Finance Bill 2021-22 Public Bill Committee (Parts 4 and 5) preview

Public Bill Committee - background

Public bill committee is the stage where the bill is debated and agreed clause by clause by a committee of MPs. Amendments and new clauses can be tabled by any MP on the committee but, in the absence of an amendment of the law resolution, the scope for amendments is strictly limited to what is authorized by the specific resolutions on which the bill is founded. (More detail on this in this House of Commons Library paper if you are interested.)

The committee hearings were scheduled as follows:

• Tuesday 14 December – sessions 1 and 2 (morning and afternoon session)
• Wednesday 5 January – sessions 3 and 4 (morning and afternoon session)
• Tuesday 11 January - sessions 5 and 6 (morning and afternoon session)
• Thursday 13 January - sessions 7 and 8 (morning and afternoon session)

It is likely that not all sessions will be needed.

The following MPs have been appointed to the committee (backbenchers unless indicated):

Conservatives: Stuart Anderson, Rob Butler, Lucy Frazer (Financial Secretary), Richard Holden, Paul Howell, Andrew Jones, Cherilyn Mackrory, Alan Mak (government whip), Jerome Mayhew, Helen Whately (Exchequer Secretary)

Labour: Tonia Antoniazzi, Florence Eshalomi, James Murray (Shadow Financial Secretary), Abena Oppong-Asare (Shadow Exchequer Secretary), Liz Twist (opposition whip)

SNP: Alison Thewliss (Lead Treasury spokesperson), Richard Thomson (Treasury spokesperson)

MPs proceed through the clauses in numerical order (normally – occasionally this is varied), excluding the clauses which have already been debated (and agreed) in Committee of Whole House. These are typically the most controversial clauses, selected by the opposition for debate on the floor of the Commons chamber. Schedules are debated and voted on with the clauses to which they relate. Amendments are debated and voted on with the clauses to which they relate. New clauses may be debated with a clause to which they relate, or, if they do not relate closely enough to any existing clause, at the end of the committee stage. Regardless of when they are debated new clauses will be voted on at the end of the committee stage.

MPs will resume debate at 3pm on Wednesday 5 January at the start of part two of the bill, which covers the Residential Property Developer Tax. Parts one and two of the bill are covered in our first public bill committee preview. Since this was published Labour have tabled new clause 18, which will be debated with the RPDT, and would require the government to review the RPDT each year in order to assess the revenue it has raised and also what revenue it would raise, and the other wider effects it would have, at certain higher levels. (NB. Labour’s new clause 19, seeking a review of the impact of increasing the RPDT to discourage certain charges on holders of long leases, has not been selected for debate.)

Part three of the bill relates to the Economic Crime (Anti-Money Laundering Levy). This was covered in committee of whole House debate so will not be debated again at public bill committee.

CIOT, our Low Incomes Tax Reform Group (LITRG) and our sister body the Association of Taxation Technicians (ATT) have made a number of representations to the committee on the clauses covered in this briefing. We are asked by Parliament not to publish these until they have been accepted and published by the committee. At time of writing none of our briefings relating to these clauses has been published. When published they will appear here, under ‘Written evidence’.

Useful documents:

Finance Bill publications main page - UK Parliament website

The Finance Bill

Finance Bill Explanatory Notes

Latest amendments paper

Part Four – Other Taxes

Stamp duty and stamp duty reserve tax               

Clause 67 - Securitisation companies and qualifying transformer vehicles

Where UK securities are transferred, the transaction is subject to stamp tax. This is either Stamp Duty on paper instruments or documents or Stamp Duty Reserve Tax (SDRT) on agreements to transfer where the transfer will take place electronically. The rate is 0.5% in both cases (higher rate of 1.5% in some circumstances). This clause introduces a power enabling HMT to make Stamp Duty and SDRT changes in relation to securitisation and insurance-linked securities arrangements by secondary legislation.

This is an enabling power to allow the Stamp Office to introduce an exemption by regulation from stamp duty and SDRT on transfers of notes issued by securitisation companies and insurance linked securities. It’s essentially clarifying – and broadening in some circumstances – an exemption that already existed, rather than creating a new exemption.

[Clauses 68-70, which relate to the VAT margin scheme with regard to used cars in Northern Ireland, and clause 71, which relates to relief on the importation of dental prostheses from Great Britain to Northern Ireland, were agreed in Committee of Whole House]

Insurance premium tax

Clause 72 - Identifying where the risk is situated

This clause relocates the criteria for determining a location of risk for Insurance Premium Tax (IPT) to IPT legislation “to ensure clarity and continuity of treatment”. It does not substantively amend the location of risk criteria.

Import duty

Clause 73 - Transitioned trade remedies: decisions by Secretary of State

The government transitioned (kept) 43 trade remedies measures that had been previously implemented by the EU. Transition reviews (being conducted by the Trade Remedies Authority) assess whether the maintained measure is appropriate for the UK market and whether it should be maintained, changed, or terminated.

This clause empowers the Secretary of State to notify the Trade Remedies Authority that the Secretary of State will decide the outcome of a particular transition review. According to the Explanatory Note this is “to ensure that the Secretary of State can act effectively in the interest of UK industry when considering the impact on the UK economy of dumped or subsidised imports, or of unforeseen surges in imports, and can respond to these events by applying appropriate measures to protect UK industry.”

Clause 74 - Reference documents: amount of import duty

Amends the Taxation (Cross-border Trade) Act 2018 so that technical updates to tariff legislation, which do not alter the rate of an import duty, will made by public notice instead of regulations.

Fuel duties

Clause 75 (and schedule 10) – Restriction of use of rebated diesel and biofuels

To reduce carbon emissions Finance Act 2021 introduced restrictions on entitlement to use rebated diesel and rebated biofuels, which will take effect in April 2022. This clause and schedule contain technical amendments adjusting those restrictions.

Tobacco products duty 

Clause 76 - Rates of tobacco products duty

Increases excise duty on all tobacco products by the duty escalator (RPI + 2%), adding 54p to the price of an average packet of cigarettes, with bigger increases for hand-rolling tobacco and the cheapest cigarettes (Minimum Excise Tax).

Vehicle taxes

Clause 77 - Rates for light passenger or light goods vehicles, motorcycles etc

The rate of vehicle excise duty (VED) is chargeable on vehicles dependent on various factors including the vehicle type, engine size, date of first registration, fuel type and CO2 emissions data. This clause increases the rates.

Alongside this clause two opposition new clauses will be debated. Labour’s new clause 15 would require the government to publish an assessment of the expected level of revenues of VED from light passenger or light goods vehicles, motorcycles etc in future years in the context of the expected uptake of electric vehicles. SNP’s new clause 5 would require the government to publish an assessment of the impact of sections 77 to 79 on the goal of tackling climate change and on the UK‘s plans to reach net zero by 2050.

Clause 78 - Vehicle excise duty: exemption for certain cabotage operations

Clause 79 - HGV road user levy: extension of suspension

These two clause will be debated together. Clause 78 temporarily relaxes rules for international HGV journeys within Great Britain to provide greater resilience for supply chains, in the face of acute driver shortages. The Government will allow, until 30 April 2022, unlimited movements of HGVs within Great Britain for a period of 14 days after arriving in the UK on a laden international journey.

The HGV Road User levy is an annual charge for UK hauliers paid alongside their VED, and a daily, weekly or monthly charge for non-UK based hauliers. The levy was suspended for 12 months (to 31 July 2021) to support the haulage sector and pandemic recovery efforts, then for a further 12 months, and now clause 79 will suspend it to 31 July 2023.

Alongside these two clauses will be debated Labour’s new clause 16. This would require the government to publish an assessment of the impact of these provisions on (a) supply chain disruptions, (b) numbers of HGV drivers working in the UK, and (c) shortages of products in UK shops.

Gaming duty

Clause 80 - Amounts of gross gaming yield charged to gaming duty

Increases gross gaming yield (GGY) bands for gaming duty in line with inflation. Gaming Duty is charged on any premises in the UK where dutiable gaming (eg roulette, blackjack) takes place. The amount of duty is calculated by reference to bands of GGY (i.e. gross profits) for that accounting period.

Alongside this clause the SNP’s new clause 11 will be debated. This would require the government to publish an assessment of the provisions of clause 80 on (a) the volume of gambling, and (b) public health.

Penalties relating to excise duty

Clause 81 - Excise duty: penalties

This clause enables the excise wrongdoing penalty regime to be applied to free ports.

Environmental taxes

Clause 82 - Rates of landfill tax

Landfill tax is a levy on waste disposal at landfills. There is a lower rate of tax, which applies to less polluting qualifying materials, and a standard rate which applies to all other taxable material. This clause increases both in line with inflation. This applies in England and N Ireland (the tax is devolved in Scotland and Wales).

Clause 83 (and schedule 11) - Plastic packaging tax

Plastic Packaging Tax has already been legislated for and comes in on 1 April 2022. These amendments to that legislation appear to be just tidying up to ensure that the tax meets previously announced policy objectives and works as intended.

Alongside this clause will be debated Labour’s new clause 17. This would require an annual review of the impact of the plastic packaging tax.

Part 5 - Miscellaneous and Final

[Clauses 84 to 90, which contain measures to tackle promoters of tax avoidance, were agreed in Committee of Whole House]

[Clause 91 and schedule 14, which relate to VAT treatment of goods in free zones, were agreed in Committee of Whole House]

Uncertain tax treatment

Clause 94 (and schedule 15) - Large businesses: notification of uncertain tax treatment

New obligations on large businesses to notify HMRC where they have taken a tax position that is uncertain. Uncertain tax treatments are defined by two criteria: that a provision has been made in the accounts for the uncertainty, or that the position taken by the business is contrary to HMRC’s known interpretation (as stated in the public domain or in dealings with HMRC). A third criterion which was included in draft legislation published in the summer (that of where there is a substantial possibility that a tribunal or court would find the taxpayer’s position to be incorrect) will not be included, although the government says it is still considering this trigger for possible inclusion later.

In our briefing on this measure, CIOT say that taking out the ‘third trigger’ is a welcome move, and takes out the most problematic part of this new measure, but we are still unconvinced that the measure is needed at all. Although this latest development means that the measure that will now be introduced will be easier to comply with, it will still be an additional compliance burden for all large businesses, including the majority that are already open and transparent in their dealings with HMRC. In our view similar effects could have been achieved without legislation.

Four government amendments have been tabled to schedule 15. Amendments 7 and 9 seek to ensure that, where provision for uncertain PAYE or VAT liabilities is recognised in the accounts of a company or partnership, the accounts may be finalised before HMRC is required to be notified of the uncertainty under Schedule 15. Amendments 8 and 10 aim to ensure that Schedule 15 operates as intended where provision for uncertain liabilities is recognised in the accounts of a partnership.

Alongside this measure will be debated the SNP’s new clause 7. If passed this would require the government to publish an assessment comparing the rates of uncertain tax in the UK to those of all other OECD countries.

Discovery assessments etc

Clause 95 - Discovery assessments for unassessed income tax or capital gains tax

Clause 96 - Notification of liability to income tax and capital gains tax

These will be debated together. Clause 95 changes when HMRC can issue a ‘discovery assessment’ (a way of collecting unpaid tax) so that it is beyond doubt they may be used to collect standalone tax charges, such as the high income child benefit charge (HICBC). The change has retrospective and prospective effect, except for certain taxpayers who had already appealed on the basis that HMRC’s existing power is inadequate.

The CIOT’s Low Incomes Tax Reform Group (LITRG) has produced a briefing on this measure. LITRG have concerns about the way the change is being introduced retrospectively. This is not just because of the principle of retrospection, but also because the exception introduces unfairness on those who did not make the necessary appeal and on those who already paid the charges when they were due. LITRG say that the fundamental problem is a lack of awareness by taxpayers that they need to pay this charge.

Clause 96 provides that if a person incurs any of the tax charges contained within Section 30 of the Income Tax Act 2007, they are required to notify HMRC they have incurred that tax liability.

Clause 97 - Calculation of income tax liability for certain charges relating to pensions

Amends the list of other income tax charges in section 30(1) of the Income Tax Act 2007, by replacing the entries relating to unauthorised payments charge and unauthorised payments surcharge at sections 208(2)(a) and 209(3)(a) of FA 2004, with entries for the entire sections 208 and 209.

Temporary powers in disaster or emergency

Clause 98 - Power to make temporary modifications of taxation of employment income

Gives ministers greater ability to introduce necessary income tax and NIC reliefs in the event of future disasters or emergencies of national significance.

When the pandemic hit last year, employers found themselves having to consider the tax implications of a number of additional expenses (eg reimbursing employees the cost of equipment so they could work at home, or paying for employee’s covid tests. Under tax laws at the time, such payments could have created benefit in kind charges for both employees and employers. HMRC introduced time-limited measures to exempt both these areas from BIK charges but this clause will make it easier for HMRC to act quickly in future.

CIOT’s sister body, the Association of Taxation Technicians, had called for this power and welcomed its introduction. Michael Steed, co-chair of ATT’s Technical Steering Group, said: “In these situations, employers are making decisions in haste, and will simply be looking to manage as best they can for their staff. In such circumstances, it is very unhelpful if existing tax laws impose additional tax costs on top. Any new measures that make it easier for HMRC to react swiftly and remove tax obstacles from employers and employees in such extraordinary circumstances are very welcome.”

Emissions certificates for vehicles

Clause 99 (and schedule 16) - Vehicle CO2 emissions certificates

Provides for more types of vehicle approval certification with CO2 emissions figures to be used for the purposes of capital allowances, taxable benefits arising from the provision of cars, and Vehicle Excise Duty.

Office of Tax Simplification

Clause 100 - Increase in membership of the Office of Tax Simplification

This clause increases the maximum independent representation on the Board of the Office of Tax Simplification (OTS) by two members, to a total overall membership of up to ten.

The outcome of a review of the OTS was published in November.

Final

Clause 101 – Interpretation

Clause 102 - Short title

These clauses will not be debated.

New clauses

After debating all the clauses in the bill the committee will consider the new clauses which have been tabled. Some will have been debated earlier, alongside measures in the bill to which they relate. Others will be debated here. Any votes on new clauses (whether previously debated or not) will take place at this point.

The new clauses which will be debated here are:

SNP new clause 1 - Review of reliefs on investments

SNP new clause 6 - Review of impact of reliefs in Act on the tax gap

These will be debated together. New clause 1 states that the government must publish an assessment of the impact on the tax gap of the reliefs on investments contained in this Act, and of whether those reliefs have increased opportunities for tax evasion and avoidance. New clause 6 would require the government to publish an assessment of the impact of the tax reliefs in this Act on the tax gap, and of whether they have increased opportunities for tax evasion and avoidance.

SNP new clause 2 - Effect on GDP of international matters in Act, and of whole Act

This would require a government assessment of the effect on GDP of the international provisions of the Act, and of the Act as a whole, in different scenarios

SNP new clause 4 - Impact of Act on tackling climate change

This would require the government to publish an impact assessment of the changes in the Act as a whole on the goal of tackling climate change and the UK‘s plans to reach net zero by 2050.

New clause 13 - Review of public health, inequality and poverty effects of Act

New clause 13, tabled by Labour MP Debbie Abrahams, would require the government to report on the public health, inequality and poverty effects of the provisions of the Act. As Abrahams is not a member of the public bill committee it will require a member of the committee to move it for her.