LIVEBLOG: Finance (No.2) Bill Public Bill Committee (sittings 3 & 4)

17 May 2023

A liveblog on the third and fourth sittings of the Finance (No.2) Bill Public Bill Committee, which took place on the morning (11.30am) and afternoon (2.00pm) of Thursday 18 May 2023.

You can watch the proceedings here: Sitting three (11.30am), Sitting four (2.00pm).

The main contributors to the debate were:

Highlights

Sittings 3 and 4 of the committee covered topics including investment zones, income tax assignment and abolition of the Office of Tax Simplification.

Procedure

As with earlier sittings, MPs considered the clauses in numerical order, with the exception of those already debated in Committee of Whole House (CWH). See Tuesday's blog for more information on the committee's procedures and the clauses that were debated in CWH.

Useful documents

Finance (No.2) Bill / Explanatory Notes / Amendments Paper / All documents

The CIOT has produced a briefing for MPs on the committee in relation to Clause 346 - Abolition of the Office of Tax Simplification.

The Institute would like to see the decision reversed and, failing this, for steps to be taken to ensure that the government's commitment to 'embed tax simplification into the institutions of government' is monitored.

The CIOT’s Low Incomes Tax Reform Group has provided a written submission in relation to Clause 332 – Administration, which will render void assignments of income tax repayments.

The submission proposes an amendment requiring HMRC to monitor the impact of the policy on taxpayers and their ability to obtain refunds and urges HMRC to adopt a more consumer protection focus on the relationship between repayment agents and taxpayers.

NB: This live blog 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 three: Thursday 18 May, 11.30am

Part 6 - Other taxes

Clause 313 - Stamp duty land tax: transactions funded with the assistance of a public subsidy

Amends the SDLT Registered Social Landlord exemption to ensure that purchases made with the assistance of section 31 LGA 2003 funding to secure additional social housing stock are not subject to SDLT. This follows the granting of an additional £500m of funding for local authorities to help secure housing stock for those fleeing conflict (especially from Ukraine). More


Victoria Atkins, the Financial Secretary to the Treasury, explained that clause 313 amends the existing stamp duty land tax rules to ensure registered providers of social housing are exempt from the tax. Atkins spoke about the additional funding provided to support schemes involving Ukrainian and Afghan refugees and that this enabled local authorities to increase their supplies of housing stock.

Dame Angela Eagle (Lab) questioned the effectiveness of the government's policy, given the numbers of refugees being housed by the government in hotels.

The FST defended the government's approach and said that there was a range of options open to local authorities to help them meet housing needs.

The clause was agreed.

Clause 314 - Value added tax: deposit schemes

Simplifications to the VAT treatment of deposits charged under a drink container deposit return scheme (DRS). (NB. The government plans to introduce a DRS for bottled and canned drinks. This will require sellers of drinks to add a returnable deposit to the price of in-scope products sold in the UK.) More

The FST explained that clause 314 will ensure that businesses only calculate VAT based on the actual price paid for bottles or drinks containers covered by deposit return schemes. She emphasised that only the business making the initial sale of a drink with a deposit will be responsible for accounting for VAT on the returned deposits. The government has made significant efforts to protect both consumers and small establishments such as shops, coffee shops, and newsagents, by minimising any VAT complexity related to this matter.

The Shadow FST observed that VAT would be accounted for on the unreturned deposit amounts by the first seller of a product under a deposit scheme. This clause guarantees that no VAT will be charged at any stage of the supply chain in relation to the deposit portion, and suppliers will only need to account for VAT on the sale of standard-rated deposits included in products that have a deposit amount. He further stated that Labour do not intend to oppose this clause and expressed their desire to see the introduction of a deposit return scheme at the earliest opportunity.

Dame Angela Eagle (Lab) expressed her concern about the growing complexity associated with these changes and questioned whether the ministers are content with this development. She also inquired if the FST has given any insights or considerations to the committee regarding the management of the new challenge posed by deposit schemes and the complexity of VAT rules. Additionally, she raised the question of whether the FST has taken into account how this scheme might interact with packaging regulations.

The FST stated that there has been a strong effort to simplify the process, with the primary focus being on larger producers. She emphasised that the objectives set by HMRC and the Treasury aim to ensure fairness and simplicity in taxation and that the government would not profit from the scheme.

She said the Government would very much like to have acted in tandem with the Scottish Government on this. Douglas Chapman, for the SNP, thought it would have been "a good idea to have a consistent approach that the UK Government could get behind" but "[Scots] have had to push on with our DRS to actually achieve some of our net zero targets and a better environment for our citizens". The minister replied that there has been "so much discussion between officials behind the scenes". There had been "some significant intellectual debates" about how VAT is dealt with in cross-border scenarios. 

The clause was agreed without division.

Clauses 315-317 - Import duty (plus Schedules 19 and 20)

Clause 315 makes changes to trade remedies legislation to strengthen ministers’ powers.

Schedule 19 will require the Trade Remedies Authority (TRA) to give the Business and Trade Secretary notice at certain points in dumping, subsidisation and safeguarding investigations. It will provide ministers with the power to ask the TRA to reassess recommendations or determinations before ministers make a decision, allow the TRA to provide options within its recommendations, allow ministers the power to revoke trade remedies measures without a TRA recommendation and for ministers to apply alternative provision and final remedies to that recommended by the TRA. 

Schedule 19 also includes legislation to provide powers for the Business Secretary to make secondary legislation relating to the repayment or collection of duties following a review of a trade remedies measure. This will allow for the reimbursement or collection of monies under the trade remedies framework in certain circumstances.

Schedule 20 sets out the role of the TRA and the government in investigating and implementing bilateral safeguard measures which the UK has agreed with our Free Trade Agreement partners. The provisions will enable ministers to direct the TRA to open an investigation.

Clause 316 enables introduction of Advance Valuation Rulings. These are written decisions made by customs authorities at the request of a trader that are legally binding on both parties. They are a trade facilitation and are not mandatory. These rulings will provide traders with certainty on the valuation method that determines the customs value of goods they are importing into the UK. This will provide reassurance that the valuation method is correct and will assist in the completion of customs declarations. More

Clause 317 enables traders to request a review of, or appeal against, a decision by HMRC to require a financial guarantee as a condition of releasing imported goods from customs control in circumstances where the amount of duty due is not clear when a customs declaration is accepted by HMRC. The legislation will also bring provisions relating to these guarantees within the framework of legislation covering other forms of customs guarantee. More

The FST said these measures would ensure the country can take “full advantage of our Brexit freedoms”, allowing businesses to “continue to flourish” in exporting goods and services around the world. She added that the proposed changes to the current trade remedy procedures would allow the “broader public interest” to be covered in rulings – whereas currently decisions must be accepted or rejected in full, ministers would have “greater flexibility” to take other actions including requesting reassessment.

She said the clauses would introduce a “variety of tools…to ensure we have what we need to protect UK businesses and protect the flow of goods”.

James Murray said the UK trade Remedies Authority had already been the subject of a "political storm” after ethics adviser Lord Geidt resigned from Boris Johnson’s Government, supposedly in response to requests made to him in relation to the authority. Murray added the changes to the TRA were substantial given its short lifespan, saying: “That’s a fair amount of change for an organisation which has only existed for less than two years.”

Murray said Labour would not be opposing the measures to provide advance ruling for customs valuations or appeal requests from importers when the value of goods is unclear, adding “anything that gives businesses great clarity is to be welcomed”.

Dame Angela Eagle said the clauses were “quite mild, but seem to have a lot of implications in terms of how we pursue policing of import duties”, in order to prevent “dumping or misuse” of products on UK markets. She asked how the proposed changes to the TRA would impact it by “eating away” at its independence, also questioning whether making changes in legislation would lead to the authority becoming “constrained by law”, and why changes were being made so soon after its creation in 2021.

Responding, the FST said the Government had been "listening to industry" over the proposed changes, and reassured MPs that all those changes were in-line with obligations under the World Trade Organisation. She added the process will remain independent, with Secretary for State needing to make a speech to Parliament if they overrule a TRA ruling.

Clauses 315-317 were agreed without division, along with schedules 19 and 20.

Clause 318 - Fuel duties: excepted machines etc

Changes to restrictions on entitlement to use rebated diesel and rebated biofuels, to permit the use of rebated fuel in tractors and gear used by charities for launching lifeboats and in machines used for arboriculture, and extend entitlement to use rebated fuel to machines used primarily for providing heat and electricity for non-commercial premises. Took effect 15 March 2023. More

The clause also makes a minor technical correction. Section 14B(6) of the Hydrocarbon Oil Duties Act 1979 (HODA) cross refers to a definition in another section of HODA which has been repealed and so a definition needs to be inserted. More

Exchequer Secretary Gareth Davies said the clause would remedy minor issues with a policy change which saw those using rebated fuels being required from April 2022 to pay full duty like other motorists, in order to "reflect the harmful impact of the emissions they produce". These were largely administrative and to address "anomalies" in the policy.

James Murray said the changes proposed would have an impact on businesses and individuals utilising rebated fuels, electricity, or heating for both commercial and non-commercial purposes. Specifically, he inquired about the effect on charities operating lifeboats.

In response, the Exchequer Secretary acknowledged that the initial provision included lifeboats and their ability to use rebated fuel. However, it did not include tractors and machines necessary for lifeboats' movement in and out of the water. This aspect was not raised during the consultation process. He added that they are now amending the provision to ensure that both lifeboats and tractor machines can avail of rebated fuel.

The clause was agreed.

Clause 319 - Rates of tobacco products duty

Increase the duty rates for all tobacco products by the tobacco duty escalator of 2% above RPI inflation. Increase the rate for hand-rolling tobacco by an additional 4% above the escalator. Increase the Minimum Excise Tax by an additional 1% above the escalator. Took effect 15 Mar 2023. More

The XST explained the clause would increase the minimum amount of duty payable on a pack of cigarettes to 3% above the inflation rate.

Dame Angela Eagle (Labour) responded by stating that there is cross-party support for the tobacco duty escalator. She pointed out that according to the estimates of the Office for Budget Responsibility (OBR), the measure would increase tobacco revenues from £10 billion last year to £14 billion next year. She then raised concerns about the current marketing practices surrounding vaping in society. She argued that when taxes on tobacco products increase, the financial incentive for smuggling becomes even greater. As a result, she requested the minister to provide more information on the potential impact of this on smuggling activities.

The Exchequer Secretary responded by emphasising the need to strike the right balance with taxation. Going too high could potentially drive people towards unlawful trade. Regarding vaping, he mentioned that it is a topic frequently discussed in the House.

The clause was agreed.

Clause 320 - Soft drinks industry levy: flavour concentrates

Amends the definition of a soft drink liable to the Soft Drinks Industry Levy to include concentrates which are mixed with sugar when dispensed. More

The Exchequer Secretary stated that the change will ensure consistency across the soft drinks industry by requiring all packaged concentrates to be counted regardless of the stage at which sugar is added.

The Shadow FST acknowledged the comments made by the Exchequer Secretary and stated that they will not oppose the clause.

Dame Angela Eagle (Labour) noted that public health officials have generally agreed that sugar taxes have contributed to a decline in sales of sugary drinks and a reduction in total sugar sold by retailers and manufacturers, with a decrease of 35.4 per cent observed. She sought assurance from the minister regarding the government's acknowledgment of this success and their intention to continue efforts in lowering sugar content even further, below the current threshold of eight to seven and a half thousand tonnes in drinks. She also raised concerns about uncertainty regarding the government's direction under previous prime ministers. 

The clause was agreed.

Finance Bill Public Bill Committee - Sitting four: Thursday 18 May, 2.00pm

Clauses 321 & 322 - Air passenger duty

Clause 321 introduces, with effect from 1 April 2023, of a new domestic band and ultra long-haul band for the purposes of air passenger duty and for changes to the rates of the duty and to the list of territories. More

Clause 322 makes consequential amendments to the provisions that devolved to the Northern Ireland Assembly the power to set direct long-haul rates of APD. These amendments update the provisions to reflect the introduction by clause 321 of the ultra-long-haul band. 

The Exchequer Secretary (Gareth Davies) said the measures proposed by these clauses would help strengthen connectivity within the UK, with the ultra-long haul rate helping to support the government's wider climate objectives. Given the aviation industry does not pay VAT, Davies said the levy ensured the industry contributed to the public purse.

James Murray (Shadow Financial Secretary) said that it "could not be right for the Government to prioritise a tax cut that would be of greatest benefit to people who are able to be frequent flyers in the UK at a time when working people across the country have been hit again and again by tax rises". Labour would oppose the clause.

Murray also mischievously asked the minister to set out what the situation would be if the clause passed by confirming what rates of air passenger duty would apply in a few politically salient specific instances. "First, if someone were to travel by helicopter around the UK — for instance, from London to Southampton — would that be subject to air passenger duty? Secondly, if someone travelled on a private jet around the UK — say, from London to Blackpool — that was, for argument’s sake, a Dassault Falcon 900LX, what rate of air passenger duty would apply? Finally, if someone lives in the UK but was travelling to another home of theirs — say, in Santa Monica, California — what rate of air passenger duty would apply?" 

The Exchequer Secretary replied that "there is no APD other than on fixed-wing aircraft. Private jets pay a higher rate than any other flight domestically, and they are not... subject to the 50% cut that we are talking about here. Any ultra-long-haul flights will face a new band".

Dame Angela Eagle (Lab) asked how the devolution of powers to the Northern Ireland Executive would work in practice, given the Northern Ireland Assembly is currently suspended. And she sought clarification of discussions around wider efforts to tax aviation fuels. 

Craig Whittaker (Con) asked about the economic impact of the tax and its impact on the competitiveness of the industry.

The XST gave an outline of how the tax operates and offered to provide further detail on its economic impact. He offered to provide a further update in due course on the operation of the tax in Northern Ireland.

Following a vote, Clause 321 was passed by 10 votes to 7. Clause 322 was agreed unanimously.

Clauses 323 - 325 (plus government amendments 9 & 10 and schedule 22) - Vehicle taxes

Clause 323 increases VED rates for cars, vans and motorcycles in line with RPI with effect from 1 April 2023. To support the haulage sector, VED for Heavy Goods Vehicles (HGVs) will remain frozen for 2023-24. More

Clause 324 reforms the HGV road user levy, with effect from 1 August 2023, following the end of the levy suspension period. The reforms take into account the environmental performance of the vehicle. For foreign-registered vehicles, the reforms also ensure that the levy is focused on road usage and is more clearly aligned with the government’s international obligations. More

There are two proposed amendments to clause 324 and schedule 22. Government amendments 9 and 10 would make consequential amendments to ensure that vehicle excise duty remains chargeable on certain HGVs on the same basis, and in the same amounts, as it is chargeable before the amendment to the HGV road user levy in the Bill have effect.

Clause 325 removes certain circumstances in which the levy suspension period for a given HGV is extended longer than the government intended. In the final year of the three-year levy suspension period, each vehicle should only benefit from up to 12 months of levy free period. The clause ensures that this is the case by providing for a transitional payment where a vehicle has benefited from additional months of levy free period.

Gareth Davies (XST) explained the impact of the proposals on motorists, who he also said would continue to benefit from the government's fuel duty freeze. The measures would also help to simplify vehicle duties.

James Murray (Shadow FST) asked for clarity about the international obligations referenced in Clause 324 and indicated that the opposition would not oppose the measures. The XST said the measures would bring the UK's regime into line with 'many other countries' and that he would follow-up with further information.

Clauses 323-325, the government amendments and Schedule 22 were agreed unanimously. 

Clauses 326-329 (plus SNP New Clause 5) - Environmental taxes

Clause 326 increases the standard and lower rates of Landfill Tax in line with RPI, rounded to the nearest 5p. More

Clause 327 increases the main rates of CCL for gas and solid fuels. The gas rate will be aligned with that for electricity and the rate for solid fuels will increase proportionally to the gas rate increase. The CCL main rates on electricity and liquefied petroleum gas (LPG) will continue to be frozen for 2024-25. Also adjusts the reduced rates of CCL on gas and solid fuels for qualifying businesses in the Climate Change Agreement scheme. These businesses will pay no more tax on these fuels than had the main rates for these fuels been increased by the RPI. The reduced rates on electricity and LPG will be frozen at 2023-24 levels in 2024-25. More

Clause 328 increases rates of plastic packaging tax in line with CPI with effect from 1 April 2023.

Clause 329 reforms exemptions affecting aggregate (rock, sand and gravel) extracted during construction works. It will tax previously untaxed aggregate extracted for use on construction sites, and also simplify and extend exemptions for by-product aggregate arising unavoidably from construction projects. Takes effect 1 Oct 2023. More

Gareth Davies (XST) stated that the landfill tax is designed to incentivise waste diversion from landfill towards more environmentally friendly waste management options like recycling. Davies argued that these clauses contribute to valuable changes that encourage greener choices and support the government's climate and environmental objectives.

James Murray said that the opposition would not oppose increases in landfill tax rates, but requested further information about the broader context of landfill tax and the specific issue of landfill tax fraud, which he said had significant negative consequences for the environment and revenue. Referring to HMRC's annual estimate, he mentioned a tax gap of £125 million in 2020-21.

Regarding the plastic packaging tax, Murray asked the minister to provide an evaluation of the government's assessment of the tax's operation, specifically its impact in 2022-23 in relation to fulfilling its stated goal of stimulating recycling and reducing plastic waste.

Douglas Chapman (SNP) said that his party's new clause 5 would require the Chancellor of the Exchequer to publish an assessment of the impact of the Bill on the Government’s ability to meet their duties under the Climate Change Act 2008 and commitments under the 2015 Paris agreement. The UK Government talk about climate change when they are forced to do so, but they do not take the action required to meet their obligations, he complained.

Liz Twist (Lab) emphasised the importance of reducing environmental impact and ensuring that the necessary funds are recovered while narrowing the gap between revenue collection and expectations. The member then inquired about the number of enforcement actions and prosecutions resulting from the efforts of the joint unit on waste crime, specifically in relation to tax matters.

Dame Angela Eagle (Labour) pointed out that both HMRC and environmental agencies have a responsibility to address fraud, and expressed concern about the weakening of enforcement authorities in recent years. She requested reassurance from the minister regarding these issues.

Gareth Davies acknowledged that waste crime, including activities like fly-tipping, has a detrimental impact on communities. He acknowledged that any percentage of the tax gap is still a concern, and it is crucial to continue urging HMRC to take all necessary measures to address it effectively. He also highlighted that the government is currently reviewing the plastic packaging tax to gain a clearer understanding of its impact.

The clauses were unanimously agreed.

Part 7 – Miscellaneous and final

Clause 330 - 331 (and Schedule 23) – Freeports and investment zones

Clause 330 allows for the designation of special tax sites in or connected with Investment Zones. Special tax sites will be subject to approval by the government and will be designated using secondary legislation. Once designated, special tax sites will benefit from a package of tax reliefs:

For sites in England, SDLT relief will be made available for purchases of land or buildings, subject to that property being acquired for qualifying commercial purposes and used for such purposes in a control period of up to 3 years. Enhanced capital allowances of 100% will be made available for companies incurring qualifying expenditure on new plant and machinery primarily for use in a special tax site. An enhanced rate of structures and buildings allowances of 10% per year for 10 years for qualifying expenditure on non-residential structures and buildings in special tax sites. 

Secondary Class 1 NICs relief for employers with physical premises in a special tax site on the earnings of new employees who spend 60% or more of their working time within the sites. This rate can be applied on the earnings of all new hires up to £25,000 per year for up to 3 years. More

Clause 331 Makes provision relating to the sunset date for the tax reliefs available in special tax sites.

Victoria Atkins, said the measures would support the government’s levelling-up agenda, with investment zones given the same tax status as freeports, supporting underperforming parts of the country. Atkins then outlined the specific tax breaks that will be offered as part of the scheme to help support investment .

James Murray (Shadow FST) suggested that local authorities had been left out of pocket as a result of previous government policies on investment zones (under the premiership of Liz Truss, which have since been abandoned) and asked if the FST could apologise to councils for the disruption caused. Samantha Dixon (Labour) also lamented the impact of unsuccessful bids for investment zones on authorities in her constituency. Later, the FST would commit to investigating this. 

Dame Angela Eagle (Labour) said she supported efforts to boost the country’s economic growth but suggested the government’s policies were failing to support business investment, citing an Office for Budget Responsibility report on the impact to businesses of the UK’s departure from the European Union. She suggested that successive Prime Ministers had attempted to address this but that initiatives, such as the ‘super deduction’ had failed to make an impact. She added that there was little historical evidence to show that zones such as this had made an impact and cautioned that it was more likely to lead to economic displacement, as businesses relocate, rather than increase, their presence.

Shaun Bailey (Con) defended the government's economic investment plans, saying investment zones would support inward investment, improve productivity and boost employment. He urged his colleagues in government to ensure that they can demonstrate the real-life, tangible results of this investment.

The FST gave a defence of the efforts made by previous Conservative governments in the 1980s to support regeneration efforts in areas including Manchester and Liverpool. She said they served as examples of what government can achieve through its investment zone agenda.

Clauses 330 and 331 and Schedule 23 were unanimously agreed.

Clauses 332-337 – Administration

Clause 332 removes a taxpayer’s ability to legally assign to a third party their income tax repayment, or their right to an income tax repayment. The effect of this measure is that assignments of income tax repayments will have no legal effect and the repayment will remain the property of the taxpayer. More

Clause 333 will mean that when HMRC makes an assessment to recover money, because HMRC has made a payment or repayment to a taxpayer which is too high, late payment interest will be charged from the date HMRC made the original payment. Currently, the interest is charged 30 days after the date of the assessment.

Additionally, for customers who use the VAT Annual Accounting Scheme, late payment interest and late payment penalties will not be charged on instalments that are paid late. Late payment interest and late payment penalties will still apply to any balancing payment that is not paid on time. More

Clause 334 relates to penalties for failure to pay instalments of VAT payable under the annual accounting scheme (see above). More

Clause 335 removes certain provisions in Finance Act 2009 relating to repayment interest on VAT credits, which were not commenced. More

Clause 336 broadens existing powers to allow HMRC to move IPT forms from secondary legislation and into a public notice by way of a Statutory Instrument. This will make it easier to make administrative updates to the forms and will help facilitate digitisation of IPT forms. More

Clause 337 amends penalty rules for late payment of Plastic Packaging Tax to ensure that all late payments are treated consistently. More

The focus of this debate centred on the government's efforts to tackle problems with tax refund companies. The  FST said agents can 'provide a good service' to taxpayers however, she also noted that over 2,000 complaints had been received by HMRC about the performance of certain agents, the fees they were being charged and the use of deeds of assignments.

Assignments will now be rendered void as a result of Clause 332, a move the FST was consumer-focused and would give taxpayers greater control over their affairs. She said that the hoped MPs would publicise these changes to their constituents. The FST then provided an overview of the remaining Clauses in this group.

James Murray said that the decision to remove deeds of assignment stemmed from the actions on one particular tax refund company and noted that the policy had been welcomed by the Low Incomes Tax Reform Group. He cited LITRG's concerns around the nominations process, which could still result in taxpayers being 'tricked' into nominating 'unscrupulous' agents and noted LITRG's concerns that responsible agents may choose to leave the market for fear of not being paid for their services. He sought assurances from the government that it would respond to LITRG's concerns and commit to publishing statistics on the number of refund claims made and the proportion made by refund companies.

Murray then provided an overview of the remaining clauses in this group and signalled that the opposition would not oppose the measures.

The FST said that she was 'very pleased' that LITRG was an organisation that the government worked closely with and listens to 'very carefully'. She said that there were some taxpayers who wanted to nominate agents to handle their claims in a 'fully informed and consented manner'. She said that retaining the ability to nominate agents would ensure taxpayers could continue to access these services on a non-permanent basis, enabling them to withdraw their consent to act in future. She said the government's policy to remove deeds of assignment provided a 'critical consumer protection'.

Clauses 332-337 were agreed unanimously.

Clauses 338 – 340 – Management of customs and excise

Clause 338 establishes a new approval and enforcement regime for aerodromes which handle international movements of people and goods. Specifically, it will (a) put in place a process for HMRC to grant, amend and revoke approval governing the movement of people and goods through aerodromes that are not C&E airports; (b) require affected aerodromes to be approved and take responsibility for complying with their terms of approval. More

Clause 339 makes consequential amendments following the provisions concerning regulated aerodrome approvals introduced by clause 338.

Clause 340 amends legislation which allows businesses to continue trading during a review or appeal period where their excise approval has been revoked by HMRC. The amendment will extend businesses’ ability to trade for a short period where they are unsuccessful in overturning HMRC’s decision. This is so businesses can legally dispose of stock without incurring a penalty. More

The FST said the clauses centre on aircraft transporting passengers or goods to and from the United Kingdom. 

Such aircraft are obligated to land at or depart from a designated Customs and Excise airport, unless they have been granted permission by HMRC to utilise an aerodrome. The amendments introduced by these clauses aim to enhance the legal foundation for the aerodrome approval process.

The Shadow FST stated that they will not oppose clauses 338-339. Regarding clause 340, they acknowledged that current legislation allows for temporary approval to be granted, with the opportunity for review or appeal. 

He noted that the temporary approval automatically ends once the review or appeal process is finalised. The Shadow FST recognised that this may pose difficulties for affected businesses, as they may need time to wind down their operations after a final determination. He said the clause introduces a new discretionary power for HMRC to extend a temporary agreement following a final determination to revoke an approval or temporary approval granted during the review process.

The clauses were agreed.

Clauses 341-342 – Conditionality

Clause 341 makes the renewal of certain licences in Scotland and Northern Ireland conditional on applicants completing checks that confirm they are appropriately registered for tax. In Scotland, this will apply to licences to drive taxis and private hire cars, operate from booking offices, and operate as a metal dealer. In Northern Ireland, this will apply to licences to drive taxis. This extends existing reforms that have applied to taxi, private hire vehicle, and scrap metal licensing in England and Wales since April 2022. More

Clause 342 makes amendments to the Civic Government (Scotland) Act 1982, consequential upon the previous clause.

Victoria Atkins (FST) set out the aims of clauses 341 and 342, which the Shadow FST said the opposition would not oppose. However he requested the minister clarify how the scheme will be implemented and whether additional resources will be allocated to HMRC to enable enforcement.

The FST responded that HMRC takes compliance interventions based on risks, typically conducting investigations that cover multiple taxes and duties rather than focusing solely on a single area of taxation. If HMRC were to initiate a tax inquiry into an HGV business, it would be part of their efforts to ensure the business is compliant with all its tax obligations.

The clauses was agreed.

Clauses 343-344 – Charities and community amateur sports clubs

Clause 343 restricts charitable tax reliefs and exemptions to UK charities with effect from 15 March 2023. The taxes affected are income tax, Capital Gains Tax, corporation tax, inheritance tax, Stamp Duty, SDLT, Stamp Duty Reserve Tax, Annual Tax on Enveloped Dwellings (ATED) and Diverted Profits Tax. Non-UK charities and CASCs that HMRC has accepted qualify for charity tax reliefs will have a transitional period until April 2024. More

Clause 344 restricts charitable tax reliefs and exemptions to UK CASCs. More

The XST said that charities and community amateur sports clubs can claim Gift Aid, receiving 25 pence for every one pound of eligible donations made by UK taxpayers. In 2021-2022, UK charitable reliefs were worth £5.5 billion to the sector.

With the UK's exit from the European Union, the government is proposing to restrict UK tax reliefs to UK charities and community amateur sports clubs, protecting the integrity of the tax system as it is more challenging for HMRC to oversee charities and sports clubs located outside the UK.

The XST added that this provision offers an opportunity for those eligible to register in the UK. If they are unable to do so, alternative arrangements can be made. This measure ensures that taxpayer money in the UK will be utilised for UK charities and community amateur sports clubs, supporting effective oversight through HMRC compliance activities.

The Shadow FST expressed no opposition to the clause, as it introduces a restriction on the availability of tax reliefs, allowing only UK charities and UK community amateur sports clubs to access such benefits.

The clauses were agreed.

Clause 345 (and Schedule 24) – Homes for Ukraine Sponsorship Scheme: exemptions from tax

Clause 345 exempts ‘thank you’ payments made by local authorities to sponsors under the Homes for Ukraine Sponsorship scheme from income tax and corporation tax. More Introduces temporary reliefs from ATED and the 15% rate of SDLT for dwellings made available for occupation by individuals granted entry clearance or permission to stay in the UK under the scheme. More

The FST said that this clause introduces temporary relief from the 15 per cent rate of stamp duty land tax and the annual tax on enveloped dwellings for dwellings owned by companies when they are made available to Ukrainian refugees.

The Shadow FST asked if the minister could take this opportunity to explain what measures the government may consider to prevent other homes for Ukraine sponsors from facing similar challenges when they are seeking a mortgage offer.

Samantha Dickson (Labour) asked if the minister could request her officials to explore whether there are other opportunities for similarly generous individuals who are willing to offer their accommodation to assist with the numbers of Afghan families in the country.

The FST responded that she is not aware if an Afghan scheme operates in the same way as the Ukrainian scheme in terms of payments. However, she is open to considering the matter, although it may not
be relevant to the current bill under discussion.

The clauses were agreed.

Clause 346 (incl. Plaid Cymru amendment 3, SNP amendment 2 and New Clause 1 – Abolition of the Office of Tax Simplification

Abolishes the Office of Tax Simplification. Takes effect at Royal Assent.

Plaid Cymru has proposed amendment 3 to clause 346 which would require the government to present proposals for a Tax Reform Commission, in consultation with the devolved administrations, within six months of this section coming into force.

The SNP has proposed amendment 2 to this clause which would prevent the Office of Tax Simplification from being abolished until the Chancellor has replied to outstanding correspondence from the Treasury Committee on the subject (NB. This has since happened), and published a cost/benefit analysis of the policy.

An amendment and new clause was tabled by members of the House of Commons Treasury Committee – led by the committee’s chair Harriett Baldwin – but has not been selected for debate.

Amendment 1 would have left out the clause, thereby retaining the Office of Tax Simplification. New clause 1 would have required the Treasury to report annually to the Treasury Committee on tax simplification if the OTS is abolished.

Douglas Chapman (SNP) spoke to SNP amendment 2, saying that the Chartered Institute of Taxation has argued that the OTS has achieved a significant amount during its existence and could achieve much more with better ministerial support for its proposals.

He added that the Association of Taxation Technicians believes there are many benefits to the government in maintaining independent advice on tax simplification. He added that the ATT emphasised that the OTS could only maintain its level of engagement if there is trust and belief that comments and views will be treated impartially and fairly.

Dame Angela Eagle (Lab) stated that as a member of the Treasury Select Committee, the sudden announcement to abolish the OTS and the reasons given for the decision had been very surprising. She too noted that the Finance Bill demonstrated how complex financial legislation can be. She added, "I'm not arguing at all that tax systems should be completely simple. However, I would be grateful if the minister could provide the committee with some insight into why this decision has been made and reaffirmed by the new administration."

The Shadow FST asked if the Chancellor could publish an analysis of the costs and benefits of this policy. Referring to a joint letter signed by the CIOT and other organisations, he requested that the minister provide the committee with an update and response addressing the specific points outlined by the CIOT.

The FST expressed gratitude to the members of the OTS for their valuable contributions to the tax debate. She emphasised that the closure of the OTS does not imply a diminished focus on simplifying tax. She stated that she has instructed officials to ensure that any documents they prepare align with the objectives of making tax fairer and simpler.

Moreover, regarding the point about measuring metrics for simplification, she said the government is actively considering the development of a set of metrics to assess progress in simplification. They are working in collaboration with businesses and representative bodies to ensure that these metrics accurately reflect the real-world experiences of taxpayers.

Clause 346 was agreed. Following a vote, SNP Amendment 2 was defeated by 7 votes to 9.

Clause 347 – The dormant assets scheme

The Dormant Assets Scheme enables banks and building societies to channel funds from dormant accounts towards good causes. The govt plans to expand the scheme to include assets from pensions, insurance, investment and wealth management and securities sectors. This measure amends Income Tax and Inheritance Tax legislation to make sure assets transferred to the ‘reclaim fund’ which are subsequently returned, receive the correct tax treatment. More

The Dormant Assets Scheme enables banks and building societies to channel funds from dormant accounts towards good causes. The govt plans to expand the scheme to include assets from pensions, insurance, investment and wealth management and securities sectors. This measure amends Income Tax and Inheritance Tax legislation to make sure assets transferred to the ‘reclaim fund’ which are subsequently returned, receive the correct tax treatment. More

The FST said the changes proposed by the clause would help to generate a further £880 million for good causes. James Murray signalled that the government would not oppose the measure.

The clause was agreed without division.

Clauses 348 – 352 – Remaining provisions

Clause 348 (International arrangements for exchanging information) consolidates five powers that allow Automatic Exchange of Information (AEOI) regulations to be laid. (AEOI regulations enable the automatic exchange of tax information between jurisdictions to support compliance, in line with international agreements.) These powers cover OECD Mandatory Disclosure Rules (MDR), the Common Reporting Standard (CRS), Foreign Account Tax Compliance Act (FATCA), Country by Country Reporting (CbCR) and Reporting Rules for Digital Platforms (DP) regulations. There will also be a technical amendment to the power that allows MDR regulations to be laid so that these regulations work as intended. More

Clause 349 (Payment of unclaimed money in court into the Consolidated Fund) enables rules to make provision requiring unclaimed money in court to be paid into the Consolidated Fund.

Clause 350 (Financial sanctions regulations: prohibition on certain payments by HMRC) clarifies the exercise of HMRC’s functions in relation to Designated Persons (DPs) subject to financial sanctions – that is, HMRC will withhold payments and repayments from DPs subject to financial sanctions and entities that are either owned or controlled by them, that have a UK tax footprint. Also ensures any future changes to UK sanctions legislation concerning DPs subject to financial sanctions are automatically reflected in the exercise of HMRC’s functions. More

The FST gave a brief overview of the clauses and James Murray responded on similar terms for the opposition, signalling that they would not oppose the measures. He asked the minister to confirm the amounts of money that would be paid into the unconsolidated fund in 2024/25. He questioned whether the provisions of clause 350 gave rise to the fact that payments may have been made to those under financial sanctions and asked whether a breakdown could be provided.

Murray also thanked members of the committee and its staff for their work, as well as the Chartered Institute of Taxation.

The FST said that the government expected £50 million to paid into the unconsolidated fund in 2024/25. She added that taxpayer confidentiality meant she was unable to respond to the points raised concerning clause 350.

Clauses 348-352 were agreed unanimously.

New Clauses

New clause 2 (Labour backbencher Debbie Abrahams) would require the Government to report on the public health and poverty effects of the provisions of the Act.

New clause 3 (Liberal Democrat Treasury spokesperson Sarah Olney) would require the Government to produce an impact assessment of the effects of the Act on small business with particular regard to inflation and cost of energy.

New clause 4 (SNP) – would require the Chancellor to publish a report on which of the polices contained in the Act could not have been introduced if the UK has remained in the EU.

These clauses were not moved to a vote although Douglas Chapman (SNP) spoke to New Clause 4, noting the negative effects of the UK’s departure from the EU. The XST said the government was determined to take advantage of the opportunities associated with Brexit and gave a robust defence of its policies. He said that Tax Information Impact Notes and Budget documentation rendered the need for further information unnecessary.

New Clause 1, considered as part of Clause 346, was defeated by 2 votes to 9.

Concluding the committee's work, the Financial Secretary to the Treasury thanked all of those involved in the Bill process.

The Bill will be considered at report stage, having concluded committee scrutiny.