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Ruth Kelly: I welcome you to the Chair, Sir Nicholas.
I very much enjoyed the contributions made by right hon. and hon. Members on the Conservative Benches. Let me reassure them that the schedule is framed in the language of the tax law rewrite. That fundamental point has been much examined by Conservative Members, who will be reassured by that comment.
The right hon. Member for Suffolk, Coastal (Mr. Gummer) told me to get real. I would argue that if most people looked at the old stamp duty regime, under which all residential transactions bar hardly any paid full stamp duty, and half of all large commercial transactions paid full stamp duty while half paid none at all, they would realise that that was completely unacceptable. When they realised that the old regime
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was not compatible with e-conveyancing, they would find that unacceptable, too. When they considered the fact that the old regime had no proper enforcement and penalty powers, they would not think that in line with the principles of modern taxation.
Mr. Prisk: The Financial Secretary talks about the need to modernise and the importance of electronic conveyancing. Can she explain how electronic conveyancing is helped by the requirement to complete tax return forms by hand in black ink?
Ruth Kelly: The hon. Gentleman will know that those forms are available on people's computer screens. Every effort has been made to ensure that they are as user-friendly as possible, but of course the Inland Revenue is continuing to work on making the system as compatible with e-conveyancing as possible.
Ruth Kelly: The right hon. Gentleman has made so many contributions to this debate already. Perhaps he will let me answer a few more of his questions before he rises again.
The provisions will have absolutely no effect on the vast majority of transactions. In particular, residential purchasers and their advisers will notice virtually no change. Indeed, despite the dire prophecies of Conservative Members, stamp duty land tax was successfully implemented on 1 December 2003. Since then, nearly 500,000 certificates have been issued. Most residential purchasers have seen little difference. By contrast, references to stamp duty land tax in the professional press suggest that the regime has been successful in significantly reducing the avoidance opportunities that were available under stamp duty for commercial transactions. Indeed, in the first quarter of 2004, yield from land transactions was up nearly 20 per cent. on the corresponding period last year, almost certainly because of the reduced scope for avoidance.
Mr. Prisk: I am fascinated by the Minister's statement that residential buyers are not seeing any difference. All the solicitors I have spoken to have talked about the change from a one-page tax form to a 12-page document plus 37 pages of explanatory notes—there are always a lot of explanatory notes with this tax. In what way does that change make no difference to residential buyers? Most of the solicitors told me that they expect to have to charge about another £50 for their time in order to deal with this new tax arrangement.
Ruth Kelly:
I am arguing that the purchaser of a property undertaking a residential transaction will probably see no difference whatever. I understand and respect the fact that the hon. Gentleman has many friends in the community of solicitors, who are arguing at every opportunity that completing a form that they are not used to completing is a huge additional burden. I hope that the majority of solicitors will get used to completing it. They do not have to fill in every page, and it should not take them very long. The provisions are not
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onerous; I have seen them myself and they are entirely reasonable. I am sure that solicitors will adjust to the new form in due course.
The avoidance industry has not been idle, however, and that is partly the reason the provisions in this year's Bill are needed. Clause 282, which introduces the schedule, makes a number of amendments to stamp duty land tax legislation. Although the schedule might appear daunting, I can reassure hon. Members in two respects. First, most of the length of the schedule arises from the fact that it re-enacts in primary legislation regulations that were made last November. We have already debated those regulations at length, and many of the comments made today reflect subjects that have already been debated in the House.
Mr. Gummer: I agree with the Minister about stopping avoidance, but, given that that will mean a great deal more money coming into the Treasury, will she tell me what tax cuts are being made in order for this not to be a tax-increasing measure? That is the issue. The provision will increase the amount of money coming into the Treasury. Where will cuts be made to ensure that this does not represent an increase in taxation?
Ruth Kelly: I can correct the right hon. Gentleman by saying that many of the measures before us today have been suggested to us by practitioners, and they will close tax avoidance routes that were leading to a loss of revenue on which we had already counted, and which we would not have been able to secure if these measures had not been introduced.
Many of the provisions in the schedule are technical, and we have already debated several of them today. I do not intend to run through them all, but I shall deal with the specific point about chain-breaking raised by the hon. Member for Hertford and Stortford (Mr. Prisk). I understand that he has not had the opportunity to table an amendment on the subject. He argues that the conditions on chain-breaking are over-restrictive, but that is certainly not the case. I should perhaps remind hon. Members that we have already extended the relevant period from one year, as set out in the Finance Act 2003, to two years. I certainly think it reasonable that relief should be available only where there is evidence that the property is genuinely the individual's residence, not where, for example, the main use of the property has been to generate income.
Clearly, it is important in that situation to have, for example, restrictions on the time that an individual would need to have occupied the property. If there were no limits, any property dealer could say it was a chain-breaker. We believe that we have completely fulfilled the Chief Secretary's commitment in that regard. For all those reasons, I urge all members of the Committee to support the schedule.
Question put and agreed to.
Schedule 37 agreed to.
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Clause 283
Mr. Prisk: I beg to move amendment No. 16, in clause 283, page 237, line 16, leave out
'the land consists entirely of residential property and'.
The Temporary Chairman (Sir Nicholas Winterton): With this it will be convenient to discuss amendment No. 15, in clause 283, page 237, line 18, leave out '£1,000' and insert '£5,000'.
Mr. Prisk: Amendment No. 16 would remove the restriction in clause 283(2)(b)(b) and narrow the application of the new notification procedures to residential property. On the whole, and despite our previous discussions, the clause is welcome in that it seeks to reduce compliance costs and the burden by relaxing the notification procedures for the taxpayer. Despite our reservations about previous elements of the legislation, in this instance the clause will probably help the taxpayer and, indeed, the tax collector. Under current drafting, however, the land must consist "entirely of residential property". That seems somewhat illogical, I suspect that it may prove self-defeating and there is a danger that it could prove impractical. Let me run through those points briefly.
I believe that the measure could be illogical because, if the purpose is to cut the compliance burden, why apply the matter of the kind of use—the type of property use—in this instance? I believe that it could be self-defeating, because if the Revenue hopes to reduce its administrative costs, would it not be wiser to include all kinds of property? What is the relevance of the type of property? Doing so could be impractical because the clause relies in part on a definition under section 116 of residential property. I have to say that that is not one of the clearest elements. Let me cite one example that relates to that.
Under current drafting, it is necessary to distinguish between two transactions under which a householder's garden was expanded—on the one hand, where the land forms part of a neighbour's garden, when the provision will apply, and, on the other, where the land is part of a field in an adjoining farm, when it will not. I am grateful to Mr. Jeremy de Souza of White and Bowker for highlighting that instance. He is one of several people to have done so. Does the Minister recognise that that is a potentially needless restraint on the clause? In the interests of compliance, will she accept our amendment?
May I now move amendment No. 15?
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