Finance Bill 2024-25 Committee: Government resist calls for further assessments of Bill’s impact

The date for report stage has not yet been announced, but it is expected to be published soon.

You can read the transcripts here: Sitting three and Sitting four.

Session 3 – Thursday 30 January 2025, 11:30 – 13:01

Part 3: Other taxes (continued)

Inheritance tax (employee benefit trusts) (clauses 58-60) 

Clause 58: EBTs: Prohibition on applying property for benefit of participators etc 

Clause 59: EBTs: restriction on proportion of beneficiaries who may be participators etc 

Clause 60: EBTs: shares entering trust to have been held for two years 

These clauses tighten the criteria for eligibility for the tax advantages of being an Employee Benefit Trust (EBT). An EBT is a trust which is set up by an employer to reward and motivate employees. The benefits provided may be pensions, sick pay, a share of profits, shares or almost anything the employer chooses.

The Exchequer Secretary to the Treasury, James Murray, began the session by explaining that clause 58 ensures that restrictions on shareholders and their family members benefiting from an EBT remain in place for the trust’s entire lifetime. It addresses cases where the trust deed allows close connections of a shareholder to benefit after their death, making the government’s position “explicitly clear” in legislation. He continued that clause 60 mandates that shares must be held for at least two years before being transferred into an EBT.

The Shadow Financial Secretary, Gareth Davies, raised concerns on behalf of smaller companies using EBTs that some may have to exclude certain employees from participating in share schemes to comply with the new requirement. The shadow minister asked for the minister’s view on this impact and challenged whether the benefits of the changes outweigh the risk.

The minister believed that the changes to EBTs would not affect small businesses, as the original aim of the inheritance tax exemption was to “encourage businesses to reward and motivate a wide range of employee”. He emphasised that, to qualify, EBTs must not exclusively benefit shareholders, their families, or closely connected individuals.

Clauses 58-60 - Passed

Inheritance tax (agricultural property relief) (clause 61) 

Clause 61: Agricultural property relief (APR): environmental management agreements 

The Exchequer Secretary said that clause 61, effective from 6 April 2025, ensures APR applies to land managed under an environmental agreement with or on behalf of government bodies, preventing the tax system from being a “barrier to uptake” and supporting both food production and environmental outcomes.

The Shadow Financial Secretary welcomed this £5 million annual relief for farmers but expressed concern that the government will “take away some £500 million a year through the family farm tax”. He cited the Chartered Institute of Taxation (CIOT) which “queried why the relief remains limited to schemes entered into with public authorities, rather than allowing enterprising landowners to enter into other schemes”.

In response, the minister told MPs that the relief applies only to land under environmental agreements with government bodies or approved responsible bodies in order to ensure adherence to “high, verifiable environmental standards”.

Clause 61 - Passed

Inheritance tax (statements) (clause 62) 

Clause 62: National Savings Bank: statements from HMRC no longer to be required

The Exchequer Secretary said that clause 62 removes the requirement to contact HMRC directly to check inheritance tax paid in certain limited cases, such as specific domicile conditions. He continued that this aligns with modern compliance processes and is a minor change to the broader reforms for non-UK-domiciled individuals. The Shadow Financial Secretary supported the change.

Clause 62 - Passed

Alcohol duty (clauses 63-64 plus amendment 66 and new clauses 2 and 4) 

Clause 63: Rates of alcohol duty 

Clause 64: Abolition of duty stamps for alcoholic products 

Angus MacDonald (Lib Dem) proposed amendment 66 to reduce the duty rate that applies to spirits, and also new clause 2, which sought twice yearly reviews of the impact of the measures contained in clauses 63 and 64 of the Bill. MacDonald, who represents a constituency in the Scottish highlands, claimed that the UK has the highest alcohol duty in the G7, and that a double measure of a spirit is taxed four times more than a pint of cider, despite similar alcohol content. “This punitive duty does not even deliver more revenue for the Treasury”, he said and urged the government to freeze alcohol duty on Scotch whisky and other spirits.

The Shadow Exchequer Secretary also voiced concern about the impact of duty increases, and put forward new clause 4 which would have required the Chancellor, within six months of the Bill being passed, to make a statement to Parliament about the increase to alcohol duty. He suggested that the industry sees the Retail Price Index (RPI) duty uprating as a “broken commitment” and asked if the government has assessed the impact on jobs. The shadow minister believed that Budget tax rises, including a £25 billion ‘jobs tax’, would “make it much harder for the industry to succeed”.

Paul Kohler (Lib Dem) was unhappy that the UK is moving from a ‘wine easement’ regime where 85% of all wine sold in the UK is subject to the same rate of duty to one where there are 30 different rates. Wine ABV [alcohol by volume] cannot be precisely determined until bottling, he noted, adding that it “creates huge uncertainty about price and profit margins for the industry if there are different rates of duty depending on the specific ABV, down to a gradation of 0.1% ABV.”

The Exchequer Secretary responded that, according to HMRC’s 2022 review, the duty stamps for alcoholic products are outdated, costly, and ineffective. He emphasised that the government is supporting hospitality with a draught duty reduction, saving businesses up to £100 million annually and increasing the duty difference between draught and non-draught products.

The minister suggested that opposition calls for further reports on alcohol duty impacts are unnecessary, as tax impact notes were published with the Budget. He said making the wine easement regime permanent would complicate the system and undermine the public health objectives of the revised alcohol duty system.

Clauses 63-64 – Passed.

Amendment 66 was rejected by 2 votes to 10.

New clauses are decided upon at the end of the committee stage. New clause 2 was rejected by 2 votes to 9. New clause 4 was not pressed to a vote.

Tobacco duty (clause 65 plus new clause 5)

Clause 65: Rates of tobacco products duty 

The Conservatives tabled new clause 5, which sought a review of the effects of this clause on the illicit tobacco market.

The Exchequer Secretary rejected new clause 5, saying the government has already taken into account illicit trade when setting tobacco duty rates. However, he reassured the committee members that the government would continue to monitor illicit trade and support the efforts of enforcement agencies to counter it. He added that high tobacco duty aims to reduce smoking prevalence, supporting a smoke-free UK and easing pressure on public services.

The Shadow Exchequer Secretary said that he had tabled new clause 5 to help assess the impact of clause 65 on the illicit tobacco market, as higher duty could shift consumer behaviour. He said that the OBR has suggested that the duty rate is beyond the peak of the Laffer curve—the revenue-maximising rate of tax.

The minister replied that the duty increase is designed to “raise revenue while continuing to reduce tobacco consumption”, adding HMRC have reviewed external industry figures but “World Health Organisation rules prohibit extensive engagement with the industry on such issues”.

Clause 65 - Passed

New clauses are decided upon at the end of the committee stage. New clause 5 was rejected by 4 votes to 9.

Vehicle excise duty (clause 66 plus new clause 6)

Clause 66: Rates of vehicle excise duty (VED) for light passenger or light goods vehicles etc 

The Exchequer Secretary said that clause 66 sets VED rates for 2025-26, increasing standard rates for cars, vans, and motorcycles in line with RPI. The standard VED rate for cars registered since April 2017 will rise by £5, the expensive car supplement by £15, van rates by no more than £15, and motorcycle rates by no more than £4.

The Shadow Exchequer Secretary, James Wild, broadly supported the measures but argued for a review of the effects of the £40,000 expensive car supplement (ECS) threshold (the subject of his new clause 6). “The assessment must consider the effects of the threshold on the proportion of new car sales that are electric vehicles,” he explained. He said the government’s policy “is odd because it makes people less likely to move to EVs”.

The minister said he understood what the opposition was trying to do with new clause 6, but it was not required as the government has already committed to reviewing the threshold at a future fiscal event.

Clause 66 – Passed

New clauses are decided upon at the end of the committee stage. New clause 6 was rejected by 4 votes to 9.

Taxes on goods vehicles (clauses 67-69 and 71 plus government new clause 1 and new clause 7)

Clause 67: Rates of vehicle excise duty for rigid goods vehicles without trailers etc 

Clause 68: Rates of vehicle excise duty for rigid goods vehicles with trailers 

Clause 69: Vehicle excise duty for vehicles with exceptional loads etc 

Clause 71: Rates of HGV (heavy goods vehicle) road user levy 

The Exchequer Secretary said that the government’s new clause 1 corrects an omission from the Bill of an uplift to the general haulage rate announced at the autumn Budget.

While not opposing the provisions, the Shadow Exchequer Secretary raised concerns about the timing and lack of support for affected industries, such as logistics. He suggested the industry has warned that the increases could impact investment and result in job losses.

He explained: “It is because of the issues raised with us by the logistics sector that we have tabled new clause 7, which would require the Chancellor, within six months of the Bill being passed, to make a statement about the impact of the changes. That statement must also consider the effect of the increases on the haulage sector, decarbonisation of the logistics sector and the UK economy.”

The minister labelled the new clause tabled by the Conservatives ‘not necessary’ as the government has already published relevant information outlining the expected effects. He said that revenue from HGV VED and the HGV levy helps fund public services and infrastructure, so “it is right that the taxes are regularly reviewed”.

Clauses 66-71 – Passed

New clauses are decided upon at the end of the committee stage. New clause 1 was passed without a vote. New clause 7 was not pressed to a vote.

Vehicle excise duty: zero-emissions vehicles (clause 70)

The Exchequer Secretary explained that the clause makes minor amendments to ensure the legislation for the application of vehicle excise duty to zero emission vehicles operates as intended.

The Shadow Exchequer Secretary supported the clause, calling it a “perfectly sensible measure”.

Passenger duty (clauses 72-73 plus new clause 8) 

Clause 72: Rates of air passenger duty (APD) until 1 April 2026 

Clause 73: Rates of air passenger duty from 1 April 2026 

The Exchequer Secretary told MPs that changes made in these clauses help maintain APD rates in real terms after years of high inflation. He explained that clause 73 increases the higher rate on larger private jets by an extra 50% above the increases to other rates.

The Shadow Exchequer Secretary asked if the government has assessed the impact of the 50% APD increase on economic growth and trade relationships. He said that Airlines UK has warned that higher APD could make it harder for British carriers to introduce new routes. “It is because of the impacts that the rate rises might have on consumers, industry and economic growth that we tabled new clause 8, which would require the Chancellor to publish an assessment of the impact of the changes introduced by clause 73 within 18 months of the Bill being passed.”

The minister said the government considered new clause 8 ‘unnecessary’. He said that the APD adjustments for 2026-27 are necessary because rates have fallen behind inflation. Higher increases for non-economy passengers and private jet users ensure they contribute fairly to public finances. Unlike other sectors, aviation benefits from no VAT on plane tickets and no tax on jet fuel, making APD an important way to ensure the industry pays its share, he argued.

Clauses 72-73 – Passed

New clauses are decided upon at the end of the committee stage. New clause 8 was not pressed to a vote.

Session 4 – Thursday 30 January 2025, 2:00 – 3:28

Environmental taxes (clauses 74 – 77)

Clause 74: Rates of climate change levy 

Clause 75: Rates of landfill tax 

Clause 76: Rate of aggregates levy 

Clause 77: Rate of plastic packaging tax 

The MPs moved through the clauses uprating these four environmental levies quickly.

The Economic Secretary to the Treasury, Emma Reynolds, told the committee that clause 74 will increase climate change levy rates on gas, electricity and solid fuels by RPI with effect from April next year. She said this would incentivise businesses to improve energy efficiency, supporting the government’s climate objectives.

The Shadow Financial Secretary, Gareth Davies, did not oppose the measures and welcomed the government’s decision to extend the climate change agreement scheme. This scheme allows energy-intensive industries to claim a discount on the climate change levy, subject to taking steps towards increasing their energy efficiency and reducing emissions.

Lib Dem MP Angus MacDonald opposed this clause (leading to a vote, which he lost 9-1). His unhappiness related to the fact that, in rural areas such as his, mains gas is not available. “Electricity users pay four times more for their energy than mains gas users, so a hotel on the island of Skye may pay £80,000, whereas one in a city may pay £20,000,” he explained, adding that the reason for the big disparity is that the tariffs and taxes are largely on electricity, rather than gas, despite electricity being largely renewable.

There was no controversy over clauses 75, 76 and 77, which also uprate the levies in question in line with inflation – RPI for landfill tax and aggregates levy, CPI (consumer prices index) for the plastic packaging tax. The Shadow Financial Secretary supported all three clauses.

On a plastic packaging tax, the Shadow Financial Secretary asked if there is an update for an impact assessment on this tax to which the Exchequer Secretary answered that the government will provide updates to the appropriate authorities at the relevant time.

Clause 74 – 77 – Passed

Soft drinks industry levy (clause 78 plus new clause 9) 

The Economic Secretary told MPs that, since the soft drinks industry levy came into effect in April 2018, it had succeeded in reducing the sugar content in UK soft drinks by 46%. But, she explained, the levy rates “have not been increased since their introduction… and so have gradually reduced in value against inflation. In 2018, SDIL made up approximately 11% of the price of a 330 ml can of full-sugar Coca-Cola; in January 2025, it makes up only 6%.” Thus the government proposed not simply to uprate the levy in line with inflation going forward, but to “protect the real terms value of the levy” by adding in a “catch-up” reflecting the 27% CPI change between 2018 and 2024, spread evenly over the period 2025 to 2029.

The Shadow Exchequer Secretary was concerned about this, calling it the “unprecedented backdating of this tax increase”, leading to a potential 27% retrospective increase over an extended period. He said it was “a fundamental departure from the predictability that should be at the heart of tax policy” and asked whether backdated increases are becoming a new norm within the government’s tax policies. He put forward new clause 9, which would have required the Chancellor to make a statement to Parliament about the increase to the levy.

The shadow minister also expressed concern about the impact assessment. He suggested that the measure is expected to generate £95 million by 2029-30, “yet the assessment does not model how established price elasticity in soft drinks will affect those projections”.

The minister repeated that “the catch-up reflects the 27% CPI change between 2018 and 2024… because we have considered the impact on soft drinks manufacturers, it will be spread evenly over the five rate increases from 2025 to 2029”.

Rejecting new clause 9 she highlighted that the tax information and impact note have already published in the autumn Budget.

Clause 78 – Passed

New clauses are decided upon at the end of the committee stage. New clause 9 was not pressed to a vote.

Part 4: Miscellaneous and final

Tax avoidance (clauses 79-80)

Clause 79: Limited liability partnerships

Clause 80: Loans to participators

The Economic Secretary said that clause 79 “closes a known route for tax avoidance by introducing a new rule for chargeable gains purposes when a Limited Liability Partnership (LLP) enters liquidation on or after 30 October 2024. If a member contributed an asset to the LLP and the LLP later disposes of it back to the member or a connected person, then “they are taxed on the gains on the asset up to the time of its contribution to the LLP”.

Turning to clause 80 the minister said it “closes a loophole through which some taxpayers have attempted to avoid the company tax charge known as section 455”. “As a result of the changes made by clause 80, where shareholders use circular loan arrangements to extract value from their companies, a tax charge will be applied on the relevant amount withdrawn”. While most close companies comply with tax rules, this proportionate change targets only those engaging in tax avoidance, reinforcing a “fair and just” tax system, she said.

The Shadow Financial Secretary supported the measures and said: “Tax avoidance is something that we took very seriously when in government”.

Clauses 79-80 – Passed

Crypto-asset reporting framework (clause 81)

The Economic Secretary explained that clause 81 amends legislation to include the Crypto-Asset Reporting Framework (CARF) in the list of international agreements for exchanging information and provide the Treasury the power to make regulations implementing the CARF regime, which will apply to UK crypto-asset service providers from 1 January 2026.

The Shadow Financial Secretary did not oppose the clause but sought clarification on the name. He said the industry commonly uses “cryptocurrency” rather than “crypto-asset” and wondered what is the official distinction between the two.

The minister responded that, in her view, a cryptocurrency is a type of cryptoasset, but said she would check it.

Clause 81 - Passed

Duty on vaping products (clause 82 plus amendment 67)

The Shadow Exchequer Secretary said that clause 82 allows HMRC to “prepare for the introduction of a new duty”, with the main provisions to follow in future legislation. “After consultation, a single flat-rate duty will apply, which should reduce non-compliance and tax avoidance opportunities and be more proportionate both for industry and for HMRC to administer”, he suggested.

Asking the government to support his amendment 67, the shadow minister hoped that given the government’s digital-first approach, the minister would commit to a fully digital vaping duty stamp.

The Economic Secretary recognised that effective implementation of the Bill is crucial but considered the amendment ‘unnecessary’, as HMRC are already assessing vaping duty stamps. On the illicit vaping market, she stated that HMRC intend to exploit modern technology and digitalisation to target specific risks of illicit products.

The minister suggested that: “Vaping duty stamps will support both enforcement and industry by identifying products that are non-duty paid and therefore illicit. They will also help HMRC to manage the revenue risk from the initial sell-through period and to limit the duty avoidance practice known as forestalling, which is clearing large quantities of excise goods from duty suspense immediately prior to a rate increase to avoid paying the new tax”.

Clause 82 - Passed

Amendment 67 - rejected by 4 votes to 9

Carbon border adjustment mechanism (CBAM) (clause 83)

This clause will enable HMRC “to prepare for the introduction of the UK carbon border adjustment mechanism and allow information to be disclosed for the purposes of developing the CBAM,” the Economic Secretary told MPs.

Explaining the logic behind the CBAM, the minister claimed that the “best solution” to carbon leakage is international cooperation on carbon pricing and decarbonisation, but many countries lack domestic carbon pricing. The UK CBAM will be introduced in 2027 to place a carbon price on imported carbon-intensive goods in sectors such as aluminium, cement, fertiliser, hydrogen, iron, and steel. The minister said that the clause will also allow a national authority or the UK Emissions Trading Scheme Authority to disclose information requested by HM Treasury or HMRC for purposes connected with the tax, in particular “preparing for it, developing it, implementing it and putting it into operation”.

While acknowledging that this clause is an “enabling power”, the Shadow Exchequer Secretary highlighted concerns from the CIOT about “how basic the detail of the clause is” and asked when further information will be available. He also raised concerns from the National Farmers Union that the CBAM could impact British farmers and growers, creating an “unlevel playing field”.

The minister responded that further details will be provided in draft legislation in a future Finance Bill.

Clause 83 - Passed

Final clauses (clauses 84 – 86)

Clause 84: Correction of wrong cross-reference etc

Clause 85: Interpretation

Clause 86: Short title

The changes made by clause 84 will correct errors and omissions in three pieces of legislation to ensure that the wording accurately reflects the policy intent, and remove possible confusion for readers, said the Economic Secretary. The Shadow Financial Secretary supported this.

The shadow minister took this opportunity to thank those who have supported the committee, and also the Chartered Institute of Taxation and the Association of Taxation Technicians for supporting him with briefing material.

Clause 84 - Passed

New Clauses

NC10: Review of business taxes

NC11: Review of impact of tax changes in this Act on households

NC12 : Review of effects of the Act on small businesses

At the end of committee stage MPs considered the new clauses tabled to the Bill. Some of these had already been debated so all that remained was to move/call them (or not) for a vote. Others had not yet been discussed so a short debate took place.

Government new clause 1 provides for an increase in the rate of vehicle excise duty applicable to haulage vehicles other than showman’s vehicles. There was no further debate and it was passed without a vote.

New clause 2 (Lib Dem) sought a review of the impact of alcohol duty increases on distilleries, wine producers and the hospitality industry. There was no further debate and it was voted down 2-9.

New clause 3 (Conservative), which would have required a review of how many people receiving the new state pension at the full rate are liable to pay income tax this year and in the next four tax years, and specifically what the tax liability of their state pension income will be, was not called.

New clause 4 (Conservative), which would have required a statement about the impact of increasing alcohol duty, was not called.

New clause 5 (Conservative) sought to require the Chancellor to review the impact of increased rates of tobacco duty on the illicit tobacco market. There was no further debate and it was voted down 4-9.

New clause 6 (Conservative) sought to requires the Chancellor to review the impact of the £40,000 expensive car supplement VED threshold. There was no further debate and it was voted down 4-9.

New clause 7 (Conservative), seeking a statement about the impact of increasing Vehicle Excise Duty on HGVs, was not called.

New clause 8 (Conservative), which sought an assessment of the changes to air passenger duty on the public finances, carbon emissions, and on the finances of households at a range of different income levels, was not called.

New clause 9 (Conservative), which would have required the Chancellor to make a statement about the impact of increasing the soft drinks industry levy, was not called.

New clause 10 would require the Chancellor to conduct a business tax review within six months of the Bill passing and to publish recommendations, including how tax policy can increase investment and provide certainty for businesses.

It was moved by the Shadow Exchequer Secretary who told the committee a competitive tax environment for business is needed to support growth, innovation and investment. He claimed that the Budget has impacted entrepreneurs and wealth creators, driving them away from the UK. In particular, the energy profits levy risks 35,000 jobs in Scotland and the North Sea, and the family business tax “has had a highly damaging impact on family farms and other family firms”, said the shadow minister.

The Exchequer Secretary did not support the new clause and stated that all taxes are under ongoing review. He continued that the corporate tax road map has provided ‘certainty’ by outlining which areas of business taxation will remain stable and which will be reviewed during this Parliament. Additionally, the government has committed to reviewing the business rates system.

The new clause was voted down 6-9.

New clause 11 sought to require the Chancellor to publish an assessment of the changes in the Bill on the finances of households at a range of different income levels.

Proposing the new clause, the Shadow Exchequer Secretary argued that the Budget tax increases—including alcohol duty, air passenger duty, and vehicle excise duty— would directly impact household finances, alongside rising borrowing costs, “meaning hard-working families will have to pay the costs”. He further criticised the ‘education tax’, suggesting that placing VAT on school fees would impact 100,000 children with special needs who attend independent schools without education, health, and care (EHC) plans.

The shadow minister concluded that: “Any impact that changes in the Bill will have on households should be closely monitored, which is what the new clause seeks to achieve”.

In response, the Exchequer Secretary argued that the “Impact on households” report, published alongside the autumn Budget, already provides a detailed analysis of how government measures affect incomes. This includes taxation, welfare benefits, and public services. He continued that the analysis shows that Budget 2024 and spending review 2025 Phase 1 are ‘progressive’, benefiting low-income households the most. He said that the increases in tax are concentrated on the highest-income households and overall, all but the richest 10% of households will benefit from policy decisions in 2025-26.

The Shadow Exchequer Secretary decided not to move the next new clause while saying “I also echo the thanks for the Chartered Institute of Taxation and others… who has done sterling work in supporting me”.

The new clause was withdrawn (i.e. not pressed to a vote).

New clause 12 (Conservative) would have required the government to produce an impact assessment of the effect of the Bill on small businesses. It was not moved.