Jane
Kennedy: Those bodies would need to be very swift indeed.
We would want to research a suggested model carefully, so that the
Treasury and HMRC could thoroughly understand what the economic impact
of any such model might be before we brought it forward through the PBR
for consultation. There is no point of
party principle or difference here. We are interested in setting the
debate for the future so that non-domiciled UK residents, who seek to
use the remittance basis for tax purposes, can be assured that we not
only appreciate the value that they bring to the economy, but want them
to continue to make the UK their home and to continue contributing to
the British economy in the significant way that we know they do
already. The
hon. Member for Fareham asked me to elaborate on how the Treasury
arrived at its figures. The figures that he drew upon came from the
document that we published in December, “Paying a fairer share:
a consultation on residence and domicile”. I could elaborate at
length, but I do not think that it would be of great value to the
Committee. There is not a lot more that I can add to the figures. They
were based upon estimates of people who were considered as needing to
use the day-counting rules—air crew and others who would have to
count the number of days that they were resident in the UK. It is true
that to some degree they were estimates, but they were the best
estimates based on the figures that we had. It would not necessarily be
helpful to the Committee to enter into a vague debate about those
figures.
Based upon
the representations that I have heard this morning, and on Tuesday
evening, the principle being pressed is that we should consider a
statutory residence test. I have said that I am open to those
representations and I think that it would be best to leave it at that
for now. I hope that the hon. Members for Taunton and for Fareham will
accept that the specific example of a residence test, which the hon.
Member for Taunton has put forward, is a little premature for us to
accept. Equally, it is not necessary for us to be required to lay a
report in the way that the hon. Member for Fareham has suggested. I
have made it clear that I will use my good offices to do so when we
have arrived at consensus. I know that the Chancellor does not like
issues such as this to remain unsettled, so it would be better if we
could see what consensus can be arrived at quickly, and move forward on
that basis.
9.15
am
Mr.
Browne: That was a helpful speech from the Financial
Secretary. I have some sympathy with her Treasury Ministers, and
Ministers in any Department for that matter: if they consult widely,
they are criticised for not moving with sufficient haste, and if they
fail to consult widely, they are told that they are not listening
sufficiently to representations. I hope that the Treasury can strike a
balance between those two positions and, as the Financial Secretary
says, take on board a lot of the comments that have been made by
outside bodies. Such comments are made with the good intention of
having a system that is easier for them and all citizens to understand,
whether they be UK residents or those who come here only
periodically. I
did not anticipate the Financial Secretary accepting the new clause,
and I acknowledge that a new clause drawn up by me and my hon. Friends,
albeit with the assistance of people in professional bodies, is
unlikely to be introduced off the peg by the Government. However, I
hope that it will at least provide a kick-start to a
helpful process. I do not know what the procedure is for new clauses,
but I would not wish the Committee to be detained any
longer. The
Chairman: You merely resume your seat in this
case.
Mr.
Hoban: I want to make two comments. I welcome the
Financial Secretary’s remarks. She has indicated an openness to
the debate on the need for a statutory residence test, and has sent a
clear signal to the representative bodies that we need to work quickly.
I am sure that they will take note and respond to that signal, so that
the debate can be moved forward as quickly as possible. That is in
everybody’s interest. The Financial Secretary has dealt with the
statutory residence test, but not with the questions I raised on
Tuesday evening about when we will see a revised IR20, and what
guidance will be produced on in-transit rules. She did deal with the
issue of cost. I would be grateful if she could respond
now.
Jane
Kennedy: If the hon. Gentleman will forgive me, I had an
answer for him on Tuesday afternoon but I have now mislaid that. I have
found it. I beg the Committee’s
pardon. Once
the Bill is passed, HMRC will publish a revised IR20. That will,
however, be temporary, as HMRC is rewriting all the guidance covering
residence and domicile, which will include the 2008 Budget changes. It
will be appropriate to wait until those changes have been made before
the guidance is completely rewritten. The new guidance will be subject
to consultation, following Royal
Assent.
Mr.
Hoban: I am grateful for that clarification, and also that
there will be consultation. I beg to ask leave to withdraw the
amendment. Amendment,
by leave,
withdrawn. Clause
22 ordered to stand part of the
Bill. Clause
23 ordered to stand part of the
Bill.
Schedule
7Remittance
basis
Jane
Kennedy: I beg to move amendment No. 339, in
schedule 7, page 151, leave out lines 20 to
28 and insert— ‘(3) Sections
42 and 43 of TMA 1970 (procedure and time limit for making claims),
except section 42(1A) of that Act, apply in relation to a claim under
this section as they apply in relation to a claim for
relief. 809BA Claim for
remittance basis by long-term UK resident: nomination of foreign income
and gains to which section 809G(2) is to
apply (1) This section applies
to an individual for a tax year if the
individual— (a) is aged
18 or over in that year,
and (b) has been UK resident in
at least 7 of the 9 tax years immediately preceding that
year. (2) A claim under section
809B by the individual for that year must contain a nomination of the
income or chargeable gains of the individual for that year to which
section 809G(2) is to apply.
(3) The income or chargeable gains nominated must be
part (or all) of the individual’s foreign income and gains for
that year. (4) The income and
chargeable gains nominated must be such that the relevant tax increase
does not exceed
£30,000. (5) “The
relevant tax increase”
is— (a) the total amount
of income tax and capital gains tax payable by the individual for that
year, minus (b) the total
amount of income tax and capital gains tax that would be payable by the
individual for that year apart from section
809G(2). (6) See section 809Z
for the meaning of an individual’s foreign income and gains for
a tax
year.’.
The
Chairman: With this it will be convenient to discuss the
following: Government amendments Nos. 340 to
343. Amendment
No. 52, in
schedule 7, page 153, line 37, at
end insert— ‘(6) Subsection
(4) shall not have effect
until— (a) the Treasury
has laid before the House of Commons a report setting out its
assessment of the impact of the charge
on— (i) foreign
nationals in low-paid
employment, (ii) small
businesses employing foreign nationals,
and (iii) higher education
institutions; and (b) the
report has been approved by resolution of the House of
Commons.’. Government
amendments Nos. 344 to
350.
Jane
Kennedy: I will speak briefly, as has been my habit, but I
will seek to answer any detailed questions on Government amendments
Nos. 339 to 343. I draw attention to Government amendments Nos. 339 and
342, which will introduce changes in the Bill to ensure that the
£30,000 charge should be creditable under the UK-US double
taxation agreement. I was keen to address that concern. I commend the
group of amendments to the Committee and am happy to respond in detail
to any
questions.
Mr.
Browne: Amendment No. 52 is in my name and those of my
hon. Friends so I will explain the purpose of it. Before I start, I
remember being criticised by Committee members for my absence of
drafting skills on Tuesday afternoon. Given the number of Government
amendments to the schedule, there are others who need to do their
homework in that regard. This part of the Bill is a cautionary tale for
the Government about the perils of aping Conservative policy. All kinds
of lessons can be learned from looking at these proposals in more
detail. The
Institute of Chartered Accountants, among others, was concerned about
this proposal. It may not have much of an impact on the so-called
super-rich, who will feel that the levy is not too much of a financial
burden, but it may have a detrimental impact on other categories of
people, particularly those with less money. There may be damaging
consequences for some individuals, for certain sections of the economy
and for the UK economy as a
whole. Amendment
No. 52 would delay the implementation of new section 809G(4), which
sets the £30,000 charge for claiming the remittance basis, until
the Treasury has produced a report to assess the impact of the charge
on three categories. The first is foreign nationals in low-paid
employment, a number of whom make contributions in our constituencies in
areas with shortages of UK and EU residents willing to undertake
certain tasks. The second is small businesses employing foreign
nationals. The third is higher education institutions, on which I
touched on Tuesday when the Financial Secretary conceded, following an
intervention from the hon. Member for Wirral, South, that the
Government had not undertaken any appraisal of the impact of these
proposals on the UK higher education sector. She anticipated that it
would not be a profound impact, but that was not based on a detailed
assessment undertaken by the Department. The purpose of amendment No.
52 is to delay the £30,000
charge. Ben
Chapman (Wirral, South) (Lab): May I make the point that
my question related to the case made by the Liberal Democrats on the
proposal under discussion? It did not relate to the case that had or
had not been made by the
Government.
Mr.
Browne: I have the highest regard for the hon. Gentleman
so I do not wish to imply that he had been disloyal or troublesome as a
member of the Committee. He has wisely shown no inclination to do
that. In
conclusion, the purpose of amendment No. 52 is to allow greater
reflection on the impact of the £30,000 charge on the groups
that I
mentioned.
Mr.
Hoban: I should like to raise a couple of questions on the
Government amendments. In moving the amendment, the Financial Secretary
made a point about ensuring that the £30,000 charge is
creditable under the UK-US double taxation treaty. I wonder what
happened in the period between the Budget and the Government tabling
these amendments. The Treasury commissioned Skadden, a respected US law
firm, to comment on the creditability of the charge as set out in the
Budget. The conclusion it reached was that in the absence of current
guidance by the US treasury or the IRS, the charge would be creditable
against United States federal income tax. To be fair to them and to the
Minister, there followed various caveats, as lawyers are very good at,
but will the Minister set out more clearly, for the benefit of those
who pay close interest in these proceedings, who are concerned about
creditability, what aspects of the amendment improve the chance of the
IRS and the US treasury seeing it as a creditable tax
charge? On
the specific amendments, amendment No. 339 puts a cap on the remittance
charge at £30,000. The Institute of Chartered Accountants asks
what happens if the amount nominated exceeds £30,000, either by
error—if an individual has nominated higher gains or income by
mistake—or if, when looking at the amounts to be nominated,
having originally reached a point of having £30,000, later on
perhaps a relief has been changed or amended which means that, because
of those tax changes, the gains exceed
£30,000. Amendment
No. 342 sets out what happens when an individual nominates less than
£30,000 upon income or gains. The amendment treats that
individual as if they had nominated £30,000. Would it not have
been easier for taxpayers simply to elect to use a remittance basis
without having to nominate the gains? The amendment seems to create a
situation where, if someone only nominated, say, £1, they would
be deemed to have
nominated £30,000. I am not sure why the Government have gone
down the route of that complicated nomination process when it appears
from their amendment that, if someone fails to nominate, it can be
deemed that they had nominated
£30,000. Amendment
No. 346 makes it clear that only those gains or income that have not
been nominated are taken into account when capital, income or gains
have been remitted. Would the Minister outline what the consequence
will be if the taxpayer remits nominated foreign income or
gains?
Jane
Kennedy: I invite the hon. Member for Taunton to be a
little cautious in representing his party, bearing in mind the comments
of his hon. Friend the Member for Twickenham who, as recently as their
party’s spring conference in my home city of Liverpool, divided
the UK into taxpayers and tax dodgers. I think that their policy is to
abolish the remittance basis altogether after a certain period of
residence in the UK. Inviting resident non-domiciles to pay up or pack
up is not in the interests of UK competitiveness and fails to recognise
the major contribution that resident non-domicile individuals make to
the UK economy. We have made it clear that we will retain the
remittance basis, and the changes we are making are precisely to ensure
that the remittance basis remains sustainable in the long run. By
making it a more fair and transparent system, we believe that that
sustainability is very much
improved. The
hon. Member for Taunton also criticises the number of Government
amendments that have been tabled. It is clearly a large number, but he
did, in the earlier debate, indicate that often we cannot win when we
seek to make changes to an original proposal. Draft clauses having been
published in January, we then received representations on the detail of
the draft, made changes to the draft, and made further changes after
further representations. We sought throughout the whole of that process
to ensure that we arrive at the right outcome. I believe that we have
now done
that. The
12 Government amendments arise from discussions with representative
bodies and interested parties since the publication of the Bill. I can
assure the Committee that the issues raised by the British-American
Business Council will be fed into discussions with the US on the double
taxation treaty.
9.30
am In
quick response to the early questions about what has happened since the
publication of the legal advice that we had earlier this year, there
has been a number of informal discussions between HMRC and the IRS, the
American tax authorities, to ensure that what we sought to achieve and
the legal advice we had received and published was accurate. Legal
advice is often open to interpretation. We did not want to go forward
with a set of proposals that might have been interpreted differently by
the American authorities. That is why the changes we have made have
been brought forward. We will continue to keep an open ear to the
concerns that the British-American Business Council may
have.
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