LIVEBLOG: Finance Bill 2021-22 Public Bill Committee Sittings 1 and 2

A guide and liveblog to the first two sittings of public bill committee debate on Finance Bill 2021-22 (also known as Finance (No. 2) Bill as it is the second Finance Bill in the current parliamentary session). Further sittings are planned for the new year, beginning on Wednesday 5 January.

You can find a full preview of the day's debates here, including background on what public bill committee is, and a list of MPs appointed to the committee. Shorter commentaries appear in each section below.

Proceedings can be listened to here: Sitting one (9.25), Sitting two (2.00)

The main contributors to the debate are expected to be:
Lucy Frazer (Conservative, Financial Secretary to the Treasury)
James Murray (Labour, Shadow Financial Secretary)
Alison Thewliss (SNP, Lead Treasury spokesperson)

Procedure

MPs will proceed through the clauses in numerical order, excluding the clauses which have already been debated (and agreed) in Committee of Whole House (see below). 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.

Public Bill Committee does not debate clauses and schedules debated at Committee of Whole House, that is: Clause 4 (increase in rates of tax on dividend income); Clause 6 (rate of banking surcharge and surcharge allowance); Clauses 7 and 8 and Schedule 1 (attribution of trade and property business profits etc for a tax year); Clause 12 (capital allowances: extension of temporary increase in annual investment allowance); Clauses 27 and 28 (diverted profits tax: mutual agreement procedure and closure notices etc); Clauses 53 to 66 (economic crime (anti-money laundering) levy); Clauses 68 to 71 (value added tax); Clauses 84 to 92 and Schedules 12 and 13 (avoidance); Clause 93 and Schedule 14 (free zones).

Useful government / parliamentary documents: The Bill / Explanatory Notes / Amendments paper / All documents

NB. The live blog below is contemporaneous and not checked against Hansard. We cannot guarantee that no errors have crept in and we advise on checking any passage against Hansard before repeating it.

Finance Bill Public Bill Committee - Sitting One - Tuesday 14 December, 9.25am

Programme Motion

^{The Financial Secretary will move the programme motion setting the times the committee will meet and the order the clauses will be debated (numerical order).}

The committee agreed to the programme as set out in the motion without debate.

Part One – Income Tax, Corporation Tax and Capital Gains Tax

Income tax charge, rates etc      

Clause 1 - Income tax charge for tax year 2022-23

^{This is the annual measure allowing government to collect income tax for the next 12 months.}

Clause 2 - Main rates of income tax for tax year 2022-23

^{This clause sets income tax rates for non-savings, non-dividend income for 2022-23 for England and Northern Ireland at 20%, 40% and 45% (ie no change). Rates are reduced by 10% for Welsh taxpayers and Welsh Parliament adds Welsh rates on top. The Scottish Parliament sets Scottish rates.}

Clause 3 - Default and savings rates of income tax for tax year 2022-23

^{Sets ‘savings rates’ which will apply to savings income of all UK taxpayers and the ‘default rates’ which apply to the non-savings, non-dividend income of taxpayers who are not subject to the main rates of income tax, Welsh rates of income tax or the Scottish rates of income tax. Both stay at 20%/40%/45%.} 

Clause 5 - Freezing starting rate limit for savings for tax year 2022-23

^{Starting rate limit for savings unchanged at £5,000. This is a zero rate on income from savings, but is only available to people on low incomes. If your earnings from non-savings income are over your personal allowance (usually £12,570) plus the starting rate limit (i.e. over £17,570 for most people) you can’t get this.}

The Financial Secretary to the Treasury (FST), Lucy Frazer set out the details of clauses 1, 2, 3 and 5 simultaneously, noting the importance of income tax to the wider UK tax regime in funding 'vital public services'. 

She argued that the governments proposals provided 'simplicity and fairness' in the tax system, while maintaining a generous system of reliefs.

Shadow FST James Murray gave a historical overview of the development of the income tax system, and said the government's tax policy had led to the 'highest tax burden in 70 years'. He said that the opposition would not oppose these clauses.

Murray then noted that while income tax rates would not change, the effect of National Insurance increases proposed by the Health and Social Care Levy Act would increase the burden on taxpayers. He warned that freezing the starting rate for savings at £5,000 would be impacted by the effects of inflation.

In response, the FST said that the government had frozen thresholds and increased National Insurance in response to the pandemic and the unprecedented levels of government support to help businesses and individuals. She said that the 'generous' personal allowance had increased by 50 per cent under the Conservative government and had help support those on low incomes.

Clauses 1-3 and 5 were agreed unanimously.

Pensions

Clause 9 - Liability of scheme administrator for annual allowance charge             

^{Clause 9 amends the period within which an individual can give notice to their pension scheme administrator to pay their annual allowance charge for previous tax years. It also amends the period within which a scheme administrator must provide information about, and account for, an amount of annual allowance charge.}

^{In relation to the latter Labour have tabled amendment 11, based on a suggestion made by CIOT in our representation to the committee, to make the scheme administrator hard deadline for notifying a change to the pension input amount three months before the end of the six year period to give the member time to respond.}

James Murray moved amendment 11. He welcomed the representations made by CIOT and said that the amendment, as proposed, would provide individuals with a 'scheme pays' pension with greater certainty. He said the opposition would not press this amendment to a vote but would welcome the FST views on the amendment.

In general, Murray said that the opposition welcomed the proposals contained in Clause 9, as it would help to simplify what was a complicated area of policy.

Lucy Frazer, responding, said that reducing the time period would result in individuals may be unable to access 'scheme pays' and would be left liable for a tax charge should they make a request beyond the deadline proposed in the amendment.

The amendment was withdrawn and clause 9 was passed without a vote. 

Clause 10 - Increase of normal minimum pension age

^{The normal minimum pension age (NMPA, introduced April 2006) is the age below which a registered pension scheme must not normally pay any benefits to members (unless they are retiring due to ill health). In April 2010 it was increased from 50 to 55. This clause increases it to 57 from April 2028. (NB. There are exemptions for some uniformed service pension schemes and special rules for pension schemes being transferred.)}

^{In our representation to the committee CIOT said that we are not convinced that an increase to the NMPA is necessary. We also raised some issues with the provisions for ‘block transfers’. In a separate representation to the committee LITRG expressed concern about when advice on the transitional arrangements for the change will be published.}

Lucy Frazer said that the proposals were part of a long-term policy change reflecting changing demographics and expectations of longer working years. She set out who the scheme would apply to and the exemptions (as shown above). She said that increasing the age to 57 reflected the belief that the normal minimum pension age should be set 10 years below the state pension age.

James Murray said the opposition would support Clause 10. He noted LITRG's concerns relating to transitional arrangements and, while noting that the government had acknowledged that there may be difficulties, expressed concern over a lack of clarity on when this would be addressed and how it would be communicated.

He added that it would be 'vital' for those impacted to be provided with the information they needed to make informed decisions on their pensions, protect the value of their pensions and maintain their eligibility for wider state benefit entitlements. He asked the Minister to clarify the government's timetables for publishing this guidance.

Alison Thewliss (SNP) used the debate on the clause to highlight the SNP's (annual) call for the Finance Bill Public Bill Committee to hear oral evidence from outside experts. In her opening remarks, she thanked LITRG and CIOT for their written submissions and said that further oral evidence would have allowed the committee to interrogate the detail further. Later, she noted the CIOT concerns that the increase in age as proposed by the clause was neither 'necessary or desirable'. She said people needed clarity on how they would be impacted by these changes.

The FST said the government had acknowledged the need to have a clear position on transitional arrangements and that she would keep MPs appraised with its development. She reminded MPs of the extensive scrutiny that underpins consideration of the Finance Bill. In doing so, she implicitly rejected the call for the committee to take additional oral evidence.

Clause 10 was agreed unanimously.

Clause 11 Public service pension schemes: rectification of unlawful discrimination

^{In 2014-15 the Government reformed public service pension schemes and put in place transitional arrangements allowing those close to retirement to remain in the existing schemes rather than having to move to new ones. In 2018 the Court of Appeal ruled (in ‘the McCloud judgment’) that this was unlawful discrimination against younger members of the schemes (and indirectly sex and race discrimination). The Public Service Pensions and Judicial Offices Bill aims to remedy this discrimination. This clause provides the Treasury with the power to make regulations to address the tax impacts that arise in connection with this remedy.}

^{In our representation to the committee CIOT welcomed this move but stress the importance of the government consulting before laying the proposed regulations. We also call on the government to urgently address a related issue around pension benefits after a Guaranteed Minimum Pension conversion.}

Lucy Frazer said this measure would impact 3 million people who had been unfairly discriminated against as a result of the McCloud judgement. The government will be able to use the powers contained by Clause 11 to rectify the situation for those impacted once the Public Services Pensions and Judicial Officers Bill has been passed by parliament (this is currently being considered by the House of Commons and more information can be found here). Frazer said that these pieces of legislation will ensure that those affected will be returned to the tax position they would have been in had they not suffered discrimination.

James Murray set out the background to the issue and confirmed that the opposition would not oppose the clause.

The FST welcomed the opposition's support and Clause 11 was passed unanimously.

Capital allowances

Clause 13 - Structures and buildings allowances: allowance statements

^{Structures and Buildings Allowances are a capital allowance available for the cost of constructing, renovating or converting structures or buildings for non-residential use. This clause introduces a new requirement for SBA allowance statements to include the date qualifying expenditure is incurred, or treated as incurred, where that is later than the date on which the building or structure was first brought into non-residential use.}

The FST said the clause would ensure that owners are able to claim the full amount of the relief that they are entitled to. She noted that the measures will take effect from the date of Royal Assent of the Bill (when the bill becomes law) and that it will not be made retrospective.

James Murray said the opposition would not oppose the clause, which was welcomed by the FST.

Clause 13 was agreed unanimously. 

Reliefs for investments

Clause 14 (and schedule 2) - Qualifying asset holding companies

^{Introduces a regime for the taxation of qualifying asset holding companies (QAHCs). This came out of a review of the UK funds regime, designed to enhance the UK’s competitiveness as a location for asset management and investment funds.}

^{The government has tabled six amendments to schedule 2:}

• ^{Amendments 1 and 2 are designed to secure that the definition of investment management profit-sharing arrangements is capable of encompassing arrangements where an entitlement to profits arising in connection with the provision of investment management services by an investment manager arises to another person (such as a company or a trust).}
• ^{Amendments 3 and 6 provide that a fund that is 70% controlled by category A investors meets the diversity of ownership condition.}
• ^{Amendment 4 will allow existing funds marketed before the commencement of the QAHC.}
• ^{Amendment 5 modifies the way in which the interests of creditors are accounted for in determining whether a fund is “close”.}

^{The SNP’s new clause 1 may be debated with clause 14 or clause 15. If passed, this would require the government to publish within 12 months of this Act coming into force 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.}

Lucy Frazer said these reforms had been developed as part of a wider review of the UK Funds Regime first announced at Budget 2020. She had a key objective of this review was to consider reform that enhanced the UK's competitiveness as a location for asset management and investment funds.

She said that the new regime would ensure that "where intermediate companies are used to facilitate the flow of capital, income and gains between the investments and investors, the tax they pay is proportionate to the limited activities that they perform" and would also include a series of safeguards aimed at protecting the Exchequer.

Frazer said that these proposals would build on the UK's strength as an asset management hub.

James Murray (Labour) outlined the provisions of the clause and the government's amendments to the committee, noting that the opposition would not oppose these measures.

Alison Thewliss expressed some concern that the government had brought forward its amendments 'at the last minute' but conceded that this was preferable to amending legislation 'at a later date'. She sought reassurance from the government that the legislation would not be abused.

Lucy Frazer assured Thewliss that the government kept all legislation under review and would ensure that this clause was not used to facilitate avoidance. She welcomed the fact the opposition would not oppose either the clause or the government's amendments.

Clause 14, schedule 2 and government amendments 1-6 were agreed.

Clause 15 (and schedule 3) - Real Estate Investment Trusts

^{A Real Estate Investment Trust (REIT) is a company through which investors can invest in real estate indirectly. This clause and schedule change rules on REITs to remove certain constraints and administrative burdens which the Government believes are no longer necessary. These include removal of the requirement for REIT shares to be admitted to trading in certain cases, amendment of the definition of an overseas equivalent of a UK REIT, amendment of the ‘holder of excessive rights’ charge to corporation tax, and changes to the rules which ensure a REIT’s business is primarily focused on its property rental business.}

The FST described the proposals in Clause 15 as 'targeted'. She told the committee that the regime had been popular since it was introduced in 2006. However, she told the committee that practical experiences with the regime have identified ways in which it could be improved with the aim of removing unnecessary barriers and increasing its competitiveness.

Frazer added that the amendments are designed with this in mind and would help to improve the UK's competitiveness as place to invest. These measures will take effect from 1 April 2022.

James Murray  signalled that the opposition would not oppose the measures. Alison Thewliss asked about the transparency of the regime and how it would interact with the government's Register of Overseas Entities Bill. The FST said that she would follow up with Thewliss on the point that she raised.

Clause 15 and Schedule 3 were agreed by the committee.

Clause 16 - Film tax relief: films produced to be television programmes

^{Allows films to remain eligible for film tax relief even if they are no longer intended for theatrical release, providing they are intended for broadcast and meet the four conditions required for high-end television tax relief.}

^{With this is discussed Labour’s new clause 14 which would require a review of the effectiveness of the provisions in this clause. This review would include assessing actual and potential misuse of the relief, drawing on experience of the present film tax relief regime}

The FST explained there is an imbalance between reliefs for film and TV in cases where some films had switched from cinematic release to streaming and had lost entitlement to relief. The changes made by this clause would help to provide greater certainty for film producers.

Frazer said the government opposed Labour's new clause 14 on the grounds it was unnecessary. She said that HMRC had contracted an independent research agency to evaluate the screen reliefs, the findings of which are expected to be published next year.

She said HMRC was cracking down on abuse of reliefs in this area. The current film tax relief was introduced in 2007 to replace film partnerships relief. It is a corporate relief. HMRC continues to litigate in relation to the old relief but the new relief has not been subject to the same abuse, she said.

James Murray said Labour believed the measures in the clause to be sensible and appropriate. He noted the 2014 Public Accounts Committee report which found a lack of accountability for and evaluation of tax reliefs. He said new clause 14 would specifically require the government to set out the number of enforcement actions taken against companies suspected of misusing film tax relief and against promoters of schemes related to abuse of film tax relief.

Alison Thewliss (SNP) said she was ’more than happy’ to support the measure, noting the strong presence of the film industry in her constituency and elsewhere in Glasgow. When such tax reliefs had been changed in the US the companies had tended to ‘lift and shift’ elsewhere.

The minister replied to the debate. She said the independent review started in May 2021 and they expect a report by the end of March 2022 for publication later in the year.

The clause was passed without a vote.

Clause 17 - Temporary increase in theatre tax credit

^{Clause 17 temporarily increases the rate of theatre tax relief for theatrical productions. From 27/10/21 to 31/3/23, companies will benefit from relief at a rate of 50 or 45% (touring/non-touring productions). From 1/4/23 to 31/3/24 relief will be 35/30%. From 1/4/24, rates will return to 25/20%.}

Clause 18 - Theatrical productions tax relief

^{Clarifies several areas of legislative ambiguity within theatre tax relief, including that the intended audience must be at least five people, and that productions produced for training purposes do not qualify for the relief. Presumably this is a response to abuse of this relief or at least to recognition of the potential for abuse.}

Clause 19 - Temporary increase in orchestra tax credit

^{Temporarily increases the rate of orchestra tax relief for concerts or concert series. From 27/10/21 to 31/3/23, companies will benefit from relief at a rate of 50%. From 1/4/23 to 31/3/24, the rate of relief will be 35%. From 1/4/24, the rate of relief will return to 25%.}

Clause 20 - Orchestra tax relief

^{Clarifies several areas of legislative ambiguity within orchestra tax relief, including that concerts that are produced for training purposes do not qualify for relief. Again, this is presumably to deal with abuse or potential abuse of the relief.}

Clause 21 - Temporary increase in museums and galleries exhibition tax credit

^{Temporarily increases the rate of museums and galleries exhibition tax relief (MGETR). From 27/10/21 to 31/3/23, companies will benefit from relief at a rate of 50 or 45% (touring/non-touring productions). From 1/4/23 to 31/3/24 relief will be 35/30%. From 1/4/24, rates will return to 25/20%.}

Clause 22 - Museums and galleries exhibition tax relief

^{This relief was introduced with a sunset clause and was originally due to expire on 1/4/22. This clause extends it by two years to 1/4/24. It also clarifies several areas of legislative ambiguity within the relief (including that a public display of an object is not an exhibition if it is subordinate to the use of that object for another purpose) and amends the criteria for a primary production company.}

^{In the CIOT’s representation to the committee on clauses 16-22 we noted that while the rate increases have been broadly welcomed by the sector, advisers working with them have brought a number of concerns relating to the timing and scope of the changes to our attention. These include that for productions straddling the commencement date of the higher rates there is a harsh cut off where even if 99% of the production takes place after the increase takes effect it does not benefit from it (while when rates go down there is a time apportionment). We noted that orchestras that made a series election before the Budget appear to lose out on the higher rate of relief for their entire season. We noted that while the rate of MGETR is being raised the government are not proposing to raise the cap for the relief from the current £80,000-100,000 per exhibition. As a consequence larger exhibitions will not gain any benefit from the rate increase.}

These six clauses were debated together.

The FST said the changes in these clauses would support the cultural sector in its recovery from the pandemic. They will provide further incentives for museums, galleries, orchestras and theatres to put on new productions and exhibitions.

James Murray (Labour) spoke next and was broadly supportive of the measures. Noting that more generous theatre relief is available to 'touring' productions he asked the minister how 'touring' was defined. 

On orchestra tax relief he said the help was welcome but asked the minister what help was available to help musicians in other genres or who operate in non-orchestral configurations. He noted CIOT concerns about orchestras making a series election losing out. He asked for clarity that this was the government's intention.

Murray asked whether world heritage sites fit into the definition of museums and galleries. 

Finally he noted concerns within the industry about productions which straddle the commencement date for these reliefs. A production which gained a 'green light' on October 26 would not gain the benefit of these increases however long it ran for after the commencement date. He noted that there are some in the sector who see this harsh and arbitrary and invited the minister's comments.

Alison Thewliss (SNP) also supported these measures. She asked what communication had been put out to the sector to make sure they are aware of this help. She shared James Murray's concerns. She noted that this support is for productions of some kind but thought that missed 'the other side of the equation'. It is fine to support companies but if the venues they wish to perform in go bust because they do not have the support they need that does not solve the problems they are facing. She urged the minister to look at support for the sector more widely. She said that many of those involved in the sector are freelancers and received no help at all during the pandemic. She repeated the SNP's for consideration to be given to the extension of VAT relief for the hospitality sector.

The FST responded. On world heritage sites she said it would be considered a gallery/museum and would qualify as long as it is maintained by a charity or local authority. She acknowledged that those who commence productions before 27 October will not qualify for the increased relief. They would be able to benefit from the normal rate of relief as well as the 'comprehensive package of support for the cultural sector over the pandemic'. It is important, she said, to be clear that this support is for new activity.

On touring she said HMRC had recently issued further guidance as asked for by the industry. She offered to get back to him on the point. On communication she said this was an 'important point' and she would continue to work to ensure those who qualify for the reliefs are aware of them. She added: "We are doing quite a lot of work to work out how we do spread the message more broadly on enabling companies to take up the reliefs that the government offers."

Clauses 17-22 were passed without division.

The committee then adjourned until 2pm.

Finance Bill Public Bill Committee - Sitting Two - Tuesday 14 December, 2pm

Capital gains tax: disposals of UK land etc

Clause 23 - Returns for disposals of UK land etc

^{Extends the deadline for reporting and payment of CGT on the disposal of UK land and property from 30 days to 60 days from completion. Also ends the anomaly for UK resident taxpayers involving gains from properties used for residential and commercial (mixed) use. This was a quirk in legislation that meant taxpayers had to declare capital gains on both portions of a property, despite only being legally required to pay tax owed on the residential portion of the property.}

^{In CIOT’s representation to the committee on this clause we welcomed the change but noted that the main problem with the reporting and payment process is still a lack of awareness. Also, even when they do become aware of their obligations, many individuals struggle with accessing the stand-alone digital system for reporting these transactions.}

FST Lucy Frazer said the Government recognised that this extension was needed following comments from stakeholders and a response to the OTS report of May 2021. This measure will allow taxpayers to provide more accurate figures, give them time to engage with advisers, and help to clarify the rules.

Abena Oppong-Asare (Labour) said that the opposition would not oppose the clause. She noted that the reporting period for selling or disposing of interests in UK land had been introduced with the aim of increasing compliance and reducing errors.

She noted that increasing the deadline from 30 to 60 days would increase the time available to taxpayers to provide accurate figures, would be particularly beneficial for more complex cases, and would give taxpayers more time to engage with advisers.

However, Oppong-Asare noted that the opposition remained concerned over the general lack of awareness among taxpayers of the process for reporting and paying tax due under this scheme. She sought clarification from the FST on the measures the government would take to ensure that those selling properties were made aware of their obligations and the support that the government could provide to those struggling to access the standalone system required to report such transactions.

Lucy Frazer said that she was grateful for the opposition’s support. She told the committee that HMRC engaged regularly with stakeholders and agents, who would be aware of these changes. Frazer then made a more general point about the importance of communicating changes to taxpayers.

The clause was passed without division.

International matters   

Clause 24 (and schedule 4) - Cross-border group relief

^{Following Brexit, the government is bringing the group relief rules relating to EEA-resident companies into line with those for non-UK companies resident elsewhere in the world. Claims involving EEA-resident companies will no longer be subject to more favourable rules in the UK relating to relief for non-UK losses and losses incurred by a UK permanent establishment of a foreign company.}

Lucy Frazer said the clause was needed to provide for equal treatment and protection for the UK Exchequer. This change would allow the UK to more effectively pursue its fiscal objectives.

Abena Oppong-Asare (Labour) said the measure would remove inequality between companies and contribute towards a level playing field. Labour would not oppose the measure.

The clause was passed without division.

Clause 25 - Tonnage tax

^{Tonnage tax is a special corporation tax regime which enables operators of qualifying ships to pay (generally lower) tax calculated based on the tonnage of the ship. This measure reforms the regime to boost the competitiveness of the British shipping industry following Brexit, encouraging companies to register ships in the UK by simplifying the regime and making it more flexible.}

Exchequer Secretary Helen Whately said this measure would reduce administrative complexity and stop British ships from being disadvantaged against those of other countries. It would also help to simplify the tax system.

Abena Oppong-Asare (Labour) said the measure was in part a reflection of the UK as a country with a proud maritime history but cautioned that the campaign group TaxWatch had described it as a retrograde step. She said it was deeply regretful that the Chancellor had chosen to bypass parliament and announcing the measure to  the press in the first instance and questioned whether this could helped people or organisations to benefit from the advanced notice.

SNP's Alison Thewliss asked the government whether it would have been better to look at incentives for 'green shipping', reflecting the maritime industry's contribution to pollution.

Helen Whately said the measure was aimed at supporting the UK shipping industry and helping it to compete on an international basis. She added that the measures came at a minimal cost to the Exchequer and would help to boost employment.  HMRC will be able to update guidance on tonnage taxes and Whately said that environmental taxes would be considered as part of this.

The clause was passed without division.

Clause 26 - Amendments of section 259GB of TIOPA 2010

^{The hybrids and other mismatches regime (introduced 2017) addresses arrangements that generate a tax mismatch, and in doing so implemented OECD BEPS Action 2 recommendations. Mismatches can involve either double deductions for the same expense, or deductions for an expense without any corresponding receipt being taxable. The main purpose of this clause is to put a new category of “relevant transparent entities” (such as US Limited Liability Companies) on the same footing as partnerships when they are payees.  The clause also amends existing rules relating to partnerships to make sure they work as intended.}

Lucy Frazer said that the UK was the first country to tackle hybrid mismatches a few years ago and insisted that the measures proposed by the clause were technical in nature.

Abena Oppong-Asare (Labour) said the opposition would not oppose the measure, which was passed without division.

Changes in accounting standards etc

Clause 29 (and schedule 5) - Insurance contracts: change in accounting standards

^{The Corporation Tax liabilities of insurers are based on their accounting profit. Many insurers prepare their accounts under International Accounting Standards (IAS). This measure enables the government to make provisions in secondary legislation in connection with the introduction of International Financial Reporting Standard (IFRS) 17 in Jan 2023, including revoking the requirement for all life insurance companies to spread acquisition costs over seven years for tax purposes (a simplification).}

Lucy Frazer said the measure would greatly reduce volatility on Exchequer receipts and mitigate the cash flow and regulatory impacts of the change. She described the measure as a welcome simplification that would allows the Government to respond to the (likely one-off) tax implications of the adoption of new international stands IFRS17.

Abena Oppong-Asare welcomed the measures as a simplification of tax arrangements but wondered what provisions would be put in place for insurers where the change in standards caused transitional administrative burdens.

In concluding remarks, Frazer described the clause as sensible. The clause and schedule was passed without division.

Clause 30 - Deductions allowance in connection with onerous or impaired leases  

^{Finance (No 2) Act 2017 amended loss relief rules to (among other things) limit the amount of profit against which carried-forward losses can be set. There is an exemption from the loss restriction in certain circumstances where there has been a reversal of an ‘onerous lease provision’ required for accounting purposes. This clause ensures companies will continue to benefit from this exemption.}

Lucy Frazer said the legislation was being amended to avoid the imposition of a prohibitive tax charge on those impacted. It would ensure that companies in financial distress can get the help they need.

Abena Oppong-Asare signalled that Labour would not oppose the measure.

The clause was passed without division.

Expanded dormant assets

Clause 31 (and schedule 6) - Provision in connection with the Dormant Assets Act 2022

^{The Dormant Assets Scheme enables banks and building societies to channel funds from dormant accounts (unused for 15 years and the owner cannot be contacted) towards good causes. The Dormant Assets Bill currently going through Parliament will expand the scheme to include a wider range of dormant assets, such as pensions, investment products and securities. This clause and schedule ensure that when these assets are transferred into the scheme a disposal for capital gains tax purposes does not immediately arise.}

^{In the CIOT’s representation to the committee we were broadly positive but said that as those making a dormant accounts claim (ie a previously untraceable owner who appears and wants to claim the value of their asset back) are unlikely to be familiar with the tax consequences, it is essential that adequate and accessible guidance be issued.}

Lucy Frazer said the change would mean that where a CGT charge arises, it only happens when someone comes forward to claim the asset. Where the asset was previously held in an ISA, this measure ensures no income or CGT arises when the asset is reclaimed. This schedule will only commence on the making of a Treasury order because the Dormant Asset Bill is not currently law. This is why it has time limited powers that allow Treasury to make changes by secondary legislation in the event that changes to the Dormant Asset result in additional tax issue. This legislation strikes right balance between supporting good causes and taxpayer fairness.

Labour's Abena Oppong-Asare cited CIOT concerns surrounding availability of accessible guidance to those making a dormant asset scheme claim who may otherwise be unaware of the tax consequences of their actions.

Frazer said she will update Oppong-Asare on any guidance that the Government will put forward.

The clauses were passed without division.
At this point, the committee adjourned. It is scheduled to resume consideration of the Bill on Wednesday 5 January 2022 at 3.30pm.

Compiled by the CIOT External Relations team.