Mr.
Hammond: I am grateful to the Minister for her
explanation. The 19 per cent. figure is not quite as generous as she
was making out because it has to be set against the intended rate
rather than the previous rate of small companies’ tax. She has
provided the Committee with an explanation of why the Government have
arrived at 19 per cent. and therefore I beg to ask leave to withdraw
the amendment.
Amendment, by leave,
withdrawn.
Mr.
Hammond: I beg to move amendment No. 210, in
schedule 25, page 302, line 18, after
‘machinery)’, insert
‘or section 45D (expenditure on
cars with low carbon dioxide emissions) or section 45E (expenditure on
plant and machinery for gas refuelling stations) or section 45F
(expenditure on plant and machinery for use wholly in a ring-fence
trade)’.
Again, this is
a probing amendment and offers the Minister the opportunity to explain
why payable tax credits are limited to expenditure qualifying by virtue
of section 45A of the Capital Allowances Act 2001, which relates to
energy-saving plant and machinery and section 45H, which relates to
environmentally beneficial plant and machinery. The Capital Allowances
Act 2001 also provides for first-year qualifying expenditure to be
incurred in other areas. For example, section 45D provides for
expenditure on cars with low carbon dioxide emissions, which is the
subject we have just been discussing. Section 45E provides for
expenditure on plant and machinery for gas refuelling stations and
section 45F provides for expenditure on plant and machinery for use
wholly in a ring-fenced trade.
As I
understand it, all of those areas qualify for enhanced capital
allowances. When the Minister made her introductory comments, she
explained that enhanced capital allowances were not usable by
loss-making companies. In order to incentivise start-up businesses in
particular and companies that are not profitable and thus not able to
benefit from enhanced capital allowances in general, a payable credit
was introduced. Nowhere has she explained why the payable credit is
available only for expenditure qualifying under sections 45A and 45H.
This probing amendment therefore would insert provisions for the
qualification to extend to qualifying expenditure by virtue of sections
45D, 45E and 45F. Perhaps the Minister could explain the logic behind
the restrictive approach of the
Government.
Angela
Eagle: The amendment would extend the availability of
first-year tax credits so that expenditure on cars with low carbon
dioxide emissions, plant and machinery for gas refuelling stations, and
plant and machinery for use in wholly ring-fenced trades would
qualify. Although
some expenditure currently qualifies for the first-year allowances, the
Government’s intention has always been clear: to support
investment by loss-making businesses and environmentally beneficial and
energy-saving technologies. Enhanced capital allowances were only
extended to low carbon emission cars and gas refuelling stations
temporarily to incentivise take-up of those technologies. Through ECAs,
energy and water saving technology is a permanent feature of the
capital allowances code. Energy-saving and water-saving technologies
tend to be more expensive than comparable equipment that is not
environmentally-friendly and tax incentives are intended to compensate
for that. The
Government expect the chief beneficiaries of first-year tax credits to
be start-up businesses seeking to ensure that their carbon footprint,
and water and energy usage is reduced. It does not therefore make sense
to extend this to the purchase of vehicles, particularly because low
emission vehicles also benefit from other tax relief—namely, the
reduced vehicle emissions duty and reduced company car
tax. The
hon. Gentleman said that this is a probing amendment, but he seems to
want to extend first-year tax credits to all plant and machinery used
by North sea oil companies. That is an unnecessary incentive given that
the Finance Act 2006 made a change that indexes forward losses
attributable to capital allowances, which will provide up to 42 per
cent. more relief than was previously available. The hon. Gentleman
will know
that the tax regime for North sea oil is different, and is wholly
appropriate to what is a particular area of activity. I presume that he
supports the ring-fencing of the North sea oil regime. Taken together,
the extensions suggested in the probing amendment would cost
£100 million, which is several times the current estimate of the
cost of first-year tax credits. So I hope that with those explanations
the hon. Gentleman will assume that the Government’s intentions
have been probed, and that he will withdraw the
amendment. Mr.
Hammond: I accept the Exchequer Secretary’s point
on equipment for use in a ring-fenced trade. We will come to petroleum
revenue tax later in the Committee, and can address those issues then.
All I did was to take the areas that are eligible for enhanced capital
allowances but which were not included in the payable tax credit. I
understand what the hon. Lady says, but in her introduction she
suggested that this was simply a measure to deal with the situation
where enhanced capital allowances were currently of no use to
companies, to ensure that they could benefit from them. She said a few
moments ago that she did not want to extend the allowances to low
carbon dioxide emission cars, because this was only ever a temporary
arrangement. We have just debated a clause in which she extends that
temporary arrangement by another five years to 2013. I would have
thought that investing in the cleanest—to quote her
phrase—car was indeed an investment in environmentally-friendly
technology.
Angela
Eagle: The hon. Gentleman is aware that there are generous
tax allowances—which we have just debated—for those
businesses that wish to purchase the lowest-emitting cars, but this is
another area of assistance, which includes payments for tax credits.
Just because there is one incentive in one place in the tax system for
a car, that does not mean that we should extend all other sustainable
incentives to cars. I would have thought that the hon. Gentleman could
accept that the car issue is being dealt with in that instance, and
that here we are dealing with energy efficiency and water-efficient
infrastructure.
Mr.
Hammond: The Exchequer Secretary is wrong that there are
provisions elsewhere. She is referring to clause 74 on energy-efficient
cars. The point is that the cars covered by clause 74 may attract
enhanced capital allowances, but in these
circumstances—companies that are not profitable—the cars
will be of no value to them. That is precisely why the hon. Lady is
introducing the payable tax credit. As she says, the Government have
been truly probed and we have understood something of the Exchequer
Secretary’s thinking. I am not sure whether Committee members
will consider that thinking entirely logical, but at least we have an
explanation of it. I beg to ask leave to withdraw the
amendment. Amendment,
by leave,
withdrawn.
Mr.
Hammond: I beg to move amendment No. 211, in
schedule 25, page 302, line 20, leave
out ‘2013’ and insert ‘2018’.
This is another probing
amendment: why is the cut-off date for the payable tax credit set at
2013? There was no mention of a cut-off date in the draft legislation
that was issued with the technical note for consultation, but 2013
appeared in the published Bill. I have no particular attachment to the
2018 date, but I want to understand the rationale for the 2013 date
being in the Bill—rather than leaving the regime as an
open-ended one that the Government could change at any
time—especially as there was no consultation on the proposal to
include an end
date.
Angela
Eagle: The intention of the date is to create a structure
whereby we can assess—when we get there—how effective the
system has been and whether it needs to be reviewed, changed, rolled
forward or abandoned. Part of that is about evaluating the
effectiveness of policy. The thinking behind the 2013 date is that it
creates an appropriate time by which the system could be up and running
and gives us time to assess the effect that it is having so we can
return to it and consider whether to extend it further, roll it forward
or abandon it. It is about assessment. The feeling was that setting the
date at 2013 provided the right time scale within which to carry out a
reasonable assessment of how well the system was working, whether it
was giving value for money and whether it merited being continued or
changed.
Mr.
Field: Can the Minister explain precisely how this will
operate procedurally? If, as is being suggested, the period will come
to an end in March 2013, is she suggesting that the process will go
ahead up to the Budget in 2013, whereupon it will immediately be
extended or not extended and therefore got rid of? Is that period
sufficient? I think that my hon. Friend the Member for Runnymede and
Weybridge had in mind that the regime looking at the credits should be
extended over a slightly longer period—perhaps 10
years—during which the 10 per cent. annual write-offs,
which we discussed this morning in relation to similar allowances,
could be considered. I am interested in how the Minister envisages the
provision being put in place procedurally and what the process will be,
because realistically, for decisions to be made, we are talking
effectively about a two or three-year process, whereupon 2013 will
shortly be upon
us.
Angela
Eagle: The intention is to see how the new system works,
how it beds in and what effect it has. Hopefully, it will have a
positive effect. I believe that that will be so, but we have to
consider the evidence. As 2013 approaches, we will have evidence and we
will be in possession of some facts about how many credits have been
paid, and what they have achieved in reality in terms of ensuring that
more energy and water efficient infrastructure has been bought and
installed in the economy. We will also be able to assess the value and
usefulness of the expenditures implied by the tax credit being
paid. I am sure that,
as is usual in the assessment of the effectiveness of particular
credits and policy, there will be calls for evidence and consultations
with those who have used the credit. Then we will be able to have a
debate about whether the policy needs tweaking or changing or whether
it has served a useful purpose. All of that will take place in good
time so that a useful
policy will not be ended suddenly. Officials are well aware of the time
scales set in the Bill and will be able to work with those and make a
seamless transition to a deepening scheme of even greater effectiveness
or to a policy decision that the scheme has achieved its useful
purposes, whereupon it will be taken and it will be dealt with
accordingly. It is too
early to say, other than in theory, but there is no particular problem
with 2013 as a date: it provides time for the scheme to bed in, for
people to get used to using it, for officials to assess how it is
working and for there to be good evidence of its working. At the
appropriate time, decisions on future structures will be arrived at
sensibly.
Mr.
Field: Given that the Government make a great play of
their commitment to environmental taxes and environmental changes in
respect of the behaviour of individuals and businesses and talk readily
about how we have to plan for a considerably longer period ahead, up to
2050, it is a little bit curious that such a short period is allowed
here. No time restriction is needed in the schedule. Obviously, a
future Finance Bill could make amendments if there were concerns about
the way in which the provision was operating at some point in the
middle of the next decade. It is slightly curious that everything is
being talked of in terms of targets for 2020 or for 2050, yet in this
regard it is a relatively short period of time in which there will be
direct scrutiny of whether these particular allowances are
working.
5.45
pm
Angela
Eagle: There are other examples of such allowances being
introduced for five years, assessed and then rolled forward or not.
Clause 75, on gas refuelling stations, was for a five-year period
initially to see how effective it was. After sufficient evidence had
been gathered there was a power to extend it and there is a power to
extend this. I do not think that it is an issue that should unduly
worry the Committee.
Mr.
Hammond: I am grateful to the Minister for her
explanation—in fact, I rather agree with her. I am rather in
favour of sunset clauses in general. But I cannot help noticing that
she seems to think that they are a good idea where provisions introduce
concessions to the taxpayer, and my experience in Committee has been
that Government are rather more resistant to sunset clauses when the
boot is on the other foot. I would be happy to agree that most things
in this Finance Bill should have a 2013 sunset
clause—
Angela
Eagle: Does that include income
tax?
Mr.
Hammond: —that way the Government have to do all
the good things that the Minister talked about: evaluating how it is
working, ensuring that there are not unintended consequences and seeing
if it needs tweaking to work better. A sunset clause would be a good
idea with many
innovations. The
Minister said, from a sedentary position, “Does that include
income tax?”—no, of course not. I am talking about
innovations; new ideas. Later in Committee we might suggest that
sweeping new powers for HMRC to enter premises should be time-limited,
so
that we can evaluate how they have worked. It is a very good idea in
general but is typically applied in a one-sided
way. I am grateful to
the Minister for her explanation. We will be quoting her comments from
the Committee record back at her, as we seek to introduce sunset
clauses in relation to other provisions in future. Its purpose having
been served, I beg to ask leave to withdraw the amendment.
Amendment, by leave,
withdrawn.
Mr.
Hammond: I beg to move amendment No. 208, in
schedule 25, page 307, line 14, after
‘tax’, insert ‘that is due and
payable’.
The
Chairman: With this it will be convenient to discuss
amendment No. 209, in schedule 25, page 307, line 23, leave out from
‘as’ to end and insert ‘is just and
reasonable’.
Mr.
Hammond: Paragraph 18 of the new schedule provides for
HMRC to make payments in respect of first-year payable tax credits
claimed by companies. Payments are to be made when inquiries into a
company’s tax return are completed. There is also a provision
that enables HMRC effectively to set off payable tax credits against
corporate tax payments due from the taxpayer and, equally, to make
provisional payments in respect of payable tax credits—I assume
that that is where inquiries are ongoing—where the final
corporate tax obligations of the taxpayer are not yet resolved, and
thus there may be some need in the future to offset some element of
corporation
tax. Amendment No. 208
simply seeks to clarify that only tax due and payable can be set off
against payable tax credits. That will ensure that HMRC cannot withhold
payable tax credits against a future liability to corporation tax that
will become due at a point in the future in respect of a later
chargeable period. I hope that that was always the intention and that
the Minister can accept that the words “due and payable”
simply clarify that
intention. Amendment
No. 209 seeks to clarify the situation with regard to provisional
payments on account of first-year tax credits. As drafted, the
legislation—as we have so often seen elsewhere—gives HMRC
absolute discretion on the payment of provisional tax credits. The
amendment would make it clear that the amount paid provisionally has to
be “just and reasonable”. I was happy to hear, earlier in
our proceedings, the Exchequer Secretary saying that “just and
reasonable” is a well established term in the tax statutes. I
think she said that it occurred 72 or some other large number of times
throughout tax legislation—she read that out this morning. All
we are seeking to do is to ensure that HMRC’s behaviour in
relation to provisional payments of payable tax credits is just and
reasonable. That is an appropriate restriction on HMRC’s
discretion and I hope that the Minister will
agree.
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