MPs debate Finance Bill resolutions

3 Nov 2018

MPs today debated the resolutions accompanying the autumn 2017 Finance Bill. A live blog was posted here as the debate proceeded.

The resolutions can be viewed in today‚ s Order Paper (pages 5-12). The Government's notes on these resolutions can be viewed here.

Scroll down for background on the Finance Bill (No.2) 2017 and the resolutions being debated today.

Summary of Debate and Votes

All 48 resolutions were passed by MPs. Three of them were pressed to a vote by Labour: resolution 4 on termination payments; resolution 13 on Business Investment Relief; resolution 22 on trading profits taxable at the Northern Ireland rate. All three of these areas were the subjects of repeated criticism by Labour MPs during the debate. In summary, Labour's critique on termination and related payments was that the changes went beyond targeting abuse to target workers losing their jobs, including those who had been discriminated against. Labour MPs argued that Business Investment Relief was an unjustified tax break for non-doms, for whcih the Government had failed to provide supporting evidence. The concern on Northern Ireland corporation tax was that the proposed changes could enable N Ireland to be used as a 'brass plate' tax haven by corporations. The SNP spokesperson, Kirsty Blackman, shared some of Labour's concerns and also raised concerns over the proposal moving the burden of proof on errors in taxpayer documents. Additionally she argued for Finance Bill committee to take oral evidence.

For the Government the Financial Secretary said the Finance Bill would be published on Friday and debated next week. He defended the measures against claims that they were being rushed through. He said that a resolution relating to landfill tax had been dropped because the previous proposal will no longer be taken forward in the current Bill. HMRC have been consulting on illegal waste disposal and on 13th Sept will set out proposals in this area, which will appear in the post-November Finance Bill. The minister said Making Tax Digital would only be extended beyond VAT when it was clear the process is working well and at the very earliest in April 2020.

The only other Conservative speaker was new Treasury Committee chair, Nicky Morgan, who joined MPs from all sides in welcoming the changes to MTD. The new TC will want to explore costs and benefits for MTD fully, she said. She was concerned at the extensive use of retrospectivity in the resolutions, though she understood the reasons for its use. She also identified scrutiny of secondary legislation as an important area. In response to an intervention from the SNP spokesperson suggesting oral evidence sessions for FB committee, she speculated that this may be a matter for business managers, but agreed that more constructive input on legislation was a good thing.

Debate on Finance Bill resolutions ‚ Wednesday 6 September 2017 (live blog)(Notes reflect debate as heard by author and transcription errors cannot be ruled out)

2.50pm Deputy Speaker The Deputy Speaker told MPs that the 48 resolutions would be debated together.

2.51pm Financial Secretary to the Treasury Mel Stride The FST explained the process whereby many of the clauses in the pre-election Finance Bill were dropped to be reintroduced after the election. These resolutions ‚ pick up where we left off‚ , he said. There had been substantial consultation on these measures including the publication of draft clauses. This open and consultative approach is an important part of the tax policymaking process, he said. He was asked whether the resolutions were covered by the ‚ deal‚ between the DUP and the Conservative Party. The FST did not answer directly, saying only that the process would be the same as any consideration of ways and means resolutions. The Government will publish draft clauses on September 13th for the next Finance Bill (which will itself be published after the November Budget). He said that a resolution relating to landfill tax had been dropped from the Order Paper because the previous proposal will no longer be taken forward in the current Bill. HMRC have been consulting on illegal waste disposal and on 13th Sept will set out proposals in this area, which will appear in the post-November Bill. He then provided an outline of the measures that would be in the Finance Bill, including changes to corporate interest deductibility and loss relief, anti-avoidance measures and ending permanent non-dom status for those permanently resident in the UK. There was also some 'knockabout' on Labour's tax plans. FST challenged over the amount of retrospective proposals. Explains this results from impact of election on Bill timetable. Turns to Making Tax Digital - "moving to a digital system will enable us to address the £9 billion cost of taxpayer errors". FST says he has heard concerns of business and will only extend beyond VAT when clear the process is working well and at the very earliest in April 2020.

3.13pm Peter Dowd, Shadow Financial Secretary Shadow FST focuses his early remarks on economic and political uncertainty. He finds it odd that we are standing in September debating 'summer Finance Bill' which was supposed to be passed before the recess. Blames the delay on 'chaos' and a 'zombie parliament'. Second reading of Finance Bill will be only four days after Bill's publication, he says (suggesting it is set for Tuesday next week - tomorrow's Business Statement should confirm this). Ranges widely with his remarks, saying the Government is failing to meet the challenges the country faces, eg on productivity, or to address the 'black hole' in the public finances created by Chancellor's u-turn on national insurance and what he called the 'bung' to the DUP, among other things. Giant loopholes created for offshore trusts in non-dom proposals, he argues. "This Government is on the side of tax dodgers, not taxpayers," he says. Cuts to HMRC will ensure measures trumpeted by the minister fail before they even begin, he adds. Business investment relief changes - little evidence this relief has been effective in creating extra investment; expanding this relief just a giveaway to non-doms, he argues. Devolving CT rates to Northern Ireland - won't reopen devolution of the tax. But changes proposed would enable N Ireland to be used as a 'brass plate' tax haven by corporations.

3.30pm Nicky Morgan, Chair of Treasury Committee First speech as incoming chair of TC. Pays tribute to predecessor Andrew Tyrie. Looks forward to working constructively with ministers. Early remarks cover broad economic landscape. Stresses importance of economic openess - to trade, investment and migration. Turns to resolutions. Refers to 2011 TC principles for tax policy. Very interested in how tax policy is made and work HMT is doing on tax base. Two of those principles - certainty and stability. Alarming that 27 resolutions are remarked as having retro effect. Retrospectivity should be applied sparingly (though understands reasons for its use - 'on this occasion retrospection not as bad as it might have been'). Making Tax Digital - no-one objects to digital interaction but concerns were raised about initial proposals. Agrees with intervener that people do need someone to talk to - either face to face or a 'really good' phone system. "We all have cases where people have found it very frustrating to get hold of HMRC... It is something we should look at further." VAT a sensible area to start with MTD. Intervener suggests Govt should allow firms to opt in to voluntary digital record-keeping. Morgan is sympathetic to suggestion. New TC will want to explore costs and benefits for MTD fully. Identifies scrutiny of secondary legislation as important area. Hope TC and others will get more opportunity to scrutinise Budget measures than we got in March. Kirsty Blackman (SNP) suggests oral evidence sessions for FB committee. Morgan speculates this may be a matter for business managers, but more constructive input on legislation a good thing.

3.43pm Kirsty Blackman, SNP Treasury Spokesperson Repeated her support for FB committee taking oral evidence from external organisations. Welcomed some of the resolutions, eg changes around grassroots sport, access to legal advice, changes to petroleum revenue tax, taking on enablers of avoidance schemes. VAT refund to museums and galleries order expected but not yet been laid. Worries museums and galleries may lose out. Scottish Govt's programme for government announced yesterday - positive on electric vehicles. Pleased to see changes to make electric vehicles become more affordable in this Finance Bill. Concerned about lack of evidence on c13 - business investment relief. Making it easier for non-doms to benefit from that status in a way that someone living next door to them without that status could not. "I've not seen evidence as to why they want to increase use of this scheme", she says. Interested in seeing more gov figures around this. Errors in taxpayer documents - includes changes to ensure people who have sought tax advice may be in trouble for having errors in their documents. A more difficult thing for people to understand. Concerned that some people who have tried their best to stay on right side of the law and to fill in forms appropriately will be caught accidentally by this. Asked govt to look at this. Changes to gaming duty - when govt putting tax on alcohol to discourage negative behaviour this seems to be reducing amount of gaming duty paid. Concerned about this. Pleased minister made changes to digital reporting. Will be scrutinising going forward. Closing of tax offices a concern. When filling in forms for MTD individuals will need to phone tax office. Not sure there is enough support for businesses doing this. Not fair that Scottish police and fire services pay VAT when, eg, Highways England, do not. Customs officers - would like to see govt scrutinise what's happening at ports more effectively to ensure appropriate checks and appropriate tax being paid. Concerned about resolution 4 around termination payments. Not seen evidence this is as significant an issue as govt are suggesting.

3.58pm Luke Graham (Con MP for South Perthshire) Quarterly reporting - needs to be as easy as possible for business to operate. VAT for Police Scotland - will be asking govt to review this.

4pm Kevan Jones (Lab MP for North Durham) Landfill tax - a massive area where proper regulation needed. Massive amounts not being paid; funding organised crime; huge costs for local authorities. On a par proportionately with alcohol and tobacco tax evasion. Also concerned about what is going into landfill sites. "No checks on what is happening." Suspicious about number of fires at waste transfer stations. Made a number of suggestions to tackle fraud in this area. Air passenger duty. A concern to the north east that Scottish govt air departure tax will have an impact on airports such as Newcastle. If Scots abolished altogether it would have very damaging impact on Newcastle. Closure of tax offices - gave example of constituent in business who, if she had a problem, used to get into her car and go and meet a known person. Before we roll out MTD, we need to make it easier for small businesses to get help; relationship managers approach would help. Criticised over-zealous approach taken by HMRC to small business. Gave constituency example - bathroom showroom. HMRC 'using sledgehammer to crack a nut'. Last year had visit from HMRC saying he is now responsible for VAT payable by plumbers, etc he contracts to. Now being hit by tax bill for £24K - 'a little harsh'. Jones has written to Chancellor twice on this. Is HMRC suggesting that if I hire someone to do some work on my behalf, that I should pay their VAT? he asked. Drew contrast with landfill operators and 'the Googles of this world' who, he said, were being ignored by HMRC when it comes to enforcement. Cosmetic surgery - collection of VAT. Is it payable on cosmetic procedures? Sought clarity from Govt of what rules are. You don't pay VAT on medical procedures, but these are not (usually) medical procedures. He drew a distinction between cosmetic surgery and, say, facial reconstruction after an accident. Puppy farming - organised crime getting involved. Cited Dogs Trust study. 'Clear this is another new way of getting lots of money without paying taxation'. Stressed importance of HMRC co-operating with other agencies. If you want to stop this trade, one way would be to use the tax system. Large amounts of cash changing hands.

4.54pm Wes Streeting (Lab MP for Ilford North) We live in 'a revolutionary moment' said Streeting, citing the economic crash, Brexit and the technological revolution. But, he said, UK Government is just patching with the measures in the resolutions. Indicated that he has been re-elected as a Labour member of Treasury Committee. Making Tax Digital - no doubt that there are many benefits for Revenue and, potentially, business of digitisation, but serious concerns about impact of unintended red tape and bureaucracy on SMEs. Pleased to see concerns of TC taken on board and deadline moved back. Nonetheless some further cautionary notes that ministers should take into account. Will be looking to implement MTD for VAT in spring 2019 alongside Brexit; little hope of smooth Brexit; idea that business will be wrestling new Customs checks, etc. and get MTD on top... Tax avoidance - 'sometimes a real sense of detachment between those who've benefited greatly from the economic order as it is and those who have been on the sidelines'. Claimed govt rhetoric divorced from reality - these resolutions still include measures which enable non-doms to get advantages not available to UK-domiciled. Responding to an intervention from Kevan Jones, agreed that 'sweetheart deals' with non-doms and others should be public and transparent. Diverted profits tax - 'so-called Google tax' - 'Google barely paid a penny'. HMRC insufficiently accountable to taxpayers - ministers should take a far tighter grip on what is going on, making sure conduct in line with constituents' expectations; resource HMRC sufficiently to implement policy as intended. Treasury Committee - there is provision for a sub-cttee to look at HMRC work; we should consider using that. From phone service through to resourcing, a 'serious piece of work to be done around performance of HMRC'. People feel that the link between hard work and the rewards of hard work has been weakened. This has a corrosive impact on politics itself. He suggested changes to N Ireland corporation tax might be due to Conservative dependence on DUP votes. Business investment relief - 'this particular measure (resolution 13) covers a special category of business investment which benefits non-doms.' 'This does seem to be particularly unfair.' 'If the govt is serious about attracting foreign investment there are better ways to do it.' Resolution 4 tightens income tax treatment of termination payments. People 'feel injustice about the way the rules are rigged'. Concerned that the measure narrows the scope of tax relief on termination payments. This measure goes beyond targeting abuse to target workers losing their jobs, he argued, calling this 'an outrage'.

6.04pm Ruth George (Lab MP for High Peak) Argued the Finance Bill would make society more unequal. Focused her remarks on termination payments and business investment relief. More than 20 years ago (as a teenager) she worked as a tax accountant for a firm specialising in advising non-doms. She felt sorry for non-dom clients who had to stay out of UK for a set number of days in each tax year. Clients had to plan personal arrangements around those limits. 'That is no way for people to live their lives.' Contrasted generous treatment of non-doms with ungenerous govt treatment of disabled people. She quoted claims from the website of a firm of investment advisers about the attractiveness of BIR. 'Do we really need more overseas investors increasing our property prices?' she asked. Suggested govt may have designs on the £30,000 tax-free limit for termination payments. Asked for reassurance they would not cut it. Discrimination cases - 'taxation of their compensation payment will add financial insult to their injury'.

6.25pm Bambos Charalambous (Lab MP for Enfield Southgate) Attacked 'tax avoiding corporations' who 'choose where they pay tax, if at all'. Quoted Oxfam figures on cost of tax avoidance to developing countries. Called for more resources for HMRC.

6.28pm Steve McCabe (Lab MP for Birmingham Selly Oak) Also took up the issue of termination payments. 'If this is the right thing to do shoudln't we decide that [not HMRC]'? Suggested it was 'another [power] grab by government'. Business investment relief - called on govt to place in Commons Library 'details of where this investment is going'. 'Otherwise it just looks like another attempt to give someone a tax cut on the side.' Launched a wider critique of the Conservative approach to non-doms - 'so many exclusions, so exemptions, so many get-out routes'. Suggested lobby groups for those affected have excessive influence. Suggested Northern Ireland decision on corporation tax 'could not but have an impact on corporation tax in the rest of the country'.

6.31pm Anneliese Dodds (Labour Shadow Treasury Minister) Attacked 'piecemeal' and 'ill thought through' measures. 'This House is being rushed into a second reading of these measures just next week.' Non-doms - 'some of the measures proposed here open up new hidden back doors for non doms to shift their tax responsibilities' - cited Business Investment Relief. Less than one per cent of non-doms currently appear to be taking up that relief. Without information on which businesses and sectors are benefiting from this relief, very difficult to assess it, said Dodds. Remittance basis charge dwarfed by amount high net worth individuals would pay without it. 'Non-dom system seems, for many, just a means of enabling tax avoidance'. Tax avoidance - criticised enablers legislation for not including 'the really strong proposals that experts called for' and which were initially in the proposals. Injury to feelings payments becoming taxable - 'churlish' of govt to focus on those affected, 'penny pinching is being focused on discriminated-against workers... rather than attempting to face tax avoidance head on'. Also raised HMRC resourcing and cuts in staff numbers. Suggested the govt have an 'ideological commitment' to reducing size of HMRC. Making Tax Digital - we need HMRC staff to help people through the process.

6.44pm Mel Stride (Financial Secretary to the Treasury) Responding to the debate, the minister rebutted claims the Bill was being rushed through. On non-doms he said: 'we are abolishing permanent non-dom status', adding 'if funds are taken out of trusts they will be taxed in the normal way'. The govt expects to raise a further £1.5 billion over the next five years from non-doms as a result of this Bill. On termination payments, he stressed that the £30,000 tax-free allowance would still be available. The govt did not intend to change it and any change would be subject to an affirmative resolution. But 'this situation is being used as a vehicle for tax avoidance' and the govt were therefore right to crack down on it. He defended the Government's record on tackling tax avoidance and evasion, citing increased monies raised and numbers of prosecutions. He said the UK tax gap was one of the lowest in the world and lower than during every year that Labour was in office. Responding to Nicky Morgan's remarks he said the work of her predecessor (Andrew Tyrie) had contributed to the Government's changes to Making Tax Digital. Responding to Kirsty Blackman he thanked her for welcoming some of the Bill's measures. Responding to Wes Streeting's remarks he said it would be dangerous for politicians to get involved in the tax affairs of individuals. He said changes to Business Investment Relief should not be criticised - 'this is money coming into this country'. Reaching his conclusion the minister reeled off a long list of tax reliefs and other advantages enjoyed by the wealthy and big business under Labour which the Conservatives had stopped since 2010.

6.58pm Votes The resolutions were put to the House. Resolutions 1-3 were passed without a vote. Resolution 4, on termination payments, was subject to a vote. It passed by 317 votes to 276. Resolutions 5-12 were passed without a vote. Resolution 13, on Business Investment Relief, was subject to a vote. It passed by 320 votes to 287. Resolutions 14-21 were passed without a vote. Resolution 22, on Trading profits taxable at the Northern Ireland rate, was subject to a vote. It passed by 320 votes to 249. Resolutions 23-48 were passed without a vote. Thus all the resolutions were passed.

Finance Bill (No. 2) 2017 - Background

In April 2017 the Government introduced a Finance Bill to implement, in the main, measures announced in the March 2016 Budget and consulted on in the intervening 12 months. The calling of a snap general election required the Bill to be rushed through with committee stage and third reading compressed into a single day.

During the proceedings the Government deleted 72 out of 135 clauses and 18 out of 29 schedules, leaving the residual Bill (now an Act) only 148 pages long compared to the original 762 pages. This was in line with a call by CIOT in a letter to the Chancellor (see press statement), copied to the Shadow Chancellor (changes are negotiated between government and opposition), sent the previous week. Clauses dropped included those on Making Tax Digital (MTD), corporate loss relief and interest deductibility, VAT in relation to fulfilment houses and penalties for enablers of defeated tax avoidance schemes. A full list of what was kept and what was dropped can be seen here.

Finance Bill (No.2) 2017 (initially referred to by the Government as the Summer Finance Bill) will be published on Friday 8 September (with explanatory notes the following Tuesday). It will pass through Parliament during the autumn and is thought likely to get Royal Assent during November. The Government confirmed in July that the Bill will contain the provisions withdrawn from the pre-election Finance Bill. It very strongly implied that all of the provisions withdrawn will return.

The Government state the Bill will legislate for policies that have already been announced. This appears to rule out new measures being sprung on us, though does not necessarily rule out some previously announced measures (e.g. in Budget March 2017) being added. However given that there will be a further Finance Bill in December specifically to implement these measures (which are fairly limited in number anyway) that seems unlikely.

For further information on the July announcements ‚ including significant changes to Making Tax Digital - and updated draft legislation published at the time click here.

Prior to Finance Bill (No.2) 2017 being presented, MPs must approve a series of Ways and Means Resolutions relating to the Bill. Normally these resolutions are debated at the end of the annual Budget debate but the changed timetable due to the general election means they are getting a debate of their own now. These resolutions need to be passed before the Bill can be published.

George Crozier CIOT Head of External Relations