LIVEBLOG: Finance Bill 2021-22 Public Bill Committee Sitting 5

11 Jan 2022

Liveblog on the fifth and final sitting of the public bill committee which took place in the morning of Tuesday 11 January, covering the remaining clauses in part 5 of the bill, and new clauses. Measures debated include notification of uncertain tax treatment and discovery assessments.

A guide and liveblog to sitting five 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). 

You can find a full preview of the day's debates here (see part 5 only), 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 five (9.25am), Sitting six (2pm)

The main contributors to the debate were:
Lucy Frazer (Conservative, Financial Secretary to the Treasury)
James Murray (Labour, Shadow Financial Secretary)
Abena Oppong (Labour, Shadow Exchequer Secretary)
Alison Thewliss (SNP, Lead Treasury spokesperson)
Richard Thomson (SNP, Treasury spokesperson)


MPs proceeded through the clauses in (more or less) 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 are voted on (if moved) at the end of the committee stage.

Public Bill Committee does not debate clauses and schedules debated at Committee of Whole House, that is (in part 5 of the bill): 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 Five - Tuesday 11 January, 9.25am

Part Five – Miscellaneous and Final

Uncertain tax treatment

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

This places 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.

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. 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. Also in this group is the SNP’s new clause 7, which would require the government to publish an assessment comparing the rates of uncertain tax in the UK to those of all other OECD countries.

In our representation to the committee, CIOT welcomed the taking out of a particularly problematic ‘third trigger’ for this notification, but we are still unconvinced that the measure is needed at all. 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.

Lucy Frazer (Conservative, Financial Secretary to the Treasury) said the aim is to reduce legal interpretation 'tax gap' and the measure has been refined to be more effective and only relevant to large businesses. The Government is committed to ensuring businesses pay the tax due and the Government has reduced the tax gap, in general - but there is further to go, she said. Legal interpretation tax gap has proven a stubborn and difficult matter to resolve. This measure 'breaks new ground', she said, which will help to level the playing field with more cooperative large businesses. No need to notify in this measure if a business has already brought HMRC's attention to a possible potential problem/dispute about tax. statement, guidance and briefs by HMRC can guide large businesses on what and when to notify the tax authority. In recognition of stakeholders concerns, the Government will not introduce the 'third trigger'. The Government has consulted extensively on this measure to ensure it is proportionate. HMRC will promptly acknowledge information about uncertain tax treatments given by business. HMRC will monitor the impact on large business but the metrics is still to be decided.

Frazer responded to new clauses by SNP by saying few international authorities apart from HMRC publish a 'tax gap'. Most OECD countries do not have comparable data to help with the 'tax gap' this measure.

This measure will lead to greater openness between HMRC and large business.

James Murray (Labour, Shadow Financial Secretary) does not oppose the broad aims of this measure. But he cited CIOT's concerns about additional compliance burden. How many large businesses will this measure change the behaviour of? Why are existing powers not enough? CIOT are unsure how this measure will impact on legal interpretation tax gap, he said. He worries that penalties for failing to notify seems quite low and not a real disinective.

Richard Thomson, SNP, is disappointed that the 'third trigger' was dropped. He said the tax gap is a useful measure if imperfect.

Frazer said this measure will only effect the largest business, she repeated. We need this measure because most companies are always looking to minimise the tax they pay and HMRC does not want to be slow to react and wants to be on 'the front foot'. On penalties, the Government original proposed a flat £5,000 penalty for failure to notify but in response shareholder feedback, we decided on escalate on repeated failures up to £50,000. These are proportionate and fair, she claims. A deliberate error a larger tax geared penalty can still apply, she added.  She told SNP the measure will be reviewed and UK is one of only a few countries that have published tax gap statistics and a direct comparison with other countries in not fair.

(Government amendments all passed)

Discovery assessments etc

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

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

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 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 and 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.

Lucy Frazer (Conservative, Financial Secretary to the Treasury) gave the context of the Upper Tribunal did not have powers to recover an individuals HICBC by issuing a discovery assessment where taxpayer has neither notified HMRC or submitted a tax return. HMRC use discovery assessments routinely, she said. The UT found HMRC could not use discovery assessments in a case, and HMRC has appealed to Court of Appeal on this view.

This legislation does not create an new liabilities or obligations on taxpayers, she was keen to say.

This Government does not introduce retrospective legislation 'lightly', she assured MPs. This measure is not retrospective taxation, she was keen to say. The Government is also future proofing this measure.

It is right that taxpayers are required to self assess their tax liabilities and HMRC act when they do not.

Labour's Shadow Exchequer Secretary Abena Oppong-Asare said LITRG has raised the point that retrospective application is 'uneven and unfair'. She wants more on the Government's view of the fairness of this measure.

Alison Thewliss (SNP, Lead Treasury spokesperson) said there are so many challenges around HICBC, such as HMRC's systems not working together and people being brought into tax without their knowledge or understanding. This is a concern because LITRG says the number of families impacted by HICBC measure is growing because threshold has not changed. She also asked for information about the relationship between Gift Aid and HICBC.

Frazer said this is not retrospective taxation and relates to tax that is due. On fairness, she said it is right that everyone pays their tax due and paid equally. The UT found that tax was due but the discovery assessment process was inappropriate, she reminded MPs. HMRC do look carefully at individuals who are struggling to pay tax, such as through Time to Pay arrangements.

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

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.

Lucy Frazer (Conservative, Financial Secretary to the Treasury) said this is a correcting measure and ensures the right amount of tax is calculated and ensures HMRC can consistently calculate tax liabilities in respect of these pension charges. This clause makes minor technical revisions and together with clause 95 and 96, gives consistency and certainty of tax treatment to HMRC's administration provisions relating to these freestanding tax charges.

Labour's Shadow Exchequer Secretary Abena Oppong-Asare said Labour did not oppose this clause.

Temporary powers in disaster or emergency

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

This clause gives ministers greater ability to introduce income tax and NIC reliefs in the event of future disasters or emergencies of national significance. CIOT’s sister body, the Association of Taxation Technicians, had called for this power and welcomed its introduction. 

The Financial Secretary introduced this measure. She said COVID-19 has highlighted the limited scope to respond quickly to make changes to current benefits-in-kind and expenses tax system to support people during the pandemic. The Government is determined to learn from this experience. To respond effectively this clause introduces regulation making powers to allow Government to respond to national emergency situations, not necessarily just pandemics. The powers can be exercised in a way that provides support to taxpayers as changes can only be wholly relieving and cannot create a tax charge. The Treasury can determine when it is necessary to use these powers. Any changes made by these powers will only have affect for a limited period of time, up to a maximum of two complete tax years. This measure allows the Government to respond quickly and effectively to provide support to taxpayers in disasters and emergencies of national significance.

James Murray said Labour did not oppose the clause provided it is applied strictly in emergency situations. The clause uses the terms emergency and disaster but a specific definition of these terms is missing. Could the minister provide one? There is also no definition of temporary, he noted. There is a need for a clear and transparent framework setting these things out, he said.

Alison Thewliss, for the SNP, endorsed Murray’s points, describing the clause as ‘wide-ranging’. She wondered if the minister had taken into account PAC and NAO findings around a lack of preparedness at the Treasury for a pandemic of the kind we have experienced.

Replying to the debate the minister said that while the opposition were asking the government to be more prescriptive the reason this legislation was being brought in is because when we came into the pandemic the government did not have the flexibility it needed. Therefore the government do not want to tightly define the circumstances in which powers such as these would be used. She said there was a two year span for the measures to be effective.

James Murray came back to say he had not been asking for a prescriptive approach to determining what an emergency and a disaster are, just a published framework. The minister said it had not been defined in legislation because it is very hard to predict.

Emissions certificates for vehicles

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

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.

New clause 8 was considered in this group. This is a new clause proposed by the SNP which states that the government must publish within 12 months of this Act coming into effect an assessment of the impact of sections 99 and Schedule 16 on the goal of tackling climate change and the UK‘s plans to reach net zero by 2050.

The Financial Secretary explained that, since the end of the Brexit transition period, European type approvals are no longer automatically recognised in Great Britain. Since 1 January 2021 a provisional domestic approval process has been in operation. During 2022 this will be gradually replaced with a new comprehensive domestic approval scheme. Clause 99 makes accompanying capital allowance changes. 

Abena Oppong-Asare said Labour would not be opposing the clause.

Richard Thomson, for the SNP, said it was important not only for consumers to have confidence in figures that are published, but also to understand the impact these figures have on behaviour. This is what his party's new clause aims to do. If the government do not accept the new clause how do they intend to monitor this, he asked.

The Financial Secretary responded on new clause 8. As previously set out in discussion on new clause 5, she argued this new clause was not necessary. This measure makes minor technical changes to ensure that legislation operates as intended she said, and it is not expected to have any significant climate change impacts. 

Office of Tax Simplification

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

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.

The CIOT's representation to the committee acknowledges that the proposal to increase the size of the OTS’s board is not controversial. However the absence of any more substantial changes to the OTS’s role as a result of the recent review of its work raises broader questions when few of the office’s substantive recommendations are being implemented and the tax system as a whole is continuing to become more complicated.

With this clause were discussed two SNP new clauses. New clause 9 would have required the government to publish an assessment of the composition of the Office of Tax Simplification membership with a view to ensuring it is diverse and representative. New clause 10 would have required the government to publish a review of the membership and capacity of the OTS, including consideration of the capacity the membership would have to deal with an expansion of its remit to include fairness in the tax system.

The Financial Secretary explained that the clause would increase the size of the OTS board to ensure that the board "comprises the fullest appropriate breadth and skill set to support the work of the OTS".

Richard Thomson, for the SNP, spoke in support of his party's two new clauses (see above). Arguing for new clause 9 he noted government targets for diversity in public institutions. Arguing for new clause 10 it was important for tax fairness to be sure that we are applying the tax code equally and consistently.

James Murray, for Labour, recognised the value of adding further expertise to the board, and also the SNP's point around diversity. 

"We do however also note wider concerns from the Chartered Institute of Taxation, who question whether the broader changes suggested by the OTS are going to be implemented. Between 2010 and 2015 only 166 of the OTS's 403 recommendations to government had been wholly accepted. It is therefore surprising that there is so much enthusiasm for increasing the size of the OTS board given the government does not always seem to listen to them. We note the suggestion from the Chartered Institute of Taxation that the government should formally respond to every OTS recommendation within a prescribed timeframe. in her reply I would be grateful if the minister could set out whether she would be willing to commit to doing so."

Replying, the Financial Secretary said the OTS is an independent office of HMT so all appointments are made in line with the Office of the Commissioner for Public Appointments principles. The government has an ambition that by 2022 half of all new appointees should be women and 14 per cent should be from ethnic minorities. On new clause 10 the government remains committed to supporting the OTS. The recent OTS review makes a number of recommendations on resourcing and governance. The government does not think a further review into OTS capacity is necessary.

Responding to Murray, the minister said the OTS would be looking into how it conducts its reviews. "The fact that the government doesn't always accept fully the recommendations by the OTS is not a sign that the OTS is not performing an important function. It is performing an important function in making recommendations which the government can then look at. It is also, the OTS has a power to make suggestions on proposals that the government is thinking about itself, and I know that it works with officials, making suggestions as to how we can change and improve the legislation and proposals that we are putting forward."

James Murray intervened to ask whether the minister would commit to responding formally to every OTS recommendation within a prescribed timeframe. The minister replied that she understood why he had made that suggestion but the OTS is independent, can look at what it wishes to look at - that might not be necessarily what the government is focusing on at any particular moment, so for those reasons and some others I will not be accepting that proposal."  


Clause 101 – Interpretation - PASSED

Clause 102 - Short title - PASSED

These clauses will not be debated.

James Murray and Alison Thewliis both took the opportunity to thank the minister, the chairs and other members of the committee, as well as the committee clerks. Alison Thewliss also thanked her advisers. However she wished there was a better process in terms of scrutinising the Finance Bill than just calling for reports.

Thewliss also thanked those who submitted written evidence to the committee: "It gives us a great deal of assistance, providing comments on the bill." She wished the committee had been able to take oral evidence too.

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:

New clause 1 (SNP) - Review of reliefs on investments

New clause 6 (SNP) - 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.

Richard Thomson, for the SNP, briefly introduced the two new clauses.

The Financial Secretary responded to Alison Thewliss's points a few moments earlier on process: "There is a very clear process as to how we make legislation in taxation. There is a large amount of consultation. The process is: we announce a consultation, there is a consultation, we reflect on the consultation and then we bring in legislation. I say that just to encourage her - so long as I am in this position I am very happy to hear points that are made by the opposition benches in the course of that consultation process, to ensure that we do have the right and appropriate legislation on the statute books."

On the new clauses she said there were a range of measures in the bill to reduce the tax gap and also dealing with tax avoidance broadly. The government have had significant success since 2010 in reducing avoidance. A separate reliefs impact assessment as requested by the SNP is not necessary, she argued.

New clause one was withdrawn.

New clause 2 (SNP) - 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.

Richard Thomson (SNP) described this new clause as the 'Jim Bowen clause' referencing the Bullseye presenter's catchphrase of 'let's have a look at what you could have won'. This is the 'let's have a look at what you could won had you remained in closer alignment with the European Union' clause, said Thomson.

The Financial Secretary said that the OBR provide forecasts, published the impact on GDP at Autumn Budget 2021 and will continue to monitor impact. It would be unhelpful for the government to produce a rival forecast, she said. She added that the OBR was required to only produce forecasts in compliance with published government policy - it doesn't publish forecasts based on alternative policies, and she doesn't think it would be a useful exercise for them to do so.

New clause two was withdrawn.

New clause three (debated earlier) was not moved.

New clause 4 (SNP) - 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.

Richard Thomson (SNP) said that for every policy choice we should understand its consequences in terms of tackling climate change and that is why he is putting this new clause to the committee.

The Financial Secretary said that the net zero in government chapter of the net zero strategy sets out how government will monitor progress to make sure that it meets climate commitments. She said TIINs carefully consider climate impact. Thus the new clause is unnecessary.

Richard Thomson said he looked forward to seeing how these governance measures operate in practice.

New clause 4 was withdrawn.

New clauses 5 to 11 were not moved.

New clause 12 (SNP) - Impact of Act on tax burden of hospitality sector 

This would require the government to publish within 12 months of this Act coming into effect an assessment of the impact of the Act as a whole on the tax burden on the hospitality sector.

Richard Thomson, for the SNP, said his main concern in relation to the tax burden on the hospitality sector is VAT. "The best way for the hospitality sector to get back on its feet is to be allowed to trade as it can out of the present situation that it is in, cognisant of their obligations to wider public health objectives." We should be doing all we can to support them to support themselves, he added.

The Financial Secretary responded that the Chancellor had provided significant support to the hospitality sector over the course of the pandemic, including continuing business rates relief. The government carefully monitor the impact of all tax changes, including on different sectors, she said. TIINs include the impact of tax changes on businesses.

New clause 12 was withdrawn.

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.

The chair asked whether any member of the committee wished to move this new clause. None did.

The chair then invited committee members to report the bill to the House.

The Financial Secretary thanked the committee chairs, other committee members and officials who had supported her through the bill.

The chair thanked the clerks and others who had enabled the committee sessions, as well as his co-chairs.  Noting that the committee had concluded sooner than expected, he suggested it would be the wish of the minister "that people should use the time made available to ensure that they get their tax returns in on time". 

The bill was reported to the House at 10.55am.