.

New clause 2 and amendment 34 were not pressed to a vote.

Basis period

A number of further government amendments were made to the bill. These were introduced briefly by the Financial Secretary but did not spark wider discussion and passed without objection.

The minister explained that amendments 14 to 17 are technical amendments to the legislation abolishing the basis period rules for the self-employed and partners, and introducing the tax-year basis. “The amendments will ensure that eligible taxpayers are able to benefit from certain tax reliefs, including double taxation relief, that are given as a deduction against tax rather than against profits during the transition to the new tax-year basis. The amendments are required to avoid an unintentional outcome of the basis period reform transition rules.”

Amendments 14-17 were added to the bill.

Vehicle excise duty

Amendments 11 to 13 form part of the ‘extensive action’ that the government are taking to address the current heavy goods vehicle driver shortage, the minister told the House. They would introduce an enabling power “to make temporary changes to vehicle excise duty legislation should the government decide to introduce a further temporary extension of road haulage cabotage flexibilities beyond April and up to 31 December 2022. These amendments do not, in themselves, extend those flexibilities. The Government have made no decision to extend the cabotage easement. Any such decision would be taken only after consulting with interested parties, and in consideration of wider pressure on supply chains at the time.”

Amendments 11-13 were added to the bill.

Qualifying asset holding companies

13 amendments were being made “to address a number of technical points in the new asset holding companies regime to better reflect the original policy intentions,” the minister explained. She said the amendments followed engagement with industry and would make the rules of the tax regime clearer for companies that will use it.

Amendments 18 to 30 were added to the bill. (For notes on the individual amendments see our report stage preview.)

Changes in accounting standards

The minister explained that amendments 31 to 33 relate to accounting standards. “They make minor technical changes to part 2 of schedule 5, which revokes the requirement for life insurance companies to spread their acquisition costs over seven years for tax purposes. These changes will simply ensure that the legislation functions as originally intended.”

Amendments 31 to 33 were added to the bill. (For notes on the individual amendments see our report stage preview.)

Impact on tax burden

A number of opposition new clauses sought reviews of the impact of the bill on various matters.

New clause 6 tabled by the Labour frontbench would have required the government to review what impact measures in the bill would have on the amount of tax working people will be paying, household finances, and economic growth.  James Murray, for Labour, said that whether through this bill or any other means, the government are ‘letting energy bills soar, refusing to cancel their national insurance hike, and failing to set out a plan for growth’. The Financial Secretary countered that the government has published its ‘Impact on households’ document in the October Budget of 2021 and the Office for Budget Responsibility already produces fiscal forecasts.

New clause 25 tabled by the SNP frontbench would have required the government to publish an assessment of the impact of the Act as a whole on the tax burden on the hospitality sector.

New clauses 6 and 25 were not pressed to a vote.

Impact on climate change

The SNP tabled three new clauses relating to the bill’s impact on tackling climate change. New clause 17 would have required the government to publish an assessment of the impact of the bill as a whole. New clause 18 sought an assessment of the impact of sections 77 to 79 (vehicle taxes). New clause 21 asked for an assessment of the impact of section 99 and Schedule 16 (emissions certificates for vehicles).

Speaking to the new clauses, SNP spokesperson Alison Thewliss said: “The climate change agenda… should have run through this Finance Bill and this Budget as through a stick of rock, but unfortunately we are left with just a fluffy sweetie in the bottom of someone’s pocket. It is not enough.” She claimed Scotland has more ambitious ‘net zero’ targets than the UK.

On complaints from Thewliss that there were not enough investment incentives, Lucy Frazer countered that in the last financial year, the government issued £16 billion-worth of green bonds and set up the UK Infrastructure Bank to invest in net zero, backed with £12 billion of capital, which will also help to unlock more than £40 billion of overall investment in infrastructure.

The SNP pushed new clause 17 to a vote, but it was defeated 228:306. The other two new clauses were not pressed to a vote.

Impact on equality

New clause 7 tabled by Labour backbenchers Bell Ribeiro-Addy and Apsana Begum would have required the government to review the equality impact of the provisions of this bill, including the impact of those provisions on (a) households at different levels of income, (b) people with protected characteristics, (c) the government’s compliance with the public sector equality duty, and (d) equality in different parts of the UK and different regions of England.

Speaking in the debate, Ribeiro-Addy said ministers seemed unaware of the huge disparities within regions and that there is a huge increase in the exploitation of young people. A confident government should show how they are delivering for people, but ‘the fact remains that inequalities are out of control, and they are doing absolutely nothing to stop that’.

New clause 7 was not pressed to a vote.

Tax credits

There were no amendments proposed in this area but Alison Thewliss (SNP) asked about a query raised by the former Pensions Minister, Steve Webb, who pointed out a change on the HMRC website that now read: “Rates for Working Tax Credit, Child Tax Credit, Child Benefit and Guardian’s Allowance for the 2022 to 2023 tax year are provisional and may change between now and 6 April 2022”. She wondered why this warning had been added. Financial Secretary Lucy Frazer did not answer, but countered that the government has cut tax for low-income families by introducing the universal credit taper rate, saving working families £1,000 a month.

Other opposition amendments

A range of further opposition amendments and new clauses were tabled for the debate but got little or no discussion. These included:

• New clause 5 (Labour) which would have required a review of which companies have benefited from the Annual Investment Allowance (AIA) in 2022-23, broken down by size, sector, and country of ownership, and an assessment of the merits of the super-deduction in light of the AIA.
• Amendment 38 (SNP) which would have amended the transitional provisions for the reversion of the AIA to £200,000 on 1 April 2023, to ensure that smaller businesses with lower levels of qualifying capital expenditure are not disadvantaged by having their effective AIA limit restricted to significantly less than £200,000 for a period. (This had been proposed by the ATT.)
• New clause 20 (SNP) which would have required the government to publish an assessment comparing the rates of uncertain tax in the UK to those of all other OECD countries.
• New clause 22 (SNP) which would have required the government to publish an assessment of the composition of the Office of Tax Simplification membership with a view to ensuring it is diverse and representative.

None of these amendments was pressed to a vote. A full list of amendments and new clauses can be seen in our report stage preview.)

Third Reading debate

After the report stage votes there was a brief third reading debate. Financial Secretary Lucy Frazer claimed measures in the bill would support business across the UK, including banking, creative and shipping sectors. In addition, the bill will protect businesses and the public by clamping down on tax evasion and economic crime, improving trust and building a fairer UK economy, she argued.

Labour’s Shadow Financial Secretary, James Murray, said the bill offers nothing to help people struggling with the rising costs of living and facing tax rises this April. Yet the Bill has a tax cut for bankers, most of whom are doing very well now, which ‘shows how out of touch this Chancellor is’. He added: “There is no plan for growth in the Bill. We are stuck in a low-growth, high-tax cycle.”

SNP spokesperson Alison Thewliss said there is a lack of action to tackle the misuse of Scottish limited partnerships and shell companies, and to tackle the money flowing through London. The bill is also a missed opportunity to do more on ‘net zero’. Given last year’s COP, there should have been a great deal more to focus minds and move to a greener and fairer economy.

The Bill passed the Commons 302:226 and goes to the House of Lords, where it will be debated but not amended.