| Previous Section | Index | Home Page |
Mr. John Redwood (Wokingham) (Con): My hon. Friend is taking justifiable delight in setting out the complexities. Can he fathom how the uplift factor is derived? How can we be sure that it is appropriate, given that rents rise at different rates in different circumstances throughout the country, depending on the supply and demand in the market?
Mr. Prisk: As usual, my right hon. Friend has identified the point. The problem is in having an academic, theoretical set of formulae that conflicts entirely with the way in which the market works. That is at the heart of the error of the thinking underlying this proposal. Will the Financial Secretary assure businesses that any reasonable errors in the six-step, three-formula calculation will not lead to punitive fines?
There is a wider point of principle involved. Is it not inherently unfair that a tenant who faces a large inflationary rent rise—"abnormal" in the Government's language—for reasons outside their control should at the same time incur a substantial tax liability? Can the Financial Secretary explain in what possible way that is fair?
I cannot help taking a little delight at the language, because it merely reinforces the view that "Yes, Minister" is a training film and not a comedy, but in truth, this is a serious issue. With my amendments, I am trying to ensure that we keep the compliance burden at the lowest possible level. That is what is at issue here and I hope that the Financial Secretary will be able to
28 Apr 2004 : Column 920
explain to us why she is pressing ahead with this measure, which is absurd in purpose and unacceptable in practice.
The Temporary Chairman: For the sake of clarity, when we get past amendment no. 14, I will invite the hon. Gentleman to put his second amendment formally if he wishes to press it to a Division.
Mr. Redwood : I have declared my interest in the register.
I am grateful to my hon. Friend the Member for Hertford and Stortford (Mr. Prisk) for drawing attention to the enormous complexity that overlies the injustice of the measures. My party has been very unhappy about the Government's decision to introduce a new tax, masquerading as an old one, called stamp duty land tax and stamp duty, and it is typical of the Government that, having bungled that in the first place in regulations, they are now inviting us to re-enact it, but with crucial amendments in the light of experience and reconsideration, in such a gargantuan format in this bumper Finance Bill, which we have been picking our way through selectively and with difficulty yesterday and today on the Floor of the House.
The charge against the measure is one of drafting and of principle. My hon. Friend made it clear that absurd complexity and difficulty are involved. He kindly said that he feared that tenants might fall asleep before they got to the fifth or sixth stage of the calculation, but I think that they will be awake on caffeine tablets, tearing their hair out with extreme worry that they might get something wrong. Believe it or not—I know that the Government often do not—most of us want to comply with the tax laws and pay our fair taxes. However, it is getting very difficult these days for many people to know how to calculate their tax and to ensure that they have got it exactly right. It will be very unfair if the Revenue mistakes understandable error because of complexity for unwillingness to pay on the part of the many law-abiding people who will be wrestling with the legislation if we pass it in this form or something like it.
As my hon. Friend pointed out, there are three formulae. Anyone with a reasonable qualification in algebra will be able to handle that, but the people whom we are discussing have businesses to run, livings to earn, families to look after and elderly relatives to care for. They do not really want all this visited on them at the same time in order to try to comply. The Financial Secretary might grandly say, "Let them employ an accountant." I am all in favour of the professional classes doing well, but if someone is running a small business there are limits to how much they can afford to pay in professional fees for handling 550 pages of this Finance Bill, on top of the thousands of pages of tax and company legislation that we already have and that directors and executives are expected to be cognisant of, and capable of handling.
My hon. Friend is right to say that, on grounds of complexity and opacity, it would be good to strike this measure out or to come back with a paragraph or two that provides a sensible and more moderate explanation. However, I also have a problem with the measure in principle. As I suggested to my hon. Friend in my intervention, the property market is complicated
28 Apr 2004 : Column 921
and busy and there can be large changes in rentals after a five-year period for all sorts of reasons. The centres of towns change radically, and the centres of big cities can change even more. An area can plunge in estimation because uses and users change, or rise because of a major development, because of change in use or because a new group of rich or prosperous businesses or people comes into that district, which can justify higher rents. I hope that the formulae can fully reflect that sophistication and that people will not be penalised for extraneous forces that can move rents a lot for understandable and good reasons. The formulae and academic calculations can often be too abstract and unfair.
My final point is that I do not like the tax, which is yet another stealth tax, at all. The market economy worked perfectly well without it, but we all know why it is necessary: because the Government are wasting so much money. A much better answer would be to reduce Government waste rather than burdening all of us, and the many businesses out there struggling to earn a living in a globally competitive marketplace, with this high degree of complexity and, ultimately, cost. I welcome the bold attempt of my hon. Friend to simplify the measure and would heartily like to see the back of the tax altogether.
Ruth Kelly: I thank the hon. Member for Hertford and Stortford (Mr. Prisk) for the reasonable way in which he introduced amendment No. 14, although the same does not apply to amendment No. 13.
Amendment No. 14 affects paragraph 11 of new schedule 17A, which provides that, where the grant of a lease is exempt from the charge of stamp duty land tax by virtue of certain statutory provisions, the first non-exempt assignment of the lease is treated as the grant of a new lease. That ensures that stamp duty land tax is paid at some stage on the rental element. To his credit, the hon. Gentleman accepts the case for trying to prevent avoidance and ensuring that a bank of leases is not built up, then assigned later on down the road. Without that provision, any property-owning group could set up a bank of leases within the group in the knowledge that, sometime later, it could enter transactions with tenants that were in substance grants of leases, but in legal form assignments of existing leases, thus enabling the tenant to avoid stamp duty land tax on the rental element.
My problem with the amendment is that it merely postpones that practice for a three-year period and, after three years, enables the tax to be avoided. I could not condone that. There should not be a time limit after which tax avoidance is acceptable, so I ask the hon. Gentleman to reconsider setting in stone a three-year period after which such a practice would become acceptable. Perhaps I can reassure him that paragraph 11 applies only to leases granted on or after 1 December 2003, so there is no question of the assignment of a lease being treated as the grant of a new lease when the grant of the lease was within the old stamp duty regime.
The hon. Gentleman considers amendment No. 13 substantive. It would strike out, as he put it, provisions relating to abnormal rents. I should first emphasise that no tenant can possibly be affected by the provisions in paragraphs 14 and 15 of new schedule 17A until December 2008 at the earliest, because they apply only to leases that, when granted, are within the stamp duty
28 Apr 2004 : Column 922
land tax system. I also emphasise that the normal rule for stamp duty land tax purposes is that rent increases after the end of the fifth year are ignored completely. In particular, no one paying tax on the grant of a lease need take post-five-year rent increases into account, either in submitting an initial return or if the return needs to be revised when the rent for the first five years is ascertained.
Mr. Prisk: Given those points, just how many people will be directly affected by the measure? If only a very small number of people will be liable, the problem is that a very much larger number will be anxious that they might be and therefore have to deal with the compliance burden in terms of their time and money. Can the Financial Secretary tell us how many people—what proportion of tenants—will be affected? If it is a tiny number, surely that reinforces our argument to get rid of the measure altogether.
Ruth Kelly: I assure the hon. Gentleman that the vast majority of leases, such as those providing for retail prices index increases, will be completely unaffected by the provisions. We are talking about a small number. [Interruption.] He asks from a sedentary provision why, therefore, we do not strike out the provisions. The answer is that, if no provision were made for abnormal rent increases, it would be in the interest of parties to negotiate a nominal rent for the first five years and then a very high rent increase in year six and thereafter. I am sure that he would not want that to happen.
3 pm
| Next Section | Index | Home Page |