Mr. Malcolm Bruce (Gordon): I beg to move, That the clause be read a Second time.
The Committee will be aware that we debated this matter on the Floor of the House but were unable to debate the new clause. Many of us remain concerned about the slightly crude impact of the aggregates tax without any compensation and adjustment for the environmental impact. Representing, as I do, a rural constituency in Scotland, I am aware that there is a particular concern that the crudely imposed tax will fall disproportionately on those quarries that can produce at lower cost because it is a cash tonnage figure rather than a percentage. It penalises the more efficient operators. It may also cause smaller operators to be squeezed out in favour of the larger operators. As a consequence, the local authorities in the rural parts of the north of Scotland and the borders, which own many of these quarries, will find that the costs will go up from a squeezed revenue base with no offsetting benefit.
The clause would introduce a scheme to allow rebates for environmental improvements. I do not wish to detain the Committee, but this is important. I hope that the Minister can at least acknowledge that this concern continues and that there is a worry that the claimed environmental benefits of the tax will not turn out as the Government expect. I hope that the Government will be prepared to review the workings of the tax and to reconsider this proposal to ensure that a tax that is being introduced for claimed environmental reasons turns out to be environmental. There are many who believe that it will not. At the end of the day, it will be catalogued as just another stealth tax, just another opportunity to raise revenue from a particular sector that will cost local authorities money and will not achieve environmental gain. If the clause were adopted, environmental gain would be a condition of the implementation of the tax.
Mr. Timms: I can be helpful. We announced in the Budget that we are attracted to the idea of differential rates of aggregates levy for green quarriesthe principle that is set out in the new clause. We are exploring with a variety of interested parties how such a scheme might be achieved in practice. There are some significant practical problems to be overcome, not least in defining exactly what a green quarry is. We need to know how those issues can be resolved in a practical and workable way before introducing legislation.
I recognise that the clause is enabling legislation and that accepting it would not commit the Government to very much, but further work is needed to resolve the practical issues surrounding the idea of a green quarry rebate. That work needs to be done before we legislate. The time to legislate is when we know exactly where we are heading, not when we are just guessing, which is what the new clause does. We are attracted to the principle that the clause sets out. We want to explore with all those affected how we can make this successful. When we have done that, we will introduce legislation if we can.
Mr. Letwin: Is the hon. Gentleman aware of the irony of his remarks? It would indeed have been better if the Government had known where they were heading before they implemented the legislation. Had they known where they were heading, they could have had a clause like this new clause.
Mr. Timms: The provision in the Bill is completely clear. It is important that we make progress to deal with an important environmental issue. That is what the introduction of the levy will achieve. Beyond that we think that it is right to look at ways in which we can introduce a scheme that deals differently with green quarries. We will certainly seek to consult all those parties that are identified in paragraph 4 of the new clause. The hon. Gentleman suggested that we are introducing a stealth tax. I refer him to an earlier debate in Committee, in which it was mentioned that the introduction of the aggregates levy will be revenue neutral, because there will be a reduction in employers' national insurance contributions plus the new sustainability fund, which will account for all the proceeds from the levy.
Mr. Bruce: I accept the Government's undertaking that the aggregates levy will be revenue neutral across the piece, but it will not necessarily be revenue neutral to the businesses that are directly affected. If it were, it would be pointless and would have no effect. Under different circumstances, I might take the matter a little further. However, I wish to put on the record that my hon. Friend the Member for Torridge and West Devon and I remain concerned that the Government are pressing ahead without addressing how we might find a solution to the problem. The Government have been forewarned about casualtieswhich might still materialiseand anomalies, in which quarries are encouraged to do things that are not environmentally friendly provided that they export their products and in which we actually choose to use import substitutions for things that we can produce domestically, to get around the levy. Such anomalies will emerge.
Generally, environmental taxes have merit. However, the more of them there are and the more complicated they are, the less impact they have and the more distorted the result. I accept that the Financial Secretary has acknowledged that there is a problem and that the Government are prepared to continue examining it. In the spirit of his response and assurancesand in view of the timeI beg to ask leave to withdraw the motion.
Motion and clause, by leave, withdrawn.
The Chairman: We now come to new clause 13, with which it will be convenient to debate new clause 14.
Mr. Burnett: In view of the time constraints, and since we hope to have an opportunity to discuss the matters tomorrow, we will not move the new clause.
New schedule 2
Limited liability partnerships: investment LLPs and property investment LLPs
Meaning of ``investment LLP'' and ``property investment LLP''
1.(1) In Part XIX of the Taxes Act 1988 (supplementary provisions), after section 842A insert
``Meaning of ``investment LLP'' and ``property investment LLP''
(a) an ``investment LLP'' means a limited liability partnership whose business consists wholly or mainly in the making of investments and the principal part of whose income is derived therefrom; and
(b) a ``property investment LLP'' means a limited liability partnership whose business consists wholly or mainly in the making of investments in land and the principal part of whose income is derived therefrom.
(2) Whether a limited liability partnership is an investment LLP or a property investment LLP is determined for each period of account of the partnership.
A ``period of account'' means any period for which accounts of the partnership are drawn up.''.
(2) In section 832(1) of that Act (interpretation of the Tax Acts), at the appropriate place insert
``investment LLP'' and ``property investment LLP'' have the meaning given by section 842B;''.
(3) In section 288(1) of the Taxation of Chargeable Gains Act 1992 (interpretation), at the appropriate place insert
``property investment LLP'' has the meaning given by section 842B of the Taxes Act;''.
Pension funds, &c.: exclusion of exemptions from tax in case of income from property investment LLPs
2. In Chapter VI of Part XIV of the Taxes Act 1988 (pension schemes, &c.: miscellaneous provisions), after section 659C insert
``Treatment of income from property investment LLPs
659D.(1) The exemptions specified below do not apply to income derived from investments, deposits or other property held as a member of a property investment LLP.
(2) The exemptions are those provided by
section 592(2) (exempt approved schemes),
section 608(2)(a) (former approved superannuation funds),
section 613(4) (Parliamentary pension funds),
section 614(3) (certain colonial, &c. pension funds),
section 614(4) (the Overseas Service Pension Fund),
section 614(5) (other pension funds for overseas employees),
section 620(6) (retirement annuity trust schemes), and
section 643(2) (approved personal pension schemes).
(3) The income to which subsection (1) above applies includes relevant stock lending fees, in relation to any investments, to which any of the provisions listed in subsection (2) above would apply by virtue of section 129B.
(4) Section 659A (treatment of futures and options) applies for the purposes of subsection (1) above.''.
Pension funds, &c.: exclusion of exemption from trusts rate in case of income from property investment LLPs
3.(1) Section 686 of the Taxes Act 1988 (accumulation and discretionary trusts: special rates of tax) is amended as follows.
(2) In subsection (2)(c) (income excluded from trusts rate or Schedule F trusts rate), before the words ``income from investments, deposits or other property'' (which relate to income of certain pension funds or schemes) insert ``, subject to subsection (6A) below,''.
(3) After subsection (6) insert
``(6A) The exemptions provided for by subsection (2)(c) above in relation to income from investments, deposits or other property held as mentioned in sub-paragraph (i) or (ii) of that paragraph do not apply to income derived from investments, deposits or other property held as a member of a property investment LLP.''.
Pension funds, &c.: exclusion of exemptions in case of gains from property investment LLPs
4. In section 271 of the Taxation of Chargeable Gains Act 1992 (miscellaneous exemptions), after subsection (11) insert
``(12) Subsection (1)(b), (c), (d), (g) and (h) and subsection (2) above do not apply to gains accruing to a person from the acquisition and disposal by him of assets held as a member of a property investment LLP.''.
Insurance companies: treatment of income or gains arising from property investment LLP
5. In Chapter I of Part XII of the Taxes Act 1988 (insurance companies, &c.), after section 438A insert
``Income or gains arising from property investment LLP
438B.(1) Where an asset held by an insurance company as an asset of its long term business fund is held by the company as a member of a property investment LLP, the policy holders' share of any income arising from, or chargeable gains accruing on the disposal of, the asset which
(a) is attributable to the company, and
(b) would otherwise be referable by virtue of section 432A to pension business,
shall be treated for the purposes of the Corporation Tax Acts as referable to basic life assurance and general annuity business.
(2) For the purposes of this section the property business of the insurance company for the purposes of which the asset is held shall be treated as a separate business.
``Property business'' means a Schedule A business or overseas property business.
(3) Where (apart from this subsection) an insurance company would not be carrying on basic life assurance and general annuity business, it shall be treated as carrying on such business if any income or chargeable gains of the company are treated as referable to the business by virtue of subsection (1) above.
(4) A company may be charged to tax by virtue of this section
(a) notwithstanding section 439A, and
(b) whether or not the income or chargeable gains to which subsection (1) above applies is taken into account in computing the profits of the company for the purposes of any charge to tax in accordance with Case I of Schedule D.
(5) The policy holders' share of income or chargeable gains to which subsection (1) above applies
(a) shall not be treated as relevant profits for the purposes of section 88 of the Finance Act 1989 (corporation tax on policy holders' fraction of profits), and
(b) shall not be treated as part of the BLAGAB profits for the purposes of section 88A of that Act (lower corporation tax rate on certain profits);
but the whole of the income or gains to which that subsection applies shall be chargeable to tax at the rate provided by section 88 of that Act.
(6) So far as income is brought into account as mentioned in section 83(2) of the Finance Act 1989, sections 432B to 432F (apportionment of receipts brought into account) have effect as if subsection (1) above did not apply.
Determination of policy holders' share for purposes of s.438B
438C.(1) For the purposes of section 438B the policy holders' share of any income or chargeable gains to which subsection (1) of that section applies is what remains after deducting the shareholders' share.
(2) The shareholders' share is found by applying to the whole the fraction
A is the amount of the profits of the company for the period which are chargeable to tax under section 436; and
B is an amount equal to the excess of
(a) the amount taken into account as receipts of the company in computing those profits (apart from premiums and sums received by virtue of a claim under a reinsurance contract), over
(b) the amounts taken into account as expenses in computing those profits.
(3) Where there is no such excess as is mentioned in subsection (2) above, or where the profits are greater than any excess, the whole of the income or gains is treated as the shareholders' share.
(4) Subject to that, where there are no profits none of the income or gains is treated as the shareholders' share.''.
Insurance companies: double taxation relief
6. In section 804B of the Taxes Act 1988 (double taxation relief: company carrying on more than one category of life assurance business: restriction of credit)
(a) in subsection (2) after ``sections 432ZA to 432E'' insert ``or section 438B'', and
(b) in subsection (4) after ``section 432A'' insert ``or 438B''.
Insurance companies: capital allowances
7. In section 545 of the Capital Allowances Act 2001 (life assurance business: investment assets), for subsection (3) substitute
``(3) Any allowance under this Act in respect of an investment asset shall be treated as referable to the category or categories of business to which income arising from the asset is or would be referable.
If income so arising is or would be referable to more than one category of business, the allowance shall be apportioned in accordance with sections 432ZA to 432E, or section 438B, of ICTA in the same way as the income.''.
Friendly societies: exclusion of exemptions from tax
8.(1) In section 460 of the Taxes Act 1988 (friendly societies: exemption from tax in respect of life or endowment business), in subsection (2) (restrictions on exemption) after paragraph (ca), and before the word ``and'' following that paragraph, insert
``(cb) shall not apply to profits arising from investments, deposits or other property held as a member of a property investment LLP;''.
(2) In section 461 of that Act (registered friendly societies: exemption from tax on other business), after subsection (3) insert
``(3A) The exemption conferred by subsection (1) above does not apply to profits arising from investments, deposits or other property held as a member of a property investment LLP.''.
(3) In section 461B of that Act (incorporated friendly societies: exemption from tax on other business), after subsection (2) insert
``(2A) Subsection (1) above shall not apply to any profits arising or accruing to the society from or by reason of its membership of a property investment LLP.''.
Exclusion of relief on loans to buy into investment LLP
9. In section 362(2) of the Taxes Act 1988 (interest relief on loans to buy into partnership: conditions to be met), in paragraph (a) for the words from ``otherwise'' to ``1907'' substitute
(i) as a limited partner in a limited partnership registered under the Limited Partnerships Act 1907, or
(ii) as a member of an investment LLP;''.'[Dawn Primarolo.]
Brought up, read the First and Second time, and added to the Bill.
Clauses 106 and 107 ordered to stand part of the Bill.
Schedule 32 agreed to.
Clause 108 ordered to stand part of the Bill.