Finance Bill

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The Chairman: I can fully support what the hon. Gentleman has said about a stand part debate.
Mr. Hands: I am not going to detain the Committee for long but, I want to reinforce what has been said by my hon. Friends. It strikes me that the whole process has been deeply flawed. The consultation has been extremely poor, especially in relation to the data. Seven months later, we are not really any closer to having any more robust data.
I have a question for the Minister. Going back to the Institute for Fiscal Studies report and the pre-Budget report in October, the IFS outlined various questions. I want to see whether the Minister has any answers. What is her current estimate of the number of non-doms? How many have unremitted foreign income above £62,500 or £80,000? How much foreign income do the remainder have? How many does she believe would leave the country if these proposals came into force?
Mr. Jeremy Browne (Taunton) (LD): I wonder whether the Minister will draw on the expert analysis provided by the Government when they estimated how many members would come from new accession EU countries.
Mr. Hands: That is a very valid point. I represent a constituency where the current estimate is that 6 per cent. of the population is Polish. In the last year we had 7,300 foreign nationals apply for a national insurance number. The effect that these new regulations might have on the flow of people could be considerable, particularly in a constituency like mine.
In October, the IFS said that no one really knows the answers to these questions. I am assuming that, after seven months, the Minister, when faced with questions from a body such as the IFS, would be able to provide some reasonably good answers.
Jane Kennedy: There have been 135 Government amendments. I checked that quickly myself scanning through the amendment paper. I say to the hon. Member for Fareham—other hon. Members will be interested in this—that that is not a record. The previous record for a Finance Bill is more than 200. Guess when that was. It was in 1995.
Mr. Hoban: rose—
Mr. Bob Blizzard (Waveney) (Lab): Do not give way on that.
Mr. Hoban: Perhaps it is a sign of a Government coming to the end of their life when so many amendments are tabled to Finance Bills.
Jane Kennedy: My hon. Friend was right. I should not have given way.
On the very specific point about unfettered gifts of foreign assets offshore, HMRC made its view very clear in a frequently asked question some time ago. In simple terms, it is only when such gifts were made after 6 April 2008 that they would be taxed. I would like to answer a little more broadly than I would have done on these specific amendments, Sir Nicholas. Following the pre-Budget report, we have shared clauses in draft at the earliest opportunity. We actively looked to respond quickly to the concerns that were aired within our overall policy aim. Following the PBR in October, there was relatively muted reaction to the proposals on residence and domicile, but our response has been swift to concerns raised once the detailed clauses were put out in draft.
We have sought at every opportunity to address those concerns. That has resulted in several changes to our original proposals, and numerous improvements and simplifications to the Bill as first drafted. As has been pointed out on other occasions, when the Government respond to criticism, it is simply presented as a U-turn. One simply cannot win when one seeks to address proper concerns that have some basis, and try to amend the proposals accordingly.
On the IFS report, we have stated in both the PBR and the Budget that we assumed there were about 3,000 people who might leave, but our assumption has now fallen by about 400 as a result of the Budget changes. However, it is an area in which it is very difficult to make assumptions. We have not seen any convincing evidence that the numbers leaving the UK might be higher. As I have said repeatedly, the UK remains an attractive place to live, work and do business.
Mr. Hands: It is certainly helpful to have some estimates of these numbers—3,000 and the latest estimate 2,400—could she tell us a little bit about the methodology involved in arriving at those estimates?
Jane Kennedy: The fact is that we do not have hard data on many of these, simply because there has not previously been a need for people to declare their income offshore. So the hard data that he is seeking are not immediately available either to us or to other sources.
Mr. Hands: The Minister says that we have no hard data, but figures of 3,000 and 2,400 sound as if they have a certain amount of precision. Can she at least tell us what factor has been most involved in downgrading that estimate from 3,000 to 2,400?
Jane Kennedy: In large part it was the debate we held with representative bodies about the changes we have made that led to the clarity we were able to bring to the concerns in the early days. Although the hon. Gentleman dismissed the letter that Mr David Hartnett published, it did go a long way to allaying many fears about what the changes mean to individuals.
Mr. Hands: I thank the Minister for giving way—she has been generous—but I do not think that she has come any closer to saying where the figures of 3,000 or 2,400 have come from. Have they come from a consulted body, which seems to be her implication? If so, presumably that body must have said what was driving the change. Is it the decline in house prices, or is it something else?
Jane Kennedy: The hon. Gentleman should not try to put words into my mouth. I know that he is not trying to do it in a deliberately mischievous way—[Interruption.] I am being generous here. But for me to go into detail about the way in which we arrive at these assumptions would entail a great deal of debate in this Committee. I suggest that it may be of more value if I look in detail at the questions he has asked and see what data I can make available to the Committee. I will write to him and share the letter with the Committee.
I should like to make a more general point, Sir Nicholas, particularly in view of your advice on the stand part debate. Hon. Members criticised the fact that we had made the decisions and the fact that we had plans to proceed with the detail. The hon. Member for Cities of London and Westminster said that, on balance, he preferred the Conservative proposal, but that would have been for the flat rate charge of £25,000. Once a charge had been paid, no more questions would have been asked about an individual’s worldwide income. Their proposal would not have addressed the issue of fairness to which he rightly alluded.
2.15 pm
There was without question a great deal of awareness within the House of the complaints of unfairness, but it is also important to bear in mind that the Conservative proposal, unlike our proposal, would have charged people from the day they arrived. The hon. Gentleman referred to Indian graduates who could come here for a short time and then return to the Indian sub-continent. We very much want to encourage people of quality from around the world to come here. We would want them to come and, having worked here, perhaps to stay longer. That is why we believe that beyond seven years it is right to invite remittance users to make a greater contribution.
That brings me back to the other main difference between the two proposals. The Conservative proposal would have raised in the region of £3.5 billion from a group of people—roughly 120,000—whereas the tax take already is around £13 billion. It is around £500 million now. We were inviting a greater contribution, but a much more modest one than the Conservatives proposed. That may be why the hon. Gentleman preferred their proposal. That is not widely appreciated.
The current arrangements for the taxation of non-domiciled people in the UK are very generous. They serve the British economy well. In terms of attracting the world’s best talent to the UK we have now arrived at a balance which maintains that. It is important to recall that the changes that we propose do not affect all non-domiciles. They affect those who choose to use the highly advantageous remittance basis. I have responded in a broader way to a debate that has gone slightly wide of the amendment.
Mr. Browne: I think all reasonable people would recognise that the Conservative party’s proposals were laughably ill-conceived and put together in a characteristically amateur fashion. I concede that point to the Minister. What still seems strange is that the Conservatives succeeded in panicking the Government into coming up with a corresponding set of proposals which, judging by the number of amendments, do not seem to have been much better thought-out than the Conservative ones.
Jane Kennedy: I have drawn attention to the comments of the hon. Member for Twickenham on the matter. I would not have characterised the proposals put forward by the hon. Member for Fareham as laughably ill-conceived.
Mr. Hands: Because you copied them.
Jane Kennedy: We acknowledge that there was some merit in the idea of a charge, but we did not agree with the way in which it was proposed to levy it. We have arrived at the right balance. Our proposals are reasonable and proportionate. They allow the remittance basis to settle at a point at which it is now sustainable for the very long-term future, without the shallow and partisan criticism that we occasionally hear from the Lib Dem Benches.
Mr. Hoban: I thank the Minister for her clarification of what I was seeking to tackle in amendment No. 375. I shall not therefore push it to a vote. Any lingering ambiguity should have been dealt with by her very clear statement on pre-April 2008 gains.
In the Minister’s response to the broader issues, she highlighted the fundamental difference between the approach of our two parties, and the reason why the Government are in the mess they are in. When we consulted on our proposals for a charge on non-doms, we recognised some of the challenges there would be in trying to unpick the details of anomalies. It is a complex area. I return to one of the comments that was made in evidence to the House of Lords Select Committee: the Government have probably created as many anomalies as they have closed down.
I do not know whether I will be sitting on the Finance Bill Committee next year, but I fear that we may come back to revisit this matter, if not in terms of primary legislation, perhaps in the form of guidance or some other way of getting around the Chancellor’s commitment to avoid reopening the topic.
The way in which issues other than the charge were dealt with created the weight of opposition to some of the measures. The Minister was right: there was an immediate response to the change announced in October’s pre-Budget report. When we announced our proposals in October, there was support for them because they struck the right balance between fairness and making sure we did not create more problems than we were trying to resolve. There was support for our proposals because they seemed proportionate and reasonable.
The Government got into trouble because of the broadening of their proposals when the consultation document came out, and particularly when the draft legislation came out. That is one of people’s concerns, and the problems with the proposals and their complexity has resulted in the process we are going through today to deal with 135 amendments in the space of six hours, or however many hours there are in today’s two sittings. I do not think it has created much certainty for taxpayers.
Mr. Field: For the record, although the Finance Act 1995 may have had slightly more amendments, it was not guillotined by the Government of the day, and therefore there was a chance to discuss in full detail the various amendments that had been put forward, which has not been the case with this Bill.
The Chairman: Order. I have to correct the hon. Member for Cities of London and Westminster. The Bill is not guillotined or programmed. We have to make that clear. That does, however, give me the opportunity to say that we have—in expectation only, not according to a programme motion—just over an hour and 35 minutes to go, although it looks to me as though we will go on longer.
Mr. Hoban: Thank you, Sir Nicholas. As you said, Finance Bills are traditionally not subject to programme motions and guillotines. In the interest of moving the debate on to the gripping topic of fees, on which I would like to say a few more words, I shall draw the debate on this group to a close. I think the Government are reaping the problems of acting in haste by trying to close down loopholes and anomalies, and I feel that in some shape or form we will relive these moments with pleasure, not only on Report, but in subsequent Bills. With that, I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Amendment made: No. 486, in schedule 7, page 164, line 2, at end insert—
‘809RA Deemed income or gains not to be regarded as remitted before time when they are treated as arising or accruing
(a) income or foreign chargeable gains are treated as arising or accruing, and
(b) by virtue of anything done in relation to anything regarded as deriving from the income or chargeable gains, the income or chargeable gains would otherwise be regarded as remitted to the United Kingdom before the time when they are treated as arising or accruing,
treat the income or chargeable gains as remitted to the United Kingdom at that time.’.—[Jane Kennedy.]
Jane Kennedy: I beg to move amendment No. 354, in schedule 7, page 164, line 12, at end insert—
‘809SA Consideration for certain services
(1) This section applies to income or chargeable gains if—
(a) the income or gains would (but for subsection (2)) be taken to be remitted to the United Kingdom because conditions A and B in section 809K are met,
(b) condition A in section 809K is met because a service is provided in the United Kingdom (“the relevant UK service”), and
(c) condition B in section 809K is met because section 809K(3)(a) or (b) applies to the consideration for the relevant UK service (“the relevant consideration”).
(2) The income or chargeable gains are to be treated as not remitted to the United Kingdom if the following conditions are met.
(3) Condition A is that the relevant UK service relates wholly or mainly to property situated outside the United Kingdom.
(4) Condition B is that the whole of the relevant consideration is given by way of one or more payments to one or more bank accounts held outside the United Kingdom by or on behalf of the person who provides the relevant UK service.
(5) Sections 275 to 275C of TCGA 1992 (location of assets) apply for the purposes of subsection (3) as they apply for the purposes of TCGA 1992.’.
The amendment was drafted in consultation with representatives from the UK financial services industry. It enables the industry to continue to provide services to non-domiciled individuals. I am assured that the amendment meets the concerns that the industry has raised. The hon. Member for Fareham has indicated that he has a number of issues to raise, so I will allow him to do so and then hope to reply in more detail.
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