Finance Bill

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Mr. Hoban: Is the Minister therefore saying that DWP payments will not be taken into account when calculating the threshold test, and that people will not need to calculate it if there is an increase due to changes in DWP requirements?
Kitty Ussher: I do not have the answer to that question, but I am sure that I will.
David Wright (Telford) (Lab): They are included.
Kitty Ussher: They are included, I am told by some strange telepathic force. I hope that that answers the question asked by the hon. Member for Fareham.
On the hon. Gentleman’s question about the class of pension members, the class relates to 20 people receiving pensions. It does not matter if the people in that class change, unless it is done for avoidance purposes. The test for avoidance relates to whether the people in the class have changed to avoid the charge. There is an intentional test. I hope that I have clarified those issues for the Committee, and I commend the schedule.
Question put and agreed to.
Schedule 29 agreed to.

Clause 91

Notification and registration of transactions
Kitty Ussher: I beg to move amendment No. 149, in clause 91, page 52, line 24, leave out ‘, other than any rent,’.
The Chairman: With this it will be convenient to discuss Government amendments Nos. 150 and 151.
Kitty Ussher: These are small amendments to ensure that clause 91 and schedule 30 have the effect that we intended when we drafted them. The Government expected the changes introduced by clause 91 and schedule 30 to remove the need to notify HMRC of more than 270,000 transactions per year. It is a welcome deregulatory measure. Clause 91 introduces a rent notification threshold of £1,000, which applies to the grant of leases for a term of seven years or more and reduces the administrative burden of stamp duty land tax. Previously, one was required to notify HMRC of a grant of any lease for seven years or more, provided it was made for a chargeable consideration.
However, clause 91 also applies the same £1,000 notification trigger in respect of leases that are assigned or surrendered. The assignment of a lease refers to the transfer of rights to use leased property, which can obviously happen periodically as rents are renegotiated. The requirement to notify the assignment or surrender of leases when the relevant rent was £1,000 or more, regardless of the size of any other chargeable consideration for the assignment or surrender, was added to ensure that the data the Government collect on property transactions were not harmed by the measure.
However, since the Bill was published, we have received representations about the extra reporting that the additional requirement will create. We are, as always, keen to ensure that we can deregulate wherever possible and that we do not place additional burdens on business, so we think that we can collect the data in another way. We have re-examined the requirement and agreed that we can offset the deregulatory savings if we proceed as we originally intended.
We believe that the data collected from the notification of the granting of leases would not be unduly affected by an amendment that removed the requirement to notify HMRC of the assignment and surrender of leases when the relevant rent is £1,000 or more. I trust that the amendment is uncontroversial.
Mr. David Gauke (South-West Hertfordshire) (Con): It is a pleasure to serve under your chairmanship again, Mr. Cook. The Financial Secretary said earlier that she hoped that the pleasant weather outside would be reflected in a pleasant environment in this room. I do not think there will be a great deal of controversy about this clause. Although we might take issue with the Economic Secretary’s characterisation of the Government as always keen to deregulate, this is, none the less, a deregulatory measure.
We welcome the intention behind clause 91, which raises the threshold of notification to HMRC of a land transaction for stamp duty land tax purposes. We also welcome the fact that the Government have listened to representations—particularly from the British Property Federation and the Law Society—that the original wording would not perhaps have been as successful in reducing the regulatory burden as was intended. We therefore welcome the fact that the Government have produced not only the clause, but the amendments. Indeed, we tabled an amendment on removing the £1,000 rent requirement that is identical to Government amendment No. 150. Hence, the entire Conservative Front Bench supports amendment No. 150—such is our enthusiasm for the measure. No doubt, the Liberal Democrats will make a statement that they are the real alternative by not putting their name to the amendment.
I have a couple of questions for the Economic Secretary. The first question is about the requirement of notification for the £40,000 threshold—chargeable consideration. Given that SDLT is payable at £125,000 or £150,000—I would be grateful if the Economic Secretary will confirm that—I assume that the £40,000 requirement exists to provide the Government with property-related information, as opposed to being for the assessment of SDLT. That would enable the Minister for Housing to share that information with the Cabinet and, indeed, with passing cartographers.
There are difficulties in filing a correct SDLT return under section 75A if the purchaser has no connection with the other parties to the transaction and therefore cannot obtain the information to complete the return and self-assessment. I know that representations have been made to the Treasury on that point, so I should be grateful to know whether the Government are considering the issue of filing SDLT returns and whether there are plans to address that concern. In conclusion, we welcome the clause and the Government’s amendments.
Kitty Ussher: The hon. Gentleman raises an important point because there is obviously tension between the need simply to acquire information about what is happening in the market for a variety of Government purposes and the genuine desire to deregulate in relation to the companies and individuals concerned. The implication in his question is why the notification threshold is not the same as the threshold for the tax itself. We need the information collected from notifications to help other Departments, such as the Land Registry and valuation offices, to make assessments based on data collected from returns. Even if no tax is collected on the transactions, there is a requirement in relation to that.
The hon. Gentleman mentioned filing under section 75A, and we will be issuing guidance on that shortly. We do not believe that a return form is needed; a letter setting out the main points will suffice. I hope that answers his question.
Amendment agreed to.
Amendments made: No. 150, in clause 91, page 52, line 25, leave out from ‘£40,000’ to end of line 26.
No. 151, in clause 91, page 52, line 33, after ‘consideration’, insert
‘for the assignment or surrender’.—[Kitty Ussher.]
Clause 91, as amended, ordered to stand part of the Bill.
Schedule 30 agreed to.

Clause 92

Charge where consideration includes rent: 0% band
9.45 am
Kitty Ussher: I beg to move amendment No. 152, in clause 92, page 54, line 42, at end insert—
‘( ) In Schedule 9 to that Act (SDLT: right to buy etc), after paragraph 4A insert—
“Shared ownership lease: grant not linked with staircasing transactions etc
4B (1) For the purpose of determining the rate of tax chargeable on the grant of a shared ownership lease of a dwelling, the grant shall be treated as if it were not linked to—
(a) any acquisition of an interest in the dwelling to which paragraph 4A applies, or
(b) a transfer of the reversion to the lessee or lessees under the terms of the lease.
(2) In this paragraph “shared ownership lease” has the same meaning as in paragraph 4A.”
( ) In that Schedule, in paragraphs 10(1) and (2) and 11(b) (shared ownership trusts), omit “additional”.
( ) In that Schedule, insert at the end—
“Shared ownership trust: declaration not linked with staircasing transactions etc
12 For the purpose of determining the rate of tax chargeable on the declaration of a shared ownership trust, the declaration shall be treated as if it were not linked to—
(a) any equity-acquisition payment under the trust or any consequent increase in the purchaser’s beneficial interest in the trust property, or
(b) a transfer to the purchaser of an interest in the trust property upon the termination of the trust.”’.
The amendment follows on from the abolition of the so-called £600 rule for residential purchases and amends the stamp duty land tax rules for shared ownership in schedule 9 to the Finance Act 2003. With the abolition of the £600 rule for residential property, the premium paid for a shared ownership lease will no longer attract stamp duty land tax at 1 per cent. when it is below the threshold of £125,000, or £150,000 in a disadvantaged area. A special relief then exempts staircasing transactions that do not take the purchaser beyond an 80 per cent. share of the property.
These matters are complex, but we have realised that a situation would have been created that was not the intention of clause 92, so the amendment disapplies the linked transactions rules as they apply to the premium paid for a shared ownership lease to keep the premium out of charge when it is below the starting threshold. The amendment makes a similar change regarding an initial payment by a beneficiary of a shared ownership trust that provides shared ownership facilities for commonhold flats. The amendment will have no Exchequer cost, and I hope that it has the support of hon. Members on both sides of the Committee.
Amendment agreed to.
Question proposed, That the clause, as amended, stand part of the Bill.
Mr. Gauke: I thank the Economic Secretary for her clear explanation of the amendment. I have one question about the clause, which relaxes the £600 rule that prevents the manipulation of lease thresholds by entering into leases in which both rent and a premium are paid. Like many measures, the £600 rule was introduced as an anti-avoidance measure, and I should like to know what persuaded the Treasury that it is no longer necessary. What assurances can the Minister give that the consequence of its repeal will not be the avoidance behaviour that was the very cause of its introduction?
Kitty Ussher: The hon. Gentleman makes a valid point. We have decided that the risk of manipulation between premiums and rent to avoid paying SDLT is much greater for non-residential property than for residential property. The removal of the £600 rule for residential properties would bring huge benefits to those purchasing a property through a shared ownership scheme, by ensuring that in the vast majority of cases they pay stamp duty land tax only on transactions that take them beyond 80 per cent. ownership of the property. We were advised, for example, by the Chartered Institute of Taxation that retention of the £600 rule for non-residential property is disproportionate to the level of possible abuse. We are trying to balance the risks, and we are comfortable that there is no major incentive to abuse the provision.
Question put and agreed to.
Clause 92, as amended, ordered to stand part of the Bill.

Clause 93

Withdrawal of group relief
Kitty Ussher: I beg to move amendment No. 153, in clause 93, page 55, line 36, at end insert
‘(but see sub-paragraph (6A))’.
The Chairman: With this it will be convenient to discuss the following: Government amendment No. 154
Amendment No. 187, in clause 93, page 56, leave out lines 4 to 6.
Amendment No. 159, in clause 93, page 56, line 6, at end insert—
‘(8) The provisions of sub-paragraph (4) shall not apply unless, at the effective date of the transaction, there are arrangements in existence by virtue of which, at that time or some later time, a person has or could obtain, or any persons together have or could obtain, control of the purchaser but not of the vendor.’.
Government amendments Nos. 155 to 158.
Kitty Ussher: I shall speak to the Government amendments, which in many cases will resolve some of the issues raised by both Opposition parties. I assume that Opposition Members wish to speak to their own amendments, so I shall respond to them in detail when they have done so, rather than pre-empt them. I shall instead explain what we are trying to do with our amendments, which might lead us on to what other hon. Members wish to propose.
Clause 93 has been introduced to close a loophole that has been widely used to avoid paying stamp duty land tax. Following its announcement in the Budget, a number of representations were submitted by the industry detailing concerns about parts of the operation of the clause. In particular, there was uncertainty about how the legislation will be applied in practice and concerns that it might catch innocent transactions. The legislation is not intended to disadvantage genuine taxpayers, so the Government amendments have been introduced to ensure that the legislation operates as intended and to provide the certainty sought by the industry.
Some representations suggested that the clause is retrospective, which is not the case. It is not intended to penalise anyone who has acted on the basis of existing legislation, so Government amendment No. 158 has been introduced to ensure that the provision applies only to transfers of assets occurring after Budget day. Concern was also expressed about the meaning of “control” in the clause—this may relate to amendment No. 187, in the name of the Liberal Democrat Members. The word “control” has been used in this context for many decades, but it has been suggested that a change in control of the purchasing company might be inadvertently triggered resulting in a clawback of group relief. I would expect a property group to take the necessary legal steps to pre-empt such a possibility, without being caught by the legislation.
Government amendments Nos. 155 to 157 are consequential and address the second area of concern, which is that HMRC might construe the meaning of a change of control so widely that the change of one shareholder in a quoted company might result in a change of control and, therefore, trigger the clawback provision. Similar concerns were raised in relation to reconstruction relief. I can confirm that we intend to take the same approach—if control of a publicly owned company changes as a result of an ordinary market transfer of its shares, there will be no recovery, because we do not intend to interpret change of control so widely that simple day-to-day transactions by unconnected minority shareholders in the stock exchange could trigger a clawback. We will issue guidance shortly to confirm that view.
In conclusion, the Government amendments will provide the certainty sought by the industry, while ensuring that the loophole exploited by those seeking to avoid their share of tax will be closed. The amendments will have no Exchequer costs or revenue implications and will be welcomed by a wide range of practitioners and the industry. I shall stop now to allow others to speak to their amendments and then I will wrap up the debate.
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