Finance Bill

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Mr. Flight: As the Bill more than removes the major fiscal incentive given to small business incorporation, I see that there is an argument basically that the notice period should be the same for the self-employed as for businesses. I trust that the Revenue's guidelines will be to act in a reasonably mature and helpful manner and not to start whopping people with fines in an aggressive fashion. I also make the point that there could be a nice little earner in the measure, notwithstanding that. It is debatable. I can see the symmetry with the self-employed and I do not think that we want to raise the issue as a major point. I trust that the Revenue's guidelines will be to act in a reasonable fashion, and I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Mr. Flight: I beg to move amendment No. 111, in

    clause 55, page 61, line 21, at end insert—

    '(6A) In paragraph 2 of Schedule 18 to the Finance Act 1998 (duty to give notice of chargeability) insert—

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    ''(5) This paragraph shall not apply where notice has already been given under section 55(1) of the Finance Act 2004 (duty of company to give notice of coming within charge to corporation tax) for the accounting period.''.'.

This follows from what I have talked about in relation to amendment No. 110. It is more practical and removes the existing obligation to notify chargeability to corporation tax where notice has already been given for the same accounting period.

John Healey: What is at issue is the interaction between two separate and distinct obligations: first, the obligation under schedule 18 to the Finance Act 1998 to notify chargeability to tax as an annual obligation, which applies only if the company has not received a notice requiring a company tax return, and secondly, the obligation introduced by the new clause, which is not annual and is triggered only when a company first comes within the charge to corporation tax or comes back into charge after dormancy.

There are important differences between the separate requirements to notify. One applies only in the first year of starting a business; the other is an annual and recurring obligation. One does not depend on any liability to corporation tax; the other depends on such a liability. In one case, it is important to get things right from the start for both companies and the Inland Revenue; in the other, it only applies where there has been a failure by a company.

The amendment would switch off the failure to notify chargeability obligation for the first accounting period of a company starting in business where the clause 55 obligation has already been satisfied. The amendment adds little of value and our concern is that it could prove to be counter-productive. Switching off paragraph 2 would, in a small but possibly significant number of cases, reward non-compliance. It would pay companies deliberately to drop off the radar, as it were, when notifying under clause 55; only when the Revenue catches up with the company would it have to pay tax and interest, but it would not receive a penalty for an attempt deliberately to evade.

3.45 pm

In practice, a compliant company that gave notice within three months of first coming within the charge to corporation tax, or within three months of coming back into charge following a period of dormancy, would also have notified its chargeability to tax for that accounting period, as required under schedule 18. There is no need to provide for that explicitly in the clause. I therefore ask the hon. Gentleman to consider withdrawing the amendment.

Mr. Flight: I do not want to be a pedant—perhaps the amendment could be improved—but the intent is rather the other way round. During the first year, companies giving three months' notice under the clause should not have to repeat the obligation of notice under schedule 18. As the Minister pointed out, it would be relevant only during that first year; but they would have to continue complying with the requirements of schedule 18. It seems that bureaucracy should be aimed at removing double reporting of the same information.

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I repeat that we may have got it drafted the wrong way round, but it seems that the new arrangements for that first year should give the Revenue all it needs, albeit for different purposes, and schedule 18 should come afterwards. Would the Minister comment on that?

John Healey: I believe that I have dealt with the points made by the hon. Gentleman. The two obligations have slightly different purposes. We believe that the existing obligation under schedule 18 is fine for the purpose for which it was designed, but the obligation under clause 55 serves a different purpose, which would be undermined by the amendment. I shall therefore encourage my hon. Friends to vote against it should the hon. Gentleman choose to press it.

Mr. Flight: I hope that the Revenue can sort it out. It is clearly silly to have to give the same information in year one under two different parts of the law; it is the same information. That is what the amendment is about. It is not a huge point and it is not worth voting on, but it is the other way round from what the Minister argued. I have made my point. Perhaps the Revenue can get its act in order, so that companies will receive one request that meets both schedule 18 and the new requirements. Otherwise, it will be a classic example of the bureaucratic incompetence that is sweeping our society that people will have to send the same information twice under separate provisions. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Question proposed, That the clause stand part of the Bill.

Rob Marris (Wolverhampton, South-West) (Lab): I seek your guidance, Mr. McWilliam. Clause 55 has provision for prescribed regulations. A draft of those regulations has been circulated. Is it in order for me to make brief comments on those draft regulations?

The Chairman: It is in order.

Rob Marris: Following the point made by the hon. Member for Arundel and South Downs, paragraph 2(3) of the draft statutory instrument seems to require a company to provide information that would already have been supplied to Companies House on the incorporation of the company. It seems to be a duplication. Can the Minister explain whether it is for data protection reasons that Companies House is not allowed to pass even such basic information across to the Inland Revenue?

John Healey: If my hon. Friend will allow me, I shall look into the point and write to him. In general, the purpose of circulating regulations in draft is to give Committee members—and others, as the consultation is much wider—the chance to pick up and query any points in just that fashion.

Question put and agreed to.

Clause 55 ordered to stand part of the Bill.

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Clause 56

Relief for community amateur sports clubs

Question proposed, That the clause stand part of the Bill.

Mr. Burnett: It would be churlish not to welcome the clause, because it is a relaxation for the clubs.

The Chairman: Order. I declare to the Committee that I am a life member of Blaydon rugby club, but that is not covered by the clause.

Mr. Burnett: You jog my memory, Mr. McWilliam, because I am president of a number of such clubs in my constituency in Bideford, Great Torrington, Okehampton and Tavistock, and other places.

Mr. Stephen Pound (Ealing, North) (Lab): I am not sure whether I should address this question to the hon. Gentleman or to you, Mr. McWilliam. I am the patron of Hanwell Town football club, a darts team and the sadly now redundant Viaduct public house marbles team. [Hon. Members: ''He's lost his marbles.''] I have, in fact, lost my marbles team, rather than my marbles. Should not we all declare the amateur sports clubs with which we are associated?

The Chairman: Order. Actually, that is a matter for me. If any hon. Member has a declarable interest—that is, membership of a sports club—covered by the clause, they do need to declare it. I advise the hon. Gentleman that the marbles team is okay, since it is redundant.

Mr. Burnett: As usual, Mr. McWilliam, you bring an element of sobriety to these events that is welcome.

It would be churlish not to welcome the clause. Amateur clubs are important to all our constituencies. I wonder whether the Economic Secretary could clarify one or two matters. The clause proposes to increase the turnover exemptions from £15,000 to £30,000, and I wonder how much that will cost the Inland Revenue. Sporting clubs in my constituency with bars will find it pretty easy to exceed the £30,000 limit. It is a matter of interest to me exactly what the cost of that turnover measure will be.

One of the other reliefs in the clause relates to bank and building society interest. It repeats the bank and building society interest exemption. I take it—and I hope the Economic Secretary will agree—that bank and building society interest for such community amateur sports clubs is relieved of corporation tax and all other taxation. I would like to know—I should know this but I am afraid I do not—whether community amateur sports clubs can invest in gross interest yielding investments. Would all the interest from those investments be free of tax? I return to where I started. It is a welcome provision, but I wonder whether the Economic Secretary would be good enough to respond to the two specific points that I have raised.

Mr. Richard Bacon (South Norfolk) (Con): I, too, have an interest to declare. I am not sure whether sheep judging qualifies as a competitive sport, but two

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Sundays ago, I became a member of the Diss and District Stockmen's club and was able to pay my subscription with my winnings from the sheep judging category. Regrettably, I did not win breeding ewes, but came top in lambs for slaughter. It certainly seemed competitive at the time.

Like the hon. Member for Torridge and West Devon, I welcome this clause. It seems churlish not to. It expands the exemptions introduced by the Finance Act 2002. I want to amplify the point that he made. As the threshold is based on turnover not profit, it would be easy for any club—particularly one running a bar—to reach it. Indeed, when the hon. Member for Ealing, North (Mr. Pound) was running the London School of Economics students union, I think that he and his friends in the Labour club would have reached the turnover threshold in propping up the bar in a matter of weeks.

 
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