Carbon, landlords and helpline on agenda for last Treasury questions of 2023

Other questions covered a wide range of topics, including tax relief for local authorities, support for small businesses, plans for a carbon border adjustment mechanism and the government's approach to reducing taxes.

Business and landlord taxes

Asked about support for small businesses, the Financial Secretary, Nigel Huddleston, explained that the government already provides tax reliefs benefiting SMEs, such as annual investment allowance and employment allowance. Additionally, through the British Business Bank programmes the government has supported investments in SMEs.

The minister said extending the retail, hospitality and leisure business rates relief was worth £2.4 billion. Additionally, “by freezing the small business multiplier for a fourth consecutive year, we will be protecting more than a million properties from a multiplier increase.”

On reducing corporation tax ‘to support all businesses big and small’, the Chancellor said that 70% of trading businesses only pay the lower corporation tax rate of 19%, covering the majority of small businesses.

Selaine Saxby (Con) asked about the steps the Treasury has taken to reduce differences in the level of taxation between landlords of long and short-term lets. Huddleston highlighted that the government has provided a different income tax regime for short-term lets compared with long-term lets if “they qualify as furnished holiday lets, for which there are stringent conditions”.

Saxby argued that the changes to landlord tax relief exclude holiday lets. She wondered if the Treasury is planning to level the tax playing field to encourage long-term landlords back to the market.

The Financial Secretary responded that while the government will keep the tax treatment of property landlords under review, it has already introduced a registration scheme for short-term lets in England.

Personal taxes

Louie French, Caroline Ansell and Wendy Morton (all Con) enquired about the Treasury’s steps towards reducing taxes. The Chancellor, Jeremy Hunt, responded that “the autumn statement this year was able to deliver the biggest package of tax cuts to be scored since 1988” thanks to the difficult decisions that the government has taken on inflation and debt.

While French welcomed the measures announced, he raised concern that £28 billion-a-year of unfunded spending commitments “would likely see taxes rise and lead to higher interest rates”, if the Labour Party come into power next. Hunt said by driving up interest rates Labour’s borrowing plans would be “a back-door tax rise on families with mortgages”.

Ansell argued that the tax burden on single-earner households “puts the choice to be a stay-at-home parent beyond the reach of too many”. She wondered if any analysis has been undertaken on the transferable allowance: “At up to £252 per annum, it is currently not designed to facilitate that choice”.

Hunt pointed out that the marriage allowance is currently £1,260 per year, and that it has been fixed at 10% of the personal allowance since 2015. He believed that the best thing the government could do for working families is to bring down their taxes.

Harriett Baldwin (Con), who chairs the House of Commons Treasury Committee, raised concern about the sudden placing of restrictions on the self-assessment helpline and said: “Our most law-abiding citizens are trying to get their taxes right, so what advice can my hon. Friend the Financial Secretary to the Treasury give to them as to how they can contact HMRC”.

In response, Huddleston recommended people use the HMRC app and noted that some issues such as getting a tax code or national insurance number can easily be resolved digitally. He added that “People will still be able to call in, but we need to redeploy resources away from very simple questions towards those most in need, which will help those who are digitally unaware”.

The Labour MP, Valerie Vaz, asked the Chancellor to confirm how much higher the tax burden is forecast to be at the end of this parliament in comparison to its beginning. Hunt responded that “it will be lower at the end of the scorecard period than it would otherwise have been”.

On the number of middle-income taxpayers who have been paying the higher rate of tax since 2019, the Chancellor promised to write to the Labour MP with the exact numbers. In the meantime, he argued that for individuals on low incomes their post-tax real income has risen by 30% since 2010.

David Davis (Con) expressed concern about Kaye Adams’ court case with HMRC and wondered if the government is planning to review IR35.

The minister assured him that they will carefully analyse the outcome of this tribunal before considering future steps and explained: “the off-payroll rules ensure that people who work like employees, but through their own limited company, are taxed like employees, creating a level playing field for other workers.”

Indirect taxes

Another Conservative MP, John Penrose, enquired about the impact of a carbon border adjustment mechanism (CBAM) in the form recommended by the Commission for Carbon Competitiveness on fuel duty.

The Exchequer Secretary explained that the UK CBAM will place a “carbon price on some of the most emissions-intensive industrial goods imported to the UK” and will be implemented from January 2027.

Penrose welcomed the measure, but said “some of the details look troubling”. Davies pointed out that the government will engaged with business to ensure that they are well prepared and next year’s CBAM consultation will provide more information, including its timings.

Regarding shifting the VAT threshold upwards, the Financial Secretary acknowledged that accounting for VAT can be a burden on businesses and confirmed that the VAT threshold would be maintained at its current level until 31 March 2026.

Cat Smith (Lab) wondered whether the government would consider introducing landfill tax relief for local authorities. The Exchequer Secretary to the Treasury, Gareth Davies, said that the government is currently reviewing landfill tax and reforming current exemptions. In the meantime, a ‘land remediation pathfinder fund’ provides £78 million of targeted support to local and mayoral authorities.

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