LIVEBLOG: Finance Bill (No.3) 2018-19 – Report Stage and Third Reading Debate

10 Jan 2019

MPs got a final chance to amend this year’s Finance Bill with today’s report stage debate. Government amendments on intangible fixed assets and entrepreneurs’ relief were passed. A cross-party proposal to amend the Bill to hinder government preparations for a ‘no deal’ Brexit was passed. Another cross-party proposal for a review including consideration of the 2019 loan charge was accepted by the government.

The timetable (as it happened)

2.52pm Report stage debate starts. MPs briefly debate programme motion, then debate first group of amendments, covering the effects of the Bill on child poverty, equality and public health

4.52pm Votes on first group of amendments followed by debate on second group of amendments, covering tax and related fiscal implications of UK withdrawal from European Union

6.23pm Votes on second group of amendments followed by debate on third group of amendments, covering everything else including government amendments on intangible fixed assets and entrepreneurs’ relief

7.53pm Votes on third group of amendments, followed by third reading debate

8.46pm End of third reading debate. 

Report stage and third reading debate takes place on the floor of the House of Commons. Any MP may participate in the debate.

You can read the amendments tabled for debate here. (They are summarised below by group.) You can watch the debate here.


Group One: Effects of Bill on child poverty, equality and public health

The amendments

There are only two new clauses in this group, both tabled by the opposition.

New clause 1 (Labour) would require the Chancellor of the Exchequer to review the impact of clause 5 of the bill on child poverty and equality - DEFEATED

New clause 5 (Labour backbencher Debbie Abrahams) would require the Chancellor of the Exchequer to review the public health and poverty effects of the provisions of this Act.- NOT MOVED

The debate

The start of the debate was delayed from the expected start time by a number of points of order as well as two urgent questions and a Ten Minute Rule Motion on Palestinian National Authority Schools.

The debate began at 2.54pm.

Shadow Chief Secretary to the Treasury Peter Dowd moved new clause 1. Before talking on this clause, he said the fact that the schedule on intangible fixed assets had been tabled by the government only at report stage meant MPs were denied the chance to scrutinise it properly - no way for a government to behave, he said. He asked for the schedule to be withdrawn so it can get proper scrutiny in a future Finance Bill.

This Finance Bill is the result of a 'government on the run', he said. The ONS blew a £12bn hole in the Chancellor's Budget because of accounting changes to student loans. What is the point of the Tory party, he asked, because families are suffering. This has been the longest period of wage stagnation since Napoleonic war times, he said. He set out Labour's plans to reform the social security system and tax corporates more than today. New clause 1 will make the government face the horror of poverty in the face, he charged. Austerity was a political and ideological decision by the government - 'you cannot cut your way to growth' and it is the poorest in society who have paid the price for this policy. He said the last Labour government had two periods of economic growth shortly before the Coalition government's austerity measures drove the economy over a cliff. He pointed to the  UN special rapporteur on extreme poverty's  damning report on poverty in the UK (here).

Conservative Vicky Ford spoke up for the rise in the personal allowance, which has led to many millions of people have been taken out of tax altogether. The best way to address poverty is to help ensure people can earn more. Absolute poverty is at record lows (here), she said. The ratio of average income between top and bottom fifths of households have fallen, she said. This Bill allows people to keep more money and must be passed.

Debbie Abrahams, a Labour backbencher, moved new clause 5. She said relative poverty must be reflected on, along with absolute poverty. The most effective way to alleviate inequality is upstream (policy process) she argued. The EU looks at this sort of thing in its policies. There are 14 million people living in relative poverty - eight million of whom are working. We have four million disabled people living in poverty today. The IFS says since 2015 the lowest income decile have lost proportionately more income than any other group as a result of personal tax and benefit changes. She then highlighted health and specifically death ages between wealthy and poor people in her Oldham East and Saddleworth constituency. Society as a whole benefits when life expectancy rises - greater equality is good for everyone in society, she said.

Conservative Kevin Foster does not believe that Labour will limit tax increases just to those earning more than £80,000. Foster compared Labour's policies with those in Venezuela. He wondered why Labour is not calling for an independent report but rather wants to let the Chancellor review his own policy. SNP economy spokesperson Kirsty Blackman intervened to say this is about the government reviewing what is important to MPs on her side of the house rather than the Chancellor's own priorities. Like Vicky Ford, Foster praised the rise in the personal allowance. Abrahams intervened to ask what is the impact of a rise in personal allowance on life expectancy? Foster replied that a range of policy measures will make a difference. Abrahams came back to say Foster has no policy based evidence to his statement. Foster then went on the attack on Labour's economic record towards the end of the last Labour government, blaming that party for the economic downturn. Kirsty Blackman spoke up for Scotland's work on business rates and suggested the Conservatives follow suit. 

Labour MP Vernon Coker spoke in support of the new clauses, which he called well measured. The levels of child poverty are unacceptable, he said, because the public are “sick of thinking: ‘can't you do any better'?” Coker said food banks are good, with volunteers giving up their time, but he objects that they are used as an instrument of public policy.  He challenged the Tax Minister to get up and say, on all of the budgetary measures, the minister refuses to review the impact on the poorest.

Helen Whately, Conservative, who has a background in healthcare, said she was glad to support a government that is doing something about poverty. One must be careful not to be led into thinking a review will give us an accurate picture of all that is being done [to tackle poverty], such as reducing health inequalities. Abrahams intervened to say she has spent many years in healthcare and it is common sense to look at the impact of policies on the poorest. Whately said the minimum wage is rising and this can help people's wellbeing. We need to do more about driving exports and enterprise, she said.

Sinon Hoare, Conservative, opposes the clauses. He said smaller communities should work together to help people be more 'self-reliant' in rural communities. The average salary is about £24,000 in the UK, but rural jobs pay less - they can expect pay at about £16,000. The state is there to provide self-respect and dignity in their later life, he added, and we must reach out to people who are too proud to take help initially. He said he admires the Labour party for not being embarrassed to talk about burning injustices but he finds on the Tory side they become inhibited when talking from the heart. He made a plea to the Treasury frontbench that Conservatives do not talk about the 'why politics' enough; that is a shame because it 'stirs the soul'. You can go to any minister's office or any local council and find gathering dust on windowsills, reports and reviews and they have a shelf life which is short. He urged governments to provide policies of 'hope and growth'. A Labour MP tried to convince him to support the clauses, to which he said he does not need reviews to tell him there are poor people in his North Dorset constituency. Employment and an understanding of the benefits that come from it must be rehearsed by the Treasury team. We are all in a position as MPs because we can do something about poverty. He urged the Treasury to talk more about the 'why' about what we are doing in politics rather than statistics.

SNP economy spokesperson Kirsty Blackman supports the clauses. Blackman said there are many reasons to have a tax, such as to reflect your priorities - helping someone people's life chances should be one of them. This will require a change of focus from the government. We need statistics to prove that the government's policy does what it was intended to do. The government does not do enough evidencing. If the Scottish government had the powers to put these sort of measures in the clauses into its work, it would. "How can people have hope, when they don’t have enough to eat," she asked.

For the government, Financial Secretary to the Treasury Mel Stride said, on new clause 1, equality and fairness is at the heart of this government. This government is more transparent than any other; changes to the tax system are always accompanied by TIINs and the Budget is accompanied by detailed distributional analysis. Information on tax returns also gives Treasury information. Absolute poverty rates are at record lows, he said.

MPs voted on new clause 1. The new clause was defeated.

Group Two: Tax and related fiscal implications of UK withdrawal from European Union

(New Clauses, new Schedules and amendments relating to the subject matter of any of Clauses 68 to 78, 89 and 90)

The amendments

Six new clauses and seven amendments, all tabled by the opposition, are in this group.

New clause 3 and amendment 1 (both Labour) would each require the Chancellor of the Exchequer to review the fiscal and economic effects of the exercise of the powers in subsection 1 of clause 89 (minor amendments in consequence of EU withdrawal) before exercising those powers. - DEFEATED (NC3), NOT MOVED (AMT1)

New clause 7 (Labour) would require the Chancellor of the Exchequer to review the expected effect of the carbon emissions tax on the UK’s ability to meet its internationally agreed climate targets. - NOT MOVED

New clause 12 and amendment 16 (both SNP) would require a review within 6 months of the expenditure implications of introducing a carbon emissions tax. It would prevent part 3 (carbon emissions tax) coming into effect until such a review had been laid before the House of Commons. - NOT MOVED

New clause 13 (SNP) would require the Chancellor of the Exchequer to produce a report on consultation on certain measures within the Act, including whether the provision was published in draft; if so, whether changes were made as a result of consultation on the draft, and if not, the reasons why the provision was not published in draft and any consultation which took place on the proposed provision in the absence of such a draft. The measures specified are sections 68 to 78, 89 and 90. - NOT MOVED

New clause 19 (SNP) would require a review of the economic and fiscal impact of the use of the powers in section 89 in the event of no deal and in event of a withdrawal agreement passing. - NOT MOVED

Amendment 13 (SNP) would make regulations under clause 89 subject to the affirmative procedure. - NOT MOVED

Amendment 7 (cross party, lead signatories Yvette Cooper (Labour) and Nicky Morgan (Conservative)) would prevent the government implementing the “no deal” provisions of clause 89 without the explicit consent of Parliament for such an outcome. It would provide three options for the provisions of clause 89 to come into force: if the House of Commons has approved a negotiated withdrawal agreement and a framework for the future relationship; if the government has sought an extension of the Article 50 period; or the House of Commons has approved leaving the European Union without a withdrawal agreement and framework for the future relationship. - PASSED

Amendment 8 (cross party, lead signatories Chris Leslie (Labour) and Heidi Allen (Conservative)) would require a separate Commons vote (on a future date) before clause 89 can come into force. - DEFEATED

Amendments 14 and 15 (both SNP) would require a statement on the circumstances (in relation to negotiations) giving rise to the need for, as well as an estimate of the cost of, preparatory expenditure to introduce a charging scheme for greenhouse gas allowances.  The amendment would require a Commons resolution before expenditure could be incurred. - NOT MOVED

New clause 18 (SNP) would require a review of effects on measures in the Bill of certain changes in migration levels. - DEFEATED (Voted on with group three)

The debate

Shadow Treasury Minister Jonathan Reynolds moved new clause 3 (NC3), part of a group of amendments relating to the UK's withdrawal from the EU. He called clause 89 a 'classic' because it gives powers to the government to make tax changes with little oversight. The clauses today are of seminal importance, he said. On amendment 7 (cross party), he said a 'no deal' will cause irreparable damage to the UK economy - and that is why 'no deal' is not an option. On NC3, he said that as we edge closer to a 'no deal', this is not a hypothetical clause; we must have a full and transparent view of the implications of a clause of this kind. Ken Clarke, Conservative, said some of the fears of a 'no deal' arew real enough, which would leave us as the only developed country in the world that has no trade agreements with anyone. Regardless of the real impacts of a 'no deal' it will fundamentally undermine our credibility in the world. The BMW argument that 'it will be alright on the night', has been routinely defeated, he told Conservative John Redwood. He told Kate Hoey that the merits of the government undertaking contingency measures is different from the political case we have to consider as to whether we would find it desirable to undertake a course of action to use those contingency measures. The opportunities created by growth outside the EU have no relationship to our membership of the EU nor will they be undermined by leaving it, he said.

There has never been a more important time to take action on climate change and the UK's exit from the EU cannot be taken as an opportunity to avoid our responsibilities. The clauses and amendments are proportionate, timely and sensible, he added.

Supporting NC7 and amendment 8, Nicky Morgan, Conservative, and chair of the Treasury Committee, said Brexit can happen without this government undermining our economy, constitution and values as a country. MPs from all sides must rule out the most damaging option which is a 'no deal'. The honest truth is that the Brexit that some people in the Conservatives and some in the country want, was not on the ballot form, i.e. leaving on WTO terms. To make trade work around the world, countries will get into trade deals to reduce tariffs and this is what we have done well as part of the EU. 

Yvette Cooper, Labour, was worried that delays, drift and brinkmanship means we will crash out of the EU in 80 days' time and Parliament has a duty not just to stand by. Amendment 7 has been agreed by people who have a common concern about ‘no deal’ although they may have different views and perspectives on Brexit. The amendment does not solve any Brexit issues but provides parliamentary safeguards, she said. There are other powers the government may choose to pursue but this is our opportunity within the Finance Bill to address it. If there is deadlock, this amendment provides a way forward. This is an extremely responsible amendment, she said. ‘No deal’ is damaging to manufacturing; a local factory said to her that the costs of its imports will double in price, and another told her their European parent company will be under pressure to switch production to continental factories to avoid delays. Anna Soubry, Conservative, intervened to say this amendment will help people who rely on 'just in time' manufacturing. Cooper concluded that it is patriotic to stand up for people's jobs and contrasted that with people who say voting for this amendment is not patriotic. This amendment does not solve Brexit but it gives us a chance to calmly rule out the worst action. 

Oliver Letwin, Conservative, is another supporter of amendment 7. He said this would be just the second time he had voted against the Conservative whip. He said clause 89 was an ‘abundance of caution’ clause inspired by lawyers. He didn’t think that in itself the amendment would be likely to have a huge impact, but he was supporting it to make clear to the government that on any power in any bill relating to Brexit MPs would not allow a ‘no deal’ to occur.

Kirsty Blackman, SNP, criticised the government's failure to consult on all measures in draft. Referring to new clause 18, she said it was aimed at pushing the government to have a migration system that was evidence-led and looked at the impact on the exchequer and public services of migration policy.

Nick Boles, Conservative, said he supported amendment 7. He said that while he had voted 'remain' he found the strongest argument of the leave campaign had been that Parliament should be sovereign and should take control of all the decisions that affect his constituents. The people who had made that argument were now criticising him and other MPs for doing what they believe is right and in the national interest. He said the Conservative manifesto had said 'no deal' was better than a bad deal but had not said that it was better than any deal.

Chris Leslie, Labour, said the government was asking for a 'whopping' permission to start 'no deal' arrangements. Amendment 8 would keep the power on how to proceed with parliament. 

Robert Jenrick, the Exchequer Secretary, replied for the government. He said it was neither the government's preference nor its expectation that it would leave the EU without a deal but it was responsible to prepare for all scenarios. Clause 89 is a power to make minor, technical amendments to UK tax legislation. The government's foremost motivation was to provide certainty to taxpayers. The government had placed a list of changes envisioned by this clause in the Library of the House. This showed these changes were indeed minor. No MP had complained about any of them. All that supporting this amendment would achieve is denying taxpayers a degree of certainty. Kenneth Clarke, Conservative, intervened to ask what work the Treasury had done on the fiscal implications of 'no deal'. The minister would not be drawn. Yvette Cooper, Labour, intervened to ask the minister to confirm that the government would, if her amendment was passed, still be able to use the clause 89 powers if they accepted MPs would get a vote on 'no deal' or were willing to extend the article 50 period.

Sir Vince Cable, Lib Dem leader, offered support to amendments 7 and 8. He said they were neutral in relation to Brexit. The fiscal issues were, he said, arcane and rather gentle. His own amendment, which had not been called, was rather more brutal. He said he had been to the Portsmouth ferry port this morning and it was clear the government was totally unprepared for 'no deal', including access to the nearby naval base. 

Jonathan Reynolds, Labour spokesman, replied to the debate. He said it had been an important debate. He said there were some people for whom 'no deal' was a preferred outcome. They were wrong. 

Vote on new clause 3 - the new clause was defeated 292 - 314

Vote on amendment 7 - the amendment was passed by 303 votes to 296

Vote on amendment 8 - defeated 292 - 303

Group Three: Everything else!

(Entrepreneurs’ relief; income tax exemption relating to emergency vehicles; personal allowance and income tax thresholds; changes to capital allowances; intangible fixed assets; changes to oil activities and petroleum revenue tax; consultation on certain provisions of the Act; public health effects of wine and cider duty rates; air passenger duty; offshore tax loss; parliamentary procedure for regulations to give effect to international obligations in respect of resolution of double taxation disputes; capital gains tax in respect of certain disposals; taxation of non-UK resident companies carrying on property businesses; changes to diverted profits tax; time limits for certain assessments)

The amendments

This group includes one government new schedule, one government new clause and five government amendments. Additionally it includes 13 opposition new clauses and 24 opposition amendments

Tax thresholds and reliefs

New clause 2 (Labour) would require the Chancellor of the Exchequer to review the effectiveness of the changes made to entrepreneurs’ relief by Schedule 15. - DEFEATED

New clause 9 (SNP) would require a review of the impact on investment of the changes made to entrepreneurs’ relief which extend the minimum qualifying period from 12 months to 2 years. - NOT MOVED

New clause 10 (SNP) would require a geographical impact assessment of income tax exemptions relating to private use of an emergency vehicle.- NOT MOVED

New clause 16 (SNP) would require a distributional analysis of increasing the personal allowance to £12,750.- NOT MOVED

New clause 17 (SNP) would require a review of the effect of the changes to capital allowances in sections 29 to 34 and Schedule 12 on investment, employment and productivity - NOT MOVED

New clause 24 (Lib Dems) would require the government to assess the effects on businesses and the public finances of new capital reliefs introduced by this Act and require the government to compare these reliefs with replacing business rates with a tax on commercial land values. - NOT MOVED

Amendment 12 (SNP) would delete provisions in clause 5 removing the legal link between the personal allowance and the national minimum wage. - NOT MOVED

Amendments 2 and 3 (both government) amend schedule 15, which makes changes to the rules for entrepreneurs’ relief. The amendments add a new third test to the definition of a claimant’s qualifying public company. The amendments address and resolve concerns raised in respect of the significant uncertainties in their intended application to some commercial structures, an unintended consequence of the provisions as originally introduced. - PASSED

Amendment 30 (SNP) which would have created a new provision in schedule 12 (annual investment allowance) relating to how to calculate the maximum allowance for expenditure incurred before 1 January 2019, as part of the first straddling period, was not selected for debate by the Speaker. This amendment had been suggested in a representation from the Association of Taxation Technicians.

Amendments 34 and 35 (both SNP) would remove the retrospective effect of the new qualifying conditions for entrepreneurs relief. These amendments were suggested by the CIOT. - NOT MOVED

Avoidance or Evasion

New clause 4 (Labour) would require the Chancellor of the Exchequer to review the viability of increasing interest rates on the late payment of penalties for the promoters of tax avoidance schemes to 6.1%. - NOT MOVED

New clause 15 (SNP) would require the Chancellor of the Exchequer to produce a report on consultation on certain measures within the Act, including whether the provision was published in draft; if so, whether changes were made as a result of consultation on the draft, and if not, the reasons why the provision was not published in draft and any consultation which took place on the proposed provision in the absence of such a draft. - NOT MOVED

Other matters

New clause 6 and new schedule 1 (both government) introduce a new schedule on ‘Intangible fixed assets: restrictions on goodwill and certain other assets’. This is a response to concerns expressed by companies that the UK had become uncompetitive following a change in 2015 which denied relief for acquired goodwill and customer related intangibles.  This measure reintroduces relief in a targeted way to attract intellectual property (IP) rich business to the UK. It follows a consultation on the Intangible fixed assets regime last year. - PASSED

New clause 8 (SNP) would require the Chancellor of the Exchequer to review the effect of the changes to oil activities and petroleum revenue tax in sections 36 and 37 and schedule 14 in Scotland and the United Kingdom as a whole. - NOT MOVED

New clauses 11 and 14 (both SNP) would require the Chancellor of the Exchequer to produce a report on consultation on certain measures within the Act, including whether the provision was published in draft; if so, whether changes were made as a result of consultation on the draft, and if not, the reasons why the provision was not published in draft and any consultation which took place on the proposed provision in the absence of such a draft. - NOT MOVED

New clause 23 (Lib Dems) would require the OBR to estimate how much money would be raised by increasing all rates of income tax by 1p and freezing the higher rate threshold. - NOT MOVED

New clause 26 (cross party, lead signatories Edward Davey (Lib Dem) and Ruth Cadbury (Labour)) would require the Treasury to review the effect of the changes made by sections 79 and 80 and compare them with other legislation relating to the recovery of lost tax including specifically the loan charge provisions of Schedules 11 and 12 to the Finance (No. 2) Act 2017. - ACCEPTED BY GOVERNMENT AND PASSED

Government amendments 4, 5 and 6 amend clause 25 - Intangible fixed assets: exceptions to degrouping charges etc - PASSED

Amendment 22 (SNP) would require the Chancellor of the Exchequer to review the impact of the revised rates on cider and wine on public health.- NOT MOVED

Amendment 23 (SNP) would require the Chancellor of the Exchequer to review the effects of a reduction in air passenger duty.- NOT MOVED

Amendments 36 to 45 (all SNP) would reduce the time limits HMRC have to make an assessment of income tax or capital gains tax (Clause 79) and inheritance tax (Clause 80) to eight years, rather than 12 years, where there is non-deliberate offshore tax non-compliance. These amendments were suggested by the Association of Taxation Technicians.- NOT MOVED

Amendments 25 and 26 (both SNP) to clause 79 (offshore time limits) would mean that new section 36A of the Taxes Management Act 1970 did not apply retrospectively. These amendments were suggested by the CIOT’s Low Incomes Tax Reform Group. - NOT MOVED

Amendments 27 and 28 (both SNP) would provide for all regulations under the new power (EU double taxation directive – clause 82) to be subject to the affirmative procedure. - NOT MOVED

Amendments 17 and 18 (both SNP) would require the Chancellor of the Exchequer to review the effect on public finances, and on reducing the tax gap, of the changes made to capital gains tax in Schedules 2 and 1 respectively. - NOT MOVED

Amendment 29 (SNP) would allow UK residents to submit an amended residential property return where a capital loss on non-residential assets is incurred after the completion of the residential disposal and within the same tax year. - NOT MOVED

Amendment 19 (SNP) would require the Chancellor of the Exchequer to review the effect on public finances, and on reducing the tax gap, of Schedule 5. - NOT MOVED

Amendment 21 (SNP) would require the Chancellor of the Exchequer to review the effect on public finances of the diverted profits tax provisions in the Bill. - NOT MOVED

The debate

Anneliese Dodds, the shadow financial secretary, introduced new clause 2 and other Labour proposals in this group. NC2 requires a review of the likely efficacy of the government's changes to entrepreneurs' relief in this Bill. The relief costs £2.7 billion a year. The opposition are committed to properly reviewing tax reliefs as foregone spending to make sure they are properly targeted. The government have carried out no such review, she said. We need to know whether the government's reforms in this Bill are anythign other than cosmetic, she said. She said there were a number of measures in the Bill where those with the broadest shoulders were exempted from their full contribution to taxation. She cited three: a proportional rather than absolute value is used to exempt non-residents from the anti-enveloping rule which means they will be less likely to be subject to CGT than residents; a new discriminatory trading exemption for CGT only available to foreign investors; and a longer investigation time limit for offshore time limits for income and inheritance tax than for corporation tax, privileging those able to incorporate. She also contrasted the level of interest paid on penalties incurred by tax avoidance promoters compared to the level of interest on student loans.

On the loan charge, she said that the activities targeted by the loan charge were a form of tax avoidance but the way the government had dealt with them was unfair. For many years the government failed to take action, before clamping down purely on taxpayers and doing little to nothing to the enablers of this form of tax avoidance. She hoped the minister "will be clear - he has talked about the promotion of defective schemes. When taxpayers are described as having done something illegal, which is what HMRC has said about the behaviour of those subject to the loan charge, why will this government not say that those who have promoted those schemes also promoted something illegal; they use this language about defective schemes - I'm sorry but that is pusillanimous... We have to have a situation where those who unwittingly were led into schemes that are now described as illegal can themselves take action against those who wrongly advised them. So I hope that... he will accept this amendment. If he doesn't, I hope that he will accept... having a meeting with me... to talk about this issue, to talk about this issue, to talk about how we can better help those people who have ended up in a very difficult situation - some of them with their eyes wide open, but many, many of them not realising the impact of these schemes."

Nicky Morgan (Conservative) spoke about new clause 26. While she wouldn't be supporting the amendment she did want to put some concerns on the record on behalf of the many people who had contacted the Treasury Committee - of which she is chair - about the measure. She hoped ministers would listen and engage. She said the committee had raised concerns about the loan charge in sessions with the Chancellor, with HMRC and with CIOT. It is right that people should pay their fair share of tax on their earnings, she said, and we do not support anything which seeks to get around that. It is right that HMRC should act swiftly and firmly to close schemes down. "But tax law sets out time limits within which HMRC can open enquiries and make tax assessments, and normally those time limits take account of whether a taxpayer has taken reasonable care to comply with their tax obligations or has been careless or has deliberately decided not to comply. These time limits are seen as valuable taxpayer protections, giving a degree of certainty that takes appropriate account of taxpayer behaviour. And so it is concerning to me... that HMRC's contractor loan settlement opportunity requires people who want to put their affairs straight to waive those protections with the threat of the loan charge looming over them. It is not clear why it is necessary for that settlement opportunity to pressure people into paying tax for years which HMRC calls 'not protected' - that is years where HMRC are out of time, even though they may have had the information they needed to open enquiries or raise assessments at the proper time." Another Conservative MP intervened to support Ms Morgan's remarks. Ms Morgan said it was troubling that tens of thousands of people who want to settle with HMRC before the 5th April deadline have not received calculations from HMRC. "They need to know how much they have to pay, and I would ask Treasury ministers to make clear what will happen if those people do not hear from HMRC by 5th April."

Kirsty Blackman, SNP Treasury spokesperson, highlighted some of the amendments tabled by her and her colleagues. With regard to changes to entrepreneurs' relief they have questions about whether they will achieve what they are intended to. In relation to new clause 17 she observed that since the Brexit referendum vote over $1 trillion had been pulled from UK equity funds. That was something the government should be noting. New clauses 11 and 14 seek information on the government's consultation on the clauses in the Bill - where they didn't consult on draft clauses, what was the reason for this? She noted the new schedule tabled for the Bill at report stage, which was somewhat unusual. It would have been helpful if it had been brought forward at any earlier stage, she said. She then turned to the removal of the link between the personal allowance and the minimum wage, saying the retention of a level of protection could have been left in, which would be significant if we had a future government which intended to reduce the personal allowance. 

Anne Main (Conservative) criticised levels of business rates. She then turned to new clause 26 relating to the loan charge. She said she had serious concerns about the loan charge which she views as retrospective taxation. She gave a couple of examples from her constituents. One is being pursued for £900,000 by HMRC. He has told her that he has tried to settle the case with HMRC for £700,000 but it has been rejected. "There are many people who find themselves in tax difficulties who manage to make negotiated settlements with HMRC, and it appears to me that this particular group of people are being treated very unfairly and are being left in a very difficult situation of not knowing how much they owe and how quickly they will have to pay it." There is a report of over 100,000 people being pursued for unpaid tax, she said. "No-one is disputing people should pay tax that is due but the way this is being requested and the manner in which they have been so badly advised, and the way that they have never been able to check out if anything they were doing was illegal because they were being advised that it wasn't illegal at the time, and it's a loophole that is now being closed..." At this point another MP intervened to say a constituent of his had been affected. Ms Main then continued: "I've had constituents who say HMRC was made aware of these arrangements but no objection was raised until many years later. That has got to be fundamentally wrong. What more due diligence can any person do?" She added: "There is a clear ambiguity over the law at that time... the fact that people cannot negotiate a reasonable settlement given that they acted in good faith at the time and are now being pursued to the point of destruction of their careers, their homes, their family lives, their marriages, is completeley unacceptable." She said a review was needed and she would support the new clause if it is put to the vote.

Sir Edward Davey (Lib Dem), the lead signatory of new clause 26, said he supported the Treasury's aim of closing tax loopholes and stopping tax avoidance. The introduction of the loan charge to stop future abuse was correct and he did not seek to stop the charge from applying from 2016 when the charge was legislated for. New clause 26 uses an 'inelegant' mechanism sue to the restrictions of the Finance Bill process, proposing a review which, he believes, would reveal the unfairness of the retrospective nature of the current loan charge legislation. He argued that this was legislation was even more severe than legislation for the collection of lost tax elsewhere in the tax system. He said the measure offended against the rule of law - it was the kind of measure that had led the barons to rebel against King John, leading to Magna Carta. "It is simply not acceptable for a government to introduce a law that makes illegal something someone did years ago when at that time the action was considered legal," he said. A Labour MP intervened to offer her support for the new clause. Sir Edward continued, saying MPs should "remember that these people, our constituents, were given professional tax advice, and behaved in a way that they thought was right and lawful at the time".An SNP MP intervened to say the real culprits are the firms who designed and sold these schemes, some of whom are still trading and operating today. Sir Edward concurred. A Conservative MP intervened, saying the measure went against all fairness and surely would not survive any challenge in the ECHR. Wes Streeting MP (Labour), a member of the Treasury Committee, said he had found HMRC's evidence to the committee unconvincing. Another Conservative MP intervened in support of Sir Edward, calling the loan charge 'unjust'.

Bambos Charalambous (Labour) spoke in favour of new clause 2. He said entrepreneurs' relief was only benefiting the very wealthy and should be reviewed. He also questioned cuts to alcohol duty, citing the public health impact. He asked the government to review the impact of the duty freeze. On new clause 26, he said the loan charge was 'brutal'. Having met with constituents affected by this he said it was clear that HMRC had adopted an approach of 'shoot first, ask questions later'. 

The minister, Mel Stride, replied to the debate. He focused on new clause 26, which would require the government to lay a report before the House reviewing the effect of changes made by clauses 79 and 80 no later than March 30th 2019. While such a report would come too soon for the measures to have a real effect, the government remains committed to setting out the rationale for its policies as well as their impact "and in that spirit we will not be opposing new clause 26". He described the schemes targeted by the loan charge as "gross aggressive tax avoidance", setting out how they typically work. On the issue of whether the charges are retrospective, "they are not retrospective, in the sense taht, at the time that they were entered into, these schemes were defective... What I would also say is these schemes have been taken through the courts on many occasions - a scheme used for the benefit of Rangers Football Club was taken to the Supreme Court... and found to be defective... As I have said we will, as a government, accept this new clause. It is absolute right that when HMRC deals with the public, that they have a strict duty of care, they have a duty of proportionality, they have a duty to be as sympathetic as they can be, relative to the circumstances of those with whom they are dealing. I have, in my dealings with HMRC, made those points most forcefully clear." HMRC have recently said that for those earning £50,000 or less, that they will automatically be granted a minimum of five years time to pay as an arrangement to settle their affairs. For those who come forward before April there is, in effect, no penalty as such, they will simply be required to pay that tax which is due in the past, and was always due in the past, plus the interest that was rightly applied.

On amendment 12, relating to the minimum wage lock, he said that because the government have increased the personal allowance to £12,5000 for every year of the forecast period there is no necessity for that lock in future. Kirsty Blackman had talked about what might happen beyond that point, but that is a matter for a future government and this parliament cannot bind its successors.

Finally, on the proposed entrepreneurs' relief review, the minister said a review had been published in December 2017. It showed that a third of those in receipt of ER went on to reinvest in new businesses. Half of those aware of ER said it did significantly influence their decision to go into entrepreneurial activity.

In the limited time available the minister was not able to comment on any of the other amendments and new clauses, including those tabled by the government themselves.

MPs voted on new clause 2 - it was defeated by 312 votes to 289.

Government amendments 2 and 3 were agreed without opposition.

Government new clause 6 was agreed without opposition.

MPs voted on new clause 18 - it was defeated by 311 votes to 288.

New clause 26 was agreed without opposition.

Government new schedule 1 was agreed without opposition.

Government amendments 4-6 were agreed without opposition.


This concluded the report stage. The deputy speaker then briefly suspended the House to take a decision about certification. She then informed the House that she had completed certification of the Bill. She has confirmed the view expressed in the Speaker's provisional certificate issued on Jan 7th. Copies of the final certificate will be made available on the parliamentary website.

A consent motion is required for the Bill to proceed. Copies of that have been made available on the website and elsewhere. The minister indicated that he would move the consent motion. The House immediately resolved itself into the legislative Grand Committee England, Wales and Northern Ireland. MPs then approved the consent motion without debate or opposition.

The House then became the House of Commons again.

Third Reading debate

The debate

The Financial Secretary, Mel Stride, moved that the Bill be read a third time. He put the Bill in the context of the government's economic achievements since 2010 and praised the impact income tax cuts and the continuing fuel duty freeze would have on middle and low income taxpayers. He said that the Bill had a number of measures aimed to increase business investment.

Anneliese Dodds, for Labour, said it had been a Finance Bill of lows and highs. One high was government "finally listening,,, in relation to the loan charge". Another high was "this House seizing the initiative to act to protect our country from the negative economic consequences of a 'no deal' Brexit, and indeed from the negative consequences for our safety and resilience". She noted that the government defeat on Yvette Cooper's cross-party amendment was the first government defeat at this stage of a Finance Bill since the summer of 1978. She said this had happened in a context of Conservative ministers acting to prevent the Commons from substantively amending Finance Bills. This had become a 'new norm' reflecting a lack of confidence from the government in arguing its convictions. She criticised the insertion of a new schedule at a late stage without any information about the cost. 

Kirsty Blackman, for the SNP, started by welcoming three things in the Bill - the transferable tax history for oil and gas fields; clause 92, which has been added from an SNP amendment requesting a review of the effect of provisions on reducing tax avoidance and evasion; and clause 93, another clause a result of an amendment, relating to fixed odds betting terminals. Turning more negative, Ms Blackman described the process for this Finance Bill as 'shambolic', citing the government's failure to consult on all the measures it should have done, as well as measures in this Bill brought forward to correct errors in previous Finance Bills. She said the UK government should look at the progressive tax changes being made in Scotland. Better scrutiny is required - she repeated her call for evidence sessions in Finance Bill committee.

The Bill was read a third time and passed without opposition. The debate concluded at 8.46pm.

The Bill will next be debated briefly in the House of Lords but will not be amended further.