Mr. Laws: The Financial Secretary has made a number of reasonable points about fairness to other service providers and to those people who have already spent money improving their capital stock to make it disabled accessible. I was interested in her comments that some forms of conversion for disabled accessibility may already be open to tax relief. We look forward to hearing about the date of the publication of some more detailed guidance on that. We hope that the Government will also soon introduce the relief in respect of commercial property that she mentioned. We may wish to return to this if possible on Report.
Mr. Flight: I echo the hon. Gentleman's words. If I understood the Minister correctly, she confirmed that the Revenue would circulate guidance notes making it clear to businesses what is already available. Secondly, she said that the Government are looking at other ways of effecting some degree of tax deductibility, particularly for things like ramps to premises. I beg to ask leave to withdraw the motion.
Motion and clause, by leave, withdrawn.
The Chairman: There is a general feeling among the Committee that we would like to conclude this morning, if possible. That means that we may not have a great deal of time to devote to new clause 6.
New Clause 6
Transfers of real property between joint occupiers
'(1) The Inheritance Tax Act 1984 is amended as follows.
Mr. Flight: I beg to move, That the clause be read a Second time.
(2) After section 18 insert
''Transfers of real property between joint occupier
18A (1) A transfer on death shall be an exempt transfer to the extent that it comprises a part or whole share in an interest in real property that has been occupied as the main residence of the transferor and the transferees throughout the two years prior to the date of death.
(2) For the purposes of determining whether a property has been in the occupation referred to in paragraph (1) above, there shall be disregarded any absences during which either party has had to receive residential nursing care whether in hospital or a private facility.''.'.[Mr. Flight.]
Brought up, and read the First time.
Hon. Members will be aware that Civil Partnership Bill enables those who enter into a civil partnership to qualify for the spouse exemption from inheritance tax. Two elderly ladies living together may, if they wish,
Column Number: 775
take out a civil partnership to get the IHT advantages. Two spinster sisters would not be able to do that because of the laws of consanguinity.
There are many people living in houses, particularly in the south-east, that are potentially of value way above the inheritance tax floor. As a point of principle, it falls very hard on two sisters who have lived together for a long time if, when one dies and there is no money to pay the IHT, the other is turned out of the house. Secondly, there is a slight issue that the civil partnership arrangement implies, dare I say it, sharing the same bed.
Dawn Primarolo: I just want to explain to the hon. Gentleman that the Civil Partnership Bill is about same sex partnerships. It is about the partnership as marriage. I do not know what he does in his marriage.
Mr. Flight: I thank the Paymaster General for her educational comments. I was aware of the issue. The point that I making is that there is already a problem for two men or two women who have lived together for a long time, whatever their relationship. Because of property values, when one of them dies, the remaining partner may have to sell the house and move. Under the Civil Partnership Bill, if they choose to enter into a civil partnership contract, they will get the spouse allowance, but if they do not they will notand if they happen to be two sisters, they are not allowed to anyway.
The new clause is designed to achieve fairness. When people are living togetherand there is a deliberate two-year qualification period introducedthey should enjoy the spouse allowance. Without it, we will move into an unfair situation where some people will benefit, some people will not, and the underlying problem will not be addressed.
In their press release for the Civil Partnership Bill, the Government made the point that it was social policy legislation and that tax consequences would be dealt with in the first available Finance Bill. This Finance Bill is available and our new clause is available, so I would like to hear the Economic Secretary support it, as the Government effectively promised to do.
John Healey: We all share sympathy for those people who have lost a companion with whom they have lived, but I cannot support the new clause.
The hon. Gentleman mentioned two situations: same sex couples; and couples who do not live together as cohabiting couples but share a residence. In the first situation, I recognise that the exemption from inheritance tax for the transfer between spouses is not an option for same sex couples. We are changing that by legislating for civil partnerships, and we have made it clear that all civil partners will be treated for tax purposes consistently with married couples. We will legislate for that at the next available opportunity. It makes sense to do so.
The Civil Partnership Bill is still before the House and has not been enacted. All hon. Members will have recognised over the past few weeks that a change to
Column Number: 776
one part of the tax system can often have much wider ramifications, so it makes sense to deal with a package of reforms in one go and to implement the tax commitments that flow from the legislation once it has been passed.
In many cases, adults who share a household without living together as partners do not leave their property to the person with whom they share it. Where they do intend to leave it, they have the same opportunity as unmarried couples to minimise the impact of inheritance tax by dividing the ownership in their joint lifetime. In those circumstances, IHT is not an issue unless the shared property is worth more than £500,000.
The IHT rules have already recognised in principle that people inheriting big illiquid assets, such as a house, can have difficulties meeting tax bills up front. Where the property remains unsold, the provision exists for tax to be paid in instalments on generous terms with an attractive rate of interest over as long as 10 years. Many estates start paying their IHT in that way, but the great majority pay just one instalment before settling the outstanding amount in one lump sum.
Despite all the sympathy that we share with people who have lost a companion in such circumstances, that confirms to me that there is no real target for justifying a substantial cost to the Exchequer and the taxpayer of perhaps £100 million. I hope that at this point in proceedings the hon. Gentleman will not press his new clause to the vote.
Mr. Flight: There are just two points that I would like to stress. First, there will be an interval between the passing of the Civil Partnership Bill and the promised IHT exemption.
It being twenty-five minutes past Eleven o'clock, the Chairman, pursuant to Standing Order No. 88 (Meetings of Standing Committees), deferred adjourning the Committee.
Mr. Flight: No doubt, some partners will die during that period, so there will be no benefit. I should have thought that it would be possible to build the promised provision into this Bill.
Secondly, once the Civil Partnership Bill takes effect, there will be an ongoing issue with people asking, quite correctly, ''Why should someone get this tax benefit only if they happen to sign a civil partnership contract?'' There is no moral difference between two sisters living together and two other people of the same sex living together, but their IHT situations will be different. That is an ongoing issue.
I am pleased that the Government are committed to addressing the first part of the problem, albeit not in this Bill. I appreciate the fact that people will be able to own a property half each, which in many cases will mitigate the problem. However, as the Minister will be aware, the rise in property prices in the south-east has been such that quite a few people are still affected by this issue.
Column Number: 777
To a fair extent, the new clause is a probing clause, and although the Government have responded only in part, I would not want to the put it to a vote. I beg to ask leave to withdraw the motion.
Motion and clause, by leave, withdrawn.
Clause 308 ordered to stand part of the Bill.
Amendments made: No. 553, in
schedule 40, page 564, line 17, at end insert
'( ) Employment-related securities and options
Short title and chapter Extent of repeal
Income Tax (Earnings and Pensions) Act 2003 (c.1)
In section 519(1), the word ''and'' at the end of paragraph (a).
In section 524(1), the word ''and'' at the end of paragraph (a).
Finance Act 2003 (c.14) In Schedule 21, paragraph 18(4).
1. The repeals in sections 429, 443, 446R and 449 of the Income Tax (Earnings and Pensions) Act 2003 have effect in accordance with section (Employee-controlled companies and unconnected companies)(8).
2. The remaining repeals have effect in accordance with section (Approved plans and schemes)(11).'.
No. 501, in
No. 502, in
schedule 40, page 572, line 13, at end insert
Harry Cohen (Leyton and Wanstead) (Lab): On the top of page 565, there is what looks like a reduction in child support provision, albeit a limited one. Will the Paymaster General give me a note in due course to explain the position?
'In section 566(4), the entry relating to section 623.'.
Question proposed, That this schedule, as amended, be the Fortieth schedule to the Bill.
New clause 14, which was in my name, was not chosen for debate, although if it had been, I would have given a passionate and persuasive speech. When the Paymaster General writes to me, could she also embrace the new clause and tell me the Government's position on it?