Jane
Kennedy: I thought that the hon. Gentleman’s
explanation was very clear, if I may compliment him.
Our
amendments, which we have tabled in response to representations that we
have received, clarify the conditions under which property that is
brought to the UK will not trigger a tax charge under the remittance
basis. The changes will ensure that the legislation works as intended,
and will make things clearer for taxpayers and their advisers in this
complex area. They will deliver the final parts of the new scheme that
we are introducing to allow people to bring works of art to the UK for
public display without triggering a remittance-basis tax
charge. The
hon. Gentleman’s amendments Nos. 376 and 377 would extend the
scope of the exempt property rules, which he has described to great
effect. He wants to extend those rules to cover assets purchased abroad
with any form of unremitted income or gains. I am not sure if he
appreciates what the effect of his amendment would be.
Until now,
remittance basis users bringing into the UK assets purchased from
unremitted foreign employment income or offshore gains, have faced a
charge to tax in the UK. That has been a long-standing practice. Only
where the asset was purchased with unremitted relevant foreign income
was there no liability to tax when it was enjoyed in the UK. Relevant
foreign income is income such as bank interest, rental income or
dividends. The hon. Gentleman’s amendments would remove a tax
charge in situations where one has always arisen. It would therefore
provide a new tax break for remittance basis users. I am not sure that
he knew that would be a consequence of his amendment.
I appreciate
that the amendments have been tabled in a probing manner, but the
Government have already proposed generous provisions to exempt property
bought with unremitted relevant foreign income where it is either of
low value or falls into certain categories of personal use such as
clothing and jewellery. We also have exemptions for assets bought with
unremitted relevant foreign income and temporarily imported into the
UK. Finally, in recognition of the importance of the UK’s repair
and restoration sector, which is very significant—there is a
centre of restoration in the city of Liverpool—assets bought
with unremitted relevant foreign income can stay in the UK for an
unlimited time while being repaired or restored.
The hon.
Gentleman’s amendment No. 378 proposes two additions to the new
section dealing with assets that cease to be exempt property. I
understand the point that he is making but the issue was not raised
with us during the extensive consultation on the new section introduced
by the schedule. The amendment as drafted would lead to higher tax
charges in some circumstances. For example, if an asset cost
£10,000 but increased in value and was sold for £50,000
his amendment would tax £50,000 rather than the £10,000.
Furthermore, the amendments would provide new avoidance opportunities
for the enjoyment of exempt assets without a tax charge in others. The
outcomes are clearly at odds with the objective of schedule
7. Amendments
Nos. 379 and 380 seek to define the public access rule by reference to
where the assets are displayed. There are two reasons why those changes
are unnecessary. First, they remove the link between the public access
rule and existing schemes for VAT. We explained the reasoning behind
using that. The link between the public access rule and existing
schemes for VAT and import due to relief on importation has been in
place for some time. The alignment was developed in consultation with
key stakeholders in the art world and it was agreed that basing the
public access rule on those schemes was the most simple and
straightforward approach. I am aware that there is wider lobbying on
other types of what might be described as public access, but in
consultation a persuasive argument was made for extending the type of
venue from institutions such as galleries and museums to other
commercial properties, such as a commercial auction house—the
example cited by the hon. Gentleman. Our amendment No. 356 provides the
framework to achieve what is needed to allow that to
happen. By
bringing forward this particular package—it is a large group of
amendments, but they address genuine concerns about the handling of
movable property—we have responded to the points raised during
consultation. I therefore press the amendments in my name. I am sure
the hon. Gentleman was probing, but he may want to press some of his
amendments. However I urge the Committee, if asked to consider his
amendments, to reject
them.
Mr.
Hoban: I am grateful to the Minister for a helpful
explanation as to why the existing terms have been drawn up as they
are. It is not my intention deliberately to make the law less
restrictive or more lenient than it is currently. So I am grateful for
the clarification that she gave on personal use items and also for the
explanation of why there is a link between public access, as far as
non-domicile rules are concerned, and the VAT rules. With her comments
in mind, I beg to withdraw the amendment in my
name.
The
Chairman: The hon. Gentleman does not have to withdraw his
amendment, as the lead amendment is a Government
amendment. Amendment
agreed to.
Amendments
made: No. 487, in schedule 7, page 164, line 35, after
‘where’
insert ‘the
whole or part
of’. No.
488, in schedule 7, page 164, line 35, after ‘sold’
insert
‘, or otherwise
converted into
money’. No.
489, in schedule 7, page 164, line 43, leave out
‘“relevant rule” means—’ and insert
‘— “money”
includes— (a) a
traveller’s cheque, (b)
a promissory note, (c) a bill
of exchange, and
(d) any
other— (i) instrument
that is evidence of a debt,
or (ii) voucher, stamp or
similar token or document which is capable of being exchanged for
money, goods or services,
and “relevant
rule”
means—’. No.
356, in schedule 7, page 165, line 5, leave out from beginning to end
of line 11 on page 167 and
insert— ‘809V Public access
rule: general (1) Property
meets the public access rule if conditions A to D are
met. (2) Condition A is that
the property is— (a) a
work of art, (b) a
collectors’ item, or (c)
an antique, within the meaning
of Council Directive 2006/112/EC (see, in particular, Annex IX to that
Directive). (3) Condition B is
that— (a) the property
is available for public access at an approved
establishment, (b) the property
is to be available for public access at an approved establishment and,
in connection with its being so available, is in transit to, or in
storage at, public access rule premises,
or (c) the property has been
available for public access at an approved establishment and, in
connection with its having been so available, is in transit from, or in
storage at, public access rule
premises. (4) Property is
“available for public access” at an approved
establishment if the property
is— (a) on public
display at the
establishment, (b) held by the
establishment and made available to the public on request for viewing
or for educational use, or (c)
held by the establishment for public exhibition in connection with the
sale of the property. (5) An
“approved establishment” is—
(a) an approved museum, gallery or other
institution within the meaning of Group 9 of Schedule 2 to the Value
Added Tax (Imported Goods) Relief Order 1984,
or (b) any other person,
premises or institution designated (or of a description designated) by
the Commissioners. (6)
“Public access rule premises”
are— (a) premises in the
United Kingdom at which the property is to be, or has been, available
for public access, or (b) other
commercial premises in the United Kingdom used by the approved
establishment for the storage of property in advance of its being, or
after its having been, available for public access at the approved
establishment. (7) Condition C
is that, during the relevant period, the property meets condition B for
no more than— (a) two
years, or (b) such longer
period as the Commissioners may
specify. (8) “The
relevant period” means the
period— (a) beginning
with the importation of the property, and
(b) ending when it ceases to be in the United
Kingdom after that
importation. (9)
“Importation” means the property being brought to, or
received or used in, the United Kingdom in circumstances in which
section 809K(2)(a) applies.
(10) Condition D is that the property attracts a
relevant VAT relief (see section
809VA). 809VA Public access
rule: relevant VAT relief (1)
Property “attracts a relevant VAT relief” if any of
conditions 1 to 4 are met. (2)
Condition 1 is that article 5(1) of the Value Added Tax (Imported
Goods) Relief Order 1984 applies in relation to the importation of the
property by virtue of Group 9 of Schedule 2 to that Order (importation
of works of art or collectors’ pieces by museums
etc). (3) Condition 2 is that
article 5(1) would so apply if the following requirements were
disregarded— (a) the
requirement that the importation be from a third country,
and (b) the requirement that
the purpose of the importation be a purpose other than
sale. (4) Condition 3 is that
article 576(3)(a) of Commission Regulation (EEC) No 2454/93 (relief
from import duties for works of art etc imported for the purposes of
exhibition, with a view to possible sale) applies in relation to the
importation of the
property. (5) Condition 4 is
that article 576(3)(a) would so apply if the requirement that the
importation be from a third country were
disregarded. (6) Where the
property does not meet condition B in section 809V at the time of its
importation it is to be assumed for the purposes of this section that
the property was imported on the day during the relevant period when
the property first meets that
condition. (7) “The
relevant period” and “importation” have the same
meaning as in section 809V and “imported” is to be read
accordingly. 809VB Personal use
rule (1) Clothing, footwear,
jewellery or watches meet the personal use rule if
they— (a) are property
of a relevant person, and (b)
are for the personal use of a relevant individual.
(2) In this
section— (a)
“relevant person” has the meaning given by section 809L,
and (b) “relevant
individual” means an individual who is a relevant person by
virtue of section 809L(2)(a), (b), (c) or (d) (the individual with
income or gains, or a husband, wife, civil partner, child or
grandchild). 809VC Repair
rule (1) Property meets the
repair rule for the whole of the relevant period if, during the whole
of that period, the property meets the repair
conditions. (2) Property meets
the repair rule for a part of the relevant period
if— (a) during the whole
of that part of that period, the property meets the repair conditions,
and (b) during the whole of the
other part of that period, or the whole of each other part of that
period, the property meets the repair conditions or the public access
rule. (3) Property meets the
repair conditions if the
property— (a) is under
repair or restoration, (b) is
in transit from a place outside the United Kingdom to repair rule
premises, in transit between such premises, or in storage at such
premises, in advance of repair or restoration,
or (c) is in storage at such
premises, in transit between such premises, or in transit from such
premises to a place outside the United Kingdom, following repair or
restoration.
(4) “Repair rule premises”
means— (a) premises in
the United Kingdom that are to be used, or have been used, for the
repair or restoration referred to in subsection (3)(b) or (c),
or (b) other commercial
premises in the United Kingdom used by the restorer for the storage of
property in advance of, or following, repair or restoration of property
by the restorer. (5)
“Restorer” means the person who is to carry out, or has
carried out, the repair or restoration referred to in subsection (3)(b)
or (c). (6) Property meets the
repair conditions, or the public access rule, during the whole of a
period, or the whole of part of a period, if the property meets those
conditions or that
rule— (a) on the whole
of, or on part of, the first day of that period or part
period, (b) on the whole of, or
on part of, the last day of that period or part period,
and (c) on the whole of each
other day of that period or part
period. (7) “The
relevant period” has the same meaning as in section
809V. 809W Temporary
importation rule (1) Property
meets the temporary importation rule if the total number of countable
days is 275 or fewer. (2) A
“countable day” is a day on which, or on part of which,
the property is in the United Kingdom by virtue of being brought to, or
received or used in, the United Kingdom in circumstances in which
section 809K(2)(a) applies (whether the current case, or a past case,
when the property was so brought, received or
used). (3) A day is not a
countable day if, on that day or any part of that
day— (a) the property
meets the personal use
rule, (b) the property meets
the repair rule, or (c) the
notional remitted amount in relation to the property is less than
£1,000. (4) A day on
which, or on part of which, the property meets the public access rule
(the “relevant day”) is not a countable day if any of
conditions A to C is met. (5)
Condition A is that the property meets the public access rule during
the whole of the period of importation in which the relevant day
falls. (6) Condition B is
that— (a) the property
does not meet the public access rule during the whole of the period of
importation in which the relevant day falls,
and (b) that period of
importation— (i) begins
with a period of no public access,
and (ii) ends with a period of
public access which immediately follows that period of no public
access. (7) Condition C is
that— (a) the property
does not meet the public access rule during the whole of the period of
importation in which the relevant day falls,
and (b) during the parts, or
each of the parts of the period of importation during which the
property does not meet the public access rule it meets the repair
conditions. (8) Section
809VC(6) applies for the purposes of this
section. (9) “Period of
importation” means a period
that— (a) begins when
property is brought to, or received or used in, the United Kingdom in
circumstances in which section 809K(2)(a) applies,
and (b) ends when the property
ceases to be in the United Kingdom after having been so brought,
received or used.
(10) “Period of no public access”
means a period which is not a period of public access and
“period of public access” means a period during the whole
of which property meets the public access
rule. 809X Notional remitted
amount’.
No. 490, in
schedule 7, page 167, line 28, at end
insert— ‘( ) In subsection
(2) “money”
includes— (a) a
traveller’s cheque, (b)
a promissory note, (c) a bill
of exchange, and (d) any
other— (i) instrument
that is evidence of a debt,
or (ii) voucher, stamp or
similar token or document which is capable of being exchanged for
money, goods or services.’.—[Jane
Kennedy.]
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