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Mr. Prisk: It is disappointing that the Division was unsuccessful from our point of view, but it is important that we made the point.
Schedule 37, together with clause 282, re-enacts temporary provisions concerning the detailed implementation of stamp duty land tax on leases. It also makes a series of changes, corrections and revisions to the legislation. Part 1 of the schedule makes changes to the Finance Act 2003. Indeed, it makes 35 pages of such changes—and only nine months after the Act came into force. In many ways, that shows how the original legislation was ill considered in its preparation and enacted in haste.
I am well aware that the Chief Secretary told us last year that the legislation would need "refining"—I think that that was his term—over the next couple of years, but I have to say that this scale of refining is ridiculous. Such a piecemeal approach to a tax creates bad tax law by increasing the complexity, which results in greater uncertainty not only for the taxpayer but for the tax collector. It also undermines the Government's own arguments on tax avoidance. After all, if tax law is constantly changing, it is far more likely to result in loopholes. Inevitably, the Government have to come back the next year to fill them—and on we go with the ridiculous and vicious cycle.
Given the 35 pages of changes, we could be forgiven for thinking that the Government had sorted everything out. I wish that that were true, but problems and unfulfilled commitments remain. I shall give an example, and I hope that the Financial Secretary will be able to respond, as it relates to what is at the heart of the schedule.
I have been approached by a number of expert solicitors in this field, including solicitors belonging to the firm Wards of Bristol. They have been concerned by the commitments made by the Chief Secretary to the Treasury about chain-breaking companies. The representations arrived only in the past couple of days, which means that I have not had time to table an appropriate amendment.
On 10 June 2003, the Chief Secretary to the Treasury told the Standing Committee considering last year's Finance Bill:
"I can provide some comfort to the hon. Members who have raised the issue of chain-breaking companies. I can confirm that we will consult with bodies in the sector and will table appropriate amendments to clause 59 before the implementation of the modernised regime to ensure that chain-breaking companies can operate without a double charge to stamp duty land tax. A relief for this specific point would assist liquidity in the housing market, which we all agree is desirable. The Office of the Deputy Prime Minister has already issued a paper making the promotion of chain-breaking companies a Government policy."—[Official Report, Standing Committee B, 10 June 2003; c. 415.]
Amendments were duly tabled. Schedule 6A to the Finance Act 2003, when finalised, addressed many of the needs of chain-break schemes. However, a raft of
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different constraints remain, contrary to the Chief Secretary's commitment in Standing Committee. As a result, many transactions in this area operate with a double charge, as I shall show in three short examples.
First, the current requirement for a chain to have broken down prevents the creation of a completed chain by taking out a prospective buyer who has not yet put his property on the market. Secondly, the requirement in the legislation that the vendor, apparently simultaneously, should acquire another property as his main residence prevents chain-break companies from buying from people who need to go into nursing care; who may be undergoing divorce; or who are threatened with repossession. Finally, the restriction that the property must have been occupied as a main residence in the past two years prevents the purchase, for example, from someone who has been in a nursing home for an extended period; or from someone trying to get out of the buy-to-let market; or from someone who has been working abroad and who is looking to make the move permanent.
I hope that the Financial Secretary will consider these important matters. The proposals being considered today should have been contained in last year's Bill. What progress has been made in ensuring that the provisions introduced last year are corrected? The Chief Secretary made a clear commitment in relation to these matters, and I hope that it will now be fulfilled.
A raft of other problems have been caused by the Government's piecemeal approach. I gather that statutory instrument No. 1069 was introduced earlier this month, but that it has had to be corrected by a new provision. That highlights the Government's piecemeal and ad hoc approach to making tax law.
Finally, it is clear that this remarkably opaque tax has been very badly prepared. Today, we are considering 35 pages of changes that have been needed in less than a year, and that serves to prove my point. The various amendments to schedule 37 that the Committee considered today were tabled with the aim of improving the legislation. However, the Opposition want to put on record our concern about the impact of the tax, and our strong rejection of the Government's ad hoc and piecemeal approach to its enactment.
Mr. Redwood : My main concern about allowing schedule 37 to stand part of the Bill is that it contains 35 pages of extremely complicated provisions in respect of a new tax introduced by the Government very recently and in a rush. The schedule represents a series of wholesale amendments to the Finance Act 2003, of recent memory, and it also amends amending statutory instruments that had to be introduced in-year because of the mess that was made of the original legislation.
The 35 pages of schedule 37 are followed by the 15 pages taken up by schedules 38 and 39, which also deal with the same tax. That means that the House is being invited to agree some 50 pages of legislation in the space of perhaps an hour, in respect of a very new and badly designed tax whose introduction was bungled and badly explained a year ago. The tax warrants a Bill all to itself, with a proper Committee procedure. That might help the Government grope their way towards the proper introduction of an enormously complex tax. The
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Government designed it badly, and they have to revise it every six months to respond to the complexity of a marketplace that surprises them with its constant rises.
Mr. John Bercow (Buckingham) (Con): I am very grateful to my right hon. Friend for giving way because he is a respected veteran of these debates in Committee. Can he tell me what compatibility exists, if any, between schedule 37 and the tax law rewrite project, conducted under the auspices of the tax simplification panel, which is regularly and enthusiastically championed by the Government?
Mr. Redwood: I believe there is little or no relationship or connection. As I understand the rewrite and simplification, its intention is not to change the incidence or the impact of the legislation in any way, whereas today the Government, by rushing through these schedules, are seeking to make quite substantial changes in something that they designed a little over a year ago, legislated for in haste, re-legislated for in statutory instrument form and are now seeking to legislate for again. It is a very different exercise. Simplification would be very welcome, but I think even the best brains in the country would be unable to boil these schedules down to many fewer pages than we currently have before us, because they are ill thought through and badly designed. Even the most brilliant prose stylist in the world would be unable to condense into a reasonable space something that is so ill thought through and badly designed, because the whole point of it is that it is ghastly and complex and prolix and tedious and contradictory and inaccurate, and doubtless will need amending in subsequent regulations and in subsequent Finance Bills.
I admire the wit and wisdom of the officials involved in all this because it is clearly a lifelong task to keep bringing things back to the House in the vain hope that one day they will hit on the right solution—that one day we may have a stamp duty land tax of which Ministers can be proud, that one day there may be a lucky Minister who is allowed to come to the House and say, "Good news: we do not have to legislate again on this. We have at last succeeded." But so far Ministers have had to come to the House and say, "I know I was here last year doing this, but it is not Groundhog day; we are not doing the same again, we are doing something very different. The intention is still the same but we have discovered that what we did last time was fundamentally wrong." I know that the Committee would not like me to go into all the detail in these 35 pages, but hon. Members should at least be aware how fundamental are many of the issues that have to be re-legislated for in this extraordinary way.
We have to look again at contracts providing for conveyances to a third party—an extremely wide category under this legislation. We have to consider the effect of transfer rights. We have to consider registration of land transactions. We have to redefine the effective date of the transaction—a pretty fundamental thing, which one would have thought the Government would have got right to start with. We have to look at chargeable consideration—in other words, how much these things cost in the first place. We have to look at general provisions relating to leases. We have to look at
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rent reviews. We have to look at the assignment of agreements for leases and we have to look at lease agreements. We have to look at commencement.
Then in part 2 we get to the really juicy bit where we are amending amendments—where we are amending regulations under section 109 of the Finance Act 2003, which were designed to deal with the problems in the first place. There we have to deal with introduction and revocation—if only we were revoking the whole thing, it would save us a lot of time. We have to look at the meaning of taking possession. We have to look at relief for sale and leaseback arrangements—a fundamental point. To stay in business in a competitive market, an awful lot of businesses finance themselves by sale and leaseback, and we now discover that the provisions were wrongly drafted and some people are being unreasonably penalised and the Treasury is not getting what it thinks it should get.
We have to look at relief for acquisitions of residential property that were never meant to be captured by this thing in the first place; there is a very complicated new piece on that. We have to look at acquisition by a property trader from personal representatives. We have to look at the chain of transactions point that my hon. Friend the Member for Hertford and Stortford (Mr. Prisk) rightly highlighted. We have to look at relocation of employment cases. We have to redefine what a property trader is, which is pretty fundamental, as property traders are the people who are most likely to be tied up in these knots regularly.
We have to look at the meaning of "refurbishment" and "the permitted amount" because there are exemptions for that kind of practice under the legislation. We have to look at the particular position of unit trust schemes, which have been caught out in a way that the Government obviously did not intend. We have to look at linked transactions. We have to look at declarations by persons authorised to act on behalf of others. We even—and this is my favourite—have to change the meaning of "lease". One might have thought that when the Government set out to tax leases, they would start off with a definition, go out to consultation on it, agree it and stick with it. But no, apparently they even got that wrong, and we now need a new definition of a lease.
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